Non-Priority: Overdraft Debt

Overdraft debt

If your bank account is overdrawn and you are struggling to pay it back, you are not alone. Overdraft debt is a non-priority debt, just like unsecured loans and credit cards, because the debt is not secured against any of your assets. However, interest and charges will continue to build up as part of the terms of your overdraft facility.

The real risk: losing access to your income

The biggest danger with overdraft debt is that you may use the same account for your day-to-day payments. If the account is overdrawn, your bank may use money paid into the account (such as your wages or benefits) to reduce the overdraft before you can use it. This can leave you unable to pay for essentials like rent, food, or bills.

First Right of Appropriation

You have a legal right called the "First Right of Appropriation". This means you can tell your bank, in writing, how money paid into your account should be used. You can instruct them to set aside your income for specific bills before any of it goes towards the overdraft.

This can be a useful short-term measure, but your bank may only accept this instruction for a limited time before withdrawing your banking facilities.

What you can do

• Contact your bank and exercise your First Right of Appropriation in writing to protect your income
• Open a new basic bank account with a different provider and transfer your income there, so your wages or benefits are no longer going into the overdrawn account
• Get advice from us so we can help you understand the impact of non-payment and explore your options

Get help

• Email us at info@youthlegal.org.uk
• Call us on 020 3195 1906
• Fill in our contact form and we'll get back to you

All our advice is free and confidential. You can also check your options at Citizens Advice or StepChange.