What is this?
Hire purchase or conditional sale agreements are where you pay for something in small amounts/instalments, but you do not own the goods until you have paid off the whole amount under the agreement. You also cannot sell the goods without your creditor’s permission until the whole amount owed has been fully paid off.
They are priority debts because creditors may repossess the goods you are buying if you miss payments or sell them and use the money to reduce your debt.
What can I do?
- 1) Check what type of agreement you have. If it is hire purchase or conditional sale, your agreement should clearly say this. It should also say that it comes under the Consumer Credit Act 1974 (Amended 2006). If you are not sure what type of agreement you have, contact the creditor and ask for a copy of your agreement or contact us on our Adviceline.
- 2) If you want to keep the goods find out how much you can afford to pay and make an offer. You can do this by working out all of the money you have coming in and the money you have to pay out for essentials. You can use your bank statements and any bills and benefit letters to help you to work out how much you can afford to pay. You can also work out your budget by going to www.nationaldebtline.org and clicking on "Your budget". When you have filled in your budget, go to Step 2. You can then send a copy of your budget and make an affordable offer. You can also let them know why it is important for you to keep the goods, for example because the item is important for your wellbeing.
- 3) If you don’t want to keep the goods, you may be able to return them voluntarily if your creditor hasn’t already ended the agreement. You must tell the creditor in writing that you want to do this. If you return the goods voluntarily you will still owe the creditor a maximum of half of the agreement price, or whatever is outstanding if that is less. You will also owe reasonable costs if the goods are damaged. Once you have returned the goods you can treat the remaining balance as a non-priority debt.
What can the creditor do if I do not pay?
If after the creditor has contacted you about the arrears, you have continued to miss payments the creditor will issue you with a Default Notice. This allows them to take action to get the goods back.
- If you have paid less than a third of the amount owed, and the goods are not kept in your home or on private land, your creditor does not need to go to court to take the goods, for example the goods are a car parked on the street. They can take the goods and sell them at auction to pay off the remaining debt.
- if you have paid at least a third, or the goods are kept in your home or on private land, your creditor will need a court order to ask you to give the goods back.
- If you have a rent-to-own agreement, your creditor may also offer other options that could put you in a better position. For example, your creditor may allow you to return the goods and write off the arrears or change the item for a cheaper one. Check your agreement.
- If your creditor starts court action the court will send you forms to fill in and return. You may be able to keep the goods if you agree to make payments set by the court. You can ask the court to allow you to pay less than your normal payment if you can show it is all that you can afford.
Our Debt information has been developed in partnership with The Money Advice Trust.
If you need further support, contact us at the Adviceline on firstname.lastname@example.org or book an appointment with one of our Advisers HERE.
Date modified: September 22 2021 | Date created: June 17 2021