Unpaid Card Debt: Can You Be Taken to Court?

Yes, a card lender can take you to court for unpaid debt. If you do not pay what you owe, the people you owe can start court action to get you to pay, and for credit debts like credit cards, overdrafts and personal loans a creditor can ask you to pay back the whole amount owed¹. Court action is not the first step, though. For debts regulated by the Consumer Credit Act, which includes credit cards, a default notice must be received before a creditor can start getting a County Court judgment (CCJ)⁴.

A CCJ is a court order telling you to pay your debt⁴. It is often used as a way of recovering non-priority debts such as credit card debts and payday loans⁵. If a CCJ is made against you, you must keep to the terms of the court order, and if you do not, your creditor can go back to court and apply to enforce the debt⁶.

The most important thing to know is that ignoring the problem makes it worse, not better. A CCJ is recorded on your credit file for six years from the date it was made, unless you pay it in full within one calendar month⁷. There is free, impartial help available at every stage, and you cannot go to prison for simply not paying a credit card debt⁸.

What happens before court: arrears, default notice and debt collectors

Court action is the end of a long process, not the beginning. Missed payments are recorded on your credit file, and the creditor will soon think about sending you a default notice if the debt is something like a credit card or buy now pay later¹. A credit card company may send you a default notice if you miss three to six payments¹¹.

Default notices apply to debts regulated by the Consumer Credit Act, like credit and store cards, payday loans, personal loans and hire purchases¹². With debts regulated by the Consumer Credit Act you must get a default notice first, and debts regulated by the Consumer Credit Act must have defaulted before the people you owe can begin court action⁴. In Scotland, for debts regulated by the Consumer Credit Act, the creditor must have already sent you a default notice and must give you at least 14 days to comply before starting court action¹³.

Before a creditor can take you to court to get a CCJ they should send you a letter before action or a default notice, depending on the type of creditor it is⁵. If you have asked for information about your credit agreement and the creditor has not complied, the creditor may still be permitted to add interest and charges in line with your terms and conditions, send a default notice, pass your information to a credit reference agency or debt collector, sell your debt, or take your case to court without getting a judgment¹⁴.

Many debts are passed to a debt collection agency before court. A debt collection agency may be used by a creditor, such as a bank, a utility company or a phone company, to attempt to find a solution when you have an outstanding balance on a loan, store card or bills¹⁵. If your debt is passed to a debt collection agency, the people you owe can take court action against you¹⁶. A debt collection agency can take court action if you do not pay¹⁷.

County court judgments: what a CCJ means for you

A CCJ is an order from the court to pay back what you owe¹⁸. Having a CCJ can affect your credit rating and may make it harder for you to obtain credit in the future⁵. The CCJ will appear on your credit report, which is the information a credit reference agency provides to the companies that assess your applications¹⁹. This will count against you if you apply for credit in the future²⁰.

A CCJ can make borrowing harder or more expensive while it is recorded on your credit files²¹. If you have a CCJ made against you, you must keep to the terms of the court order, and if you do not, for example you fail to pay, your creditor can go back to court and apply to enforce the debt⁶. A creditor can ask the court to allow further action to collect the debt, including taking money from your wages or sending an enforcement agent, previously known as a bailiff, to your home³. A creditor might ask a court to send debt collectors to visit you²².

Depending on the amount of the debt and your circumstances, creditors could ask the court to send enforcement agents to seize your non-essential goods or make you bankrupt, and if you are a homeowner this could result in losing your home⁶.

When a card debt becomes too old to chase

A debt may become statute barred if it is very old, which means the creditor is out of time to collect it²³. For credit card debt and most other credit debts, the limitation period is six years⁹. The Limitation Act 1980 sets out the rules on how long a creditor has to take certain action against you to recover a debt⁹.

There is also a separate set of rules for persistent credit card debt. Credit card companies must help you if you have been in credit card debt for more than 18 months²⁴. Your credit card company will write to you and ask you to increase your monthly payment¹⁰. The Financial Conduct Authority has proposed extending the new rules that require firms to help people in long-term persistent credit card debt to catalogue credit and store cards, and consulting on a similar package for persistent overdraft debt²⁵.

If you are not sure who you owe money to, you can find out. All CCJs are listed on your credit file, so checking your credit file will show you for sure⁴.

Options if you cannot pay, and where to get free debt help

If you cannot pay what you owe, a company must help if you are struggling to pay back what you owe, which can include reducing or cancelling any interest or fees²⁴. Creditors have several options when you cannot pay: they can let you pay through an agreement like a debt management plan, agree breathing space, give a payment holiday, or accept a settlement including partial settlements²².

If you are not getting help from the credit card company, you can take your case to the free Financial Ombudsman Service¹⁰. The Financial Ombudsman Service is free to use if you are not getting help from the credit card company or the car finance provider¹⁰.

Free, impartial debt advice is available from charities including StepChange and National Debtline, and from Citizens Advice. If you are dealing with a court claim, free advisers can help you reply to it. If you think a financial service has not followed the rules, you can check what to do with Citizens Advice²⁴.

Can a debt collection agency take me to court instead of the card company?

Yes. If your debt is passed to a debt collection agency, the people you owe can take court action against you¹⁶. A debt collection agency may be used by a creditor to attempt to find a solution when you have an outstanding balance on a loan, store card or bills¹⁵. Passing the debt to a collection agency and taking court action are both further actions a creditor can take after missed repayments²⁶.

The same rules apply whether the card company or a debt collection agency is chasing the debt. For debts regulated by the Consumer Credit Act, a default notice must be received before a creditor can start getting a CCJ⁴. A debt collection agency can take court action if you do not pay¹⁷.

Do buy now pay later debts like Klarna work the same way?

Buy now, pay later now has similar protections to credit cards, which are covered under the Consumer Credit Act²⁷. That means a default notice must be received before a creditor can start getting a CCJ⁴. These bills from companies such as Klarna are important not to ignore²⁸. Klarna performs a soft credit check when you apply for its buy now, pay later financing²⁸.

Can I go to prison for not paying a credit card debt?

No. You cannot go to prison for simply not paying a credit card debt⁸. If you have been taken to court for a non-priority debt such as a loan or credit card, this would be in the County Court and you cannot be sent to prison²⁹. In some cases, you can go to prison for not paying court fines for criminal offences, but that is a different matter³⁰.

What should I do if I receive a claim form about a card debt?

Do not ignore it. A claim form gives you a deadline to respond, and ignoring it can lead to a CCJ being made against you. You can reply to the claim, and free debt advisers can help you fill in the response⁷. If you think the debt is not yours or has already been paid, you can dispute it with the creditor²³.

If you are not getting help from the credit card company, you can take your case to the free Financial Ombudsman Service¹⁰. If you think a financial service has not followed the rules, Citizens Advice explains how to check²⁴.