Can creditors take my wages?

By Emma Lunn

If a court orders you to pay your debts and you still don't pay up, your creditors have one more weapon in their arsenal -- an "attachment of earnings order."

An attachment of earnings order allows your creditors to reroute part of your paycheque to them. Here's how these orders work -- and what to do if you receive one.

What is an attachment of earnings order?
An attachment of earnings order is a court order that requires your employer to send a certain amount of your earnings to the court, which then passes it on to your creditors.

An attachment of earnings order isn't the first thing your creditors will try if you're behind on debt repayments, however.

"A creditor may take court action against you and get a county court judgment (CCJ) or other court order requiring you to pay back the money you owe either in instalments or in full by a certain date," says Una Farrell, media relations manager for StepChange Debt Charity. "If you don't comply with this, your creditor can apply for an attachment of earnings order."

Credit card debt isn't the only debt that can result in an attachment of earnings order. Other eligible types of debt include bank loans; hire purchase agreements; student loans; and rent, mortgage, income tax, VAT and TV license arrears. Magistrates courts can also issue an attachment of earnings order if you fail to pay a magistrates court fine. attachment-of-earnings-order

You can't be given an attachment of earnings order if you're self-employed or on benefits -- you need to be an employee. And the amount you owe must also be more than £50.

What to do if a creditor comes after your wages
If a creditor applies for an attachment of earnings order, you'll receive a "Form for Replying to an Attachment of Earnings Application" (Form N56) from the court. It will ask for your employment details and information about your other debts.

You must complete the form and return it within eight days, along with a copy of your most recent wage slip. If you fail to do so, you might get a summons to go to court; if you don't turn up to court, the court may issue a warrant for your arrest.

When you send the form back, you can still offer to pay a monthly instalment and ask for the order to be suspended.

"This is a request to the court not to make an attachment of earnings order if your creditor will agree to a new payment plan," Farrell says. "If the court accepts this, it won't start taking money directly out of your wages unless you don't keep up the repayments you've agreed to."

Moreover, if your offer is accepted, your employer won't find out about your debts. But if your offer is turned down and the order is granted, the court will contact your employer, and payments will be taken from your wage.

As well as having your employer find out about your debt situation -- which you might not want -- having an attachment of earnings order against you can also increase your debt. The creditor has to pay a £100 fee to the court for an attachment of earnings order application. They can have this amount added to your debt as well the £1 administration fee that gets charged each time they take a payment from your wages.

How much money can be taken from your wage packet?
How much creditors can take will depend on your income and outgoings.

"This is based on the minimum amount of money you need to live on, which is called the protected earnings rate," Farrell says.

In other words, the court will determine how much you need to live on. The money deducted from your earnings can be taken only from wages you earn above this amount. If your income decreases one month, the amount taken will decrease as well. Creditors won't be able to get an attachment of earnings order if your take-home pay is always below the protected earnings rate (the amount the court determines you need to pay living costs).

An attachment of earnings order is a last resort for creditors. If you have debts you can't pay, it's a good idea to seek professional debt advice from an organisation such as StepChange or Citizens' Advice before your debt situation reaches this stage.

See related: 5 payoff strategies for attacking your debt, New rules set to curb aggressive bailiffs

Published: 4 April 2013