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Deal with Hire Purchase Debt

On ordinary credit agreements, the goods you buy belong to you from the time you take out the credit. The lender cannot take the goods back. They can only ask you to pay the money you owe under the agreement.

WHAT IF I CANNOT AFFORD TO PAY?

If you fall behind with your payments on a Hire Purchase or Conditional Sale Agreement, the creditor may be able to repossess the goods. Look at your agreement. There will be a box telling you how much you need to have paid to stop the creditor taking the goods back without a court order. This should be a third of the total amount payable under the agreement.

If you have paid a third or more of the total owing, the creditor must go to court to ask for the goods back. They cannot just come round and remove them. Even if you have not paid more than a third of the agreement, the creditor will need an order from the court to remove the goods from “any premises” they are on.

This appears to include your garage or drive but not a car park or roadside. If your car is parked on the road, or in a public car park, then it would be at risk.

WHAT IS THE PROCEDURE IF THE CREDITOR HAS TO GO TO COURT BEFORE THEY CAN GET THE GOODS BACK?

There is still a chance that you can keep hold of the goods, as the court has the power to agree to this as long as you can pay the debt back in reasonable instalments.

If you have a third or more of the total payable under the agreement, the creditor will ask the court to send you a Claim Form asking for the goods to be returned.

This is called an application for a “Return Order”. Notice of a hearing date with a District Judge is included. This hearing should be in your local County Court.

There will be form with the Claim that you should fill in and send back to the court within 14 days. You must fill this in if you want the court to suspend the Return of Goods Order and allow you to keep the goods at home. You need to offer to pay the debt back in monthly instalments you can afford. It is important to treat this debt as a priority over ordinary credit debts and offer as much as you can.

Send the form back to the court, not the creditor. The court will send a copy of your form to the creditor. If the creditor accepts the offer the hearing will be cancelled. If the creditor does not accept the offer the hearing will go ahead.

You must attend the hearing. The court will decide at the hearing whether they will suspend the Return Order and what monthly instalments you should pay from now on. If you do not fill in the admission form there will be a hearing anyway. If you don’t go to the hearing the court will probably grant the creditor an order telling you to return the goods.

WHAT IF I HAVE PAID LESS THAN A THIRD AND THE CREDITOR WANTS THE GOODS BACK?

If you want to keep the goods you should ask the creditor to agree to a payment arrangement with you. The creditor is most likely to accept if you can afford the full monthly instalments plus something towards the arrears. If you can’t make the full payments, the creditor may agree to reduce the payments, but usually by a small amount and only for a short time. In certain circumstances you may be able to go to court and ask to pay less than the full monthly instalment and extend the length of the agreement.

HOW MUCH WILL I OWE IF THE AGREEMENT ENDS?

If you have to decide whether to end a Hire Purchase or Conditional Sale agreement there are two options:

* return the goods voluntarily;

or

* let the creditor end your agreement and repossess the goods.

There can be a difference in the amount you end up owing depending upon how the agreement is ended.