Step 3 Dealing with your priority debts

​Business hire purchase or conditional sale

Extra advice:

what kind of agreement do you have?

If you have a hire-purchase or conditional-sale
type of credit agreement, it should state this clearly. This information only covers hire-purchase and conditional-sale agreements which come under the Consumer Credit Act. Your agreement will not come under the Consumer Credit Act if it was taken out by a limited company. If you are not sure what type of agreement you have, check your agreement or contact us for advice.

You can buy goods on different types of credit agreements. With most credit, you own the goods straight away and only owe the money to the creditor. The creditor cannot ask you to return goods you bought with most types of credit. However, with hire-purchase and conditional-sale agreements, you do not own the goods until you have paid the last instalment. The most common type of goods bought on hire-purchase agreements are cars.

Can my lender take back the goods?

If you fall behind with your payments, the lender may be able to ask you to return the goods and then sell them to reduce the debt. You cannot sell the goods yourself without the lender’s permission.

Have you paid less than a third of the debt?

If you fall behind with payments, the lender may be able to repossess the goods. If you have paid less than a third of the debt, the lender may not need to get a court order before taking your goods back. 

You may be able to return the goods. See Returning the goods voluntarily below.

Have you paid off more than a third of the debt?

If you have paid off more than one third of the total owing, the creditor must go to court to ask you to return the goods. They cannot just come round and remove them.

Returning the goods voluntarily

You may be able to return the goods by writing to your lender to end your agreement. This is only possible if your lender has not already ended your agreement. You will owe up to half the agreement amount, any arrears and reasonable charges if the goods are damaged. If you have already paid half of the payments under the agreement, you will not usually be asked to pay anything more. Once you have returned the goods, you can treat any debt you still owe as a non-priority debt.

Dealing with your non-priority debts

Keeping the goods

If it is important to you to keep the goods, you may want to treat this as a priority debt. If you do this, be prepared to explain to your creditors why you need the goods (for example, you need the car for your business or you live in a rural area with very limited transport).

Working out your household outgoings

See our fact sheet:

Time orders.

If your lender will not agree to this, you may be able to apply to the sheriff court for a ‘time order’. If this is granted, you may be able to keep your goods and make smaller reduced payments to your lender. Contact us for advice.

What if my lender takes court action?

If your lender has taken court action, you may not have to return the goods as long as you agree to make the payments that the court decides. You can ask the court to allow you to pay less than your normal payments on the agreement if you can show that this is all you can afford to pay.


Extra advice:

get help

The law about hire-purchase and conditional-sale agreements is fairly complicated. If you are behind with payments on this type of agreement, contact us for advice.