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Can you go to prison for a debt?

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Having debt is tough, and it is especially so if you are worried about any potential criminal consequences of that debt. This article looks at the issue of debt in criminal law, and whether it can lead to a criminal sentence. Debt is a problem that afflicts many people in today’s society. Prior to the Covid-19 pandemic, the Money Advice Service estimated that 8.3 million people in the UK were in debt. What with the unemployment and loss of opportunity caused by the pandemic, this number has, in all likelihood, risen. Anyone who has been in debt will know that facing spiralling credit card repayments or falling into arrears with their mortgage is intensely stressful. Not only will you be worried about losing your home and placing your family relationships in jeopardy, you may also be fearful of the criminal sanctions that you could face. This article looks at what happens if you don’t pay your debts in the UK. It answers the question of what happens if you ignore criminal fines. It considers if you can go to prison for council tax debts. Finally, it explores the consequences of existing debts if you go to prison.

What happens if I don’t pay my debts in England and Wales?

You may be wondering what the consequences are of failing to pay your debts. The answer to this question is that it depends on what type of debt you are facing. If it is a debt that you are required to pay by law, such as council tax, the consequences are different compared to if it is a debt that you owe through a contract with a creditor, such as a credit card debt.

Priority debts

Debts that you are required to pay by law, such as council tax, are known as priority debts. If you fail to pay council tax, the local authority will send you two payment reminder notices. If you still do not pay, they will send you a final notice. At this point, you will lose your right to pay the tax by instalments and payment of the full amount of council tax to the end of the year will be due.

If you still do not make the payment, the local authority will start court proceedings against you. You will receive a summons from the Magistrate’s Court with a court date. This will incur an extra £90 cost on your council tax arrears account.

If you do not file a defence before the deadline, you will receive a County Court Judgment (CCJ) against you. The court can either order the debt to be paid off in instalments or as one single amount. Unless you pay the debt off in full within 30 days of receiving it, it will be entered on the Register for Judgments, Orders and Fines, where it will remain for 6 years.

This can prevent you from being able to take steps such as open a bank account, or obtain a mortgage, or a credit card. If you receive a county court judgement and do not keep to the terms it sets out, the creditor can apply to the court to enforce the order. The court can enforce the order in the following ways:

  • Enforcement agents (bailiffs): bailiffs can be instructed to collect the debt by taking goods from your home.
  • Attachment to benefits: the local authority can deduct money from your benefits received from Department of Work and Pensions (DWP).
  • Attachment to earnings: the local authority can order your employer to take deductions from your wages or salary until the debt is repaid. Your employer is legally obliged to comply.
  • Charging order: if you owe £1000 or more and own a property, the local authority can apply to the court for a charging order. This means that when the property is sold, the local authority can recover their debt from the proceeds of the sale.
  • Insolvency proceedings: in extreme circumstances, the local authority could commence insolvency proceedings against you.
  • Committal to prison: also in extreme cases, you may be given a prison sentence. This usually only occurs where the court takes the view that you have purposefully avoided paying council tax.

Other household debts

If you fail to pay a non-priority debt such as a credit card debt, you may incur additional charges from the creditor and damage your credit score. Credit card debt is regulated by the Consumer Credit Act 1974. This states that before commencing court proceedings, your creditor is obliged to issue you with a default notice.

This notice gives you two weeks to catch up with any missed payments. If you do this, your account will continue as normal. If you do not catch up with your payments, your debt will be sold to a collection agency. If the collection agents do not succeed in securing payment, court proceedings may be issued against you. This could result in a CCJ against you. However, you cannot be sent to prison for failure to pay non-priority debt.

When you are in debt, it can be tempting to ignore letters from creditors asking for money. Research conducted by the debt charity Step Change suggests that over half of their clients wait a year or more before seeking help for the debt that they are facing. However, ignoring these letters can have damaging consequences. You could miss important information such as:

  • Statutory demands
  • Notifications that the debt has been passed to a collections agency
  • A letter of claim or a claim form

If you miss court deadlines, you are likely to find yourself in a worse situation than before. If you receive notification that your creditor has started court proceedings against you, seek legal advice from a solicitor without delay. If you do not respond to the claim against you, the court will not have the opportunity to hear information from you, which may influence the court’s understanding of facts that are relevant to the case.

What happens if you ignore criminal fines?

The consequence of ignoring criminal fines can be severe. Criminal fines are another form of priority debt, which is important to pay off before other types of debt, such as credit cards. If you fail to pay your criminal fines, the court can make the following orders to recover the money owed:

  • A weekly deduction from some benefits
  • An attachment to earnings order
  • Instruction of an enforcement agent
  • You can be ordered to carry out unpaid community work
  • In some severe circumstances, you can be sent to prison

Can you go to prison for council tax debts?

The failure to pay certain debts, which are known as priority debts, can result in a prison sentence. In England, council tax is one such priority debt. Other priority debts include:

  • Criminal fines
  • Child maintenance arrears (formally required by the government)
  • Business rates

The court will only order a prison sentence for debt as a last resort, once all other attempts at securing repayment have failed.

Most common household debts will not result in a prison sentence. Examples of debts that you cannot be sent to prison for include:

  • Credit cards
  • Overdrafts
  • Pay day loans
  • Mortgages or rent arrears
  • Hire purchase debts
  • Utility arrears such as gas and electricity

It is illegal for a debt collection company to threaten that you will go to prison for failing to pay these types of debts. However, failure to pay these types of debts can lead to other types of adverse consequences.

For example, if you fail to pay your rent or keep up with your mortgage payments you may lose your home. Failure to pay credit debt can lead to you developing a poor credit rating, being charged high rates of interest, or fines for late payment. Where collection agencies fail to recover the debt, you could be sued in the civil court, leading to the appointment of a bailiff.

What happens to existing debts if you go to prison?

When you go to prison, your debts do not automatically disappear. Creditors can still commence court action against you. This could impact the people you live with. For example, if you are in rent arrears, this could result in eviction of those who still live at the property while you are in prison. Gas or electricity arrears could result in your supply being disconnected. If you are in debt and you are facing a possible prison sentence, it is advisable to notify your creditors that this is a possibility. It might be possible to negotiate reduced payments, as your income is likely to be lower whilst you are serving your sentence. It may be helpful to nominate a friend or family member to deal with your account whilst you are in prison.

Where to get further help

If you are worried that you may be facing a CCJ or other legal consequence for failure to pay your debts, contact Stuart Miller Solicitors today. Our expert team of solicitors are here to help. We will provide you with advice regarding the consequences that you may be facing, and your options for resolving the situation.

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