Dealing with debt can be a painstaking process. Often, the fact that you’ve gone into debt means that your financial situation isn’t the best, making it hard to resolve the situation. If things escalate, your creditors can take a wide variety of actions against you. If, after legal action, you still don’t or can’t pay, they may use a third party debt order form to try and secure money as it enters into your account. We take a look at how this process works and what you can do about it in our guide and frequently asked questions. 

What is a third party debt order? 

If a creditor takes out a County Court Judgement (CCJ) against you, the court basically orders you to pay them what you owe. However, if you don’t make the payments that the court demands, your creditor can use a third party debt order form to take money that is owed to you. Usually, this money comes directly from your current or savings account. 

So, if you’re expecting money from something like inheritance or redundancy, your creditor can apply to take that money as soon as it enters your bank account. This type of court action was previously known as a garnishee order. 

Although this sounds like an unappealing prospect, a third party debt order is a relatively rare form of action. Usually, creditors will use bailiffs or attachment or earnings orders instead. 

Why do companies use them?

According to Lovetts Solicitors, a creditor may use a third party debt order if they know that you have money incoming. It also gives them the element of surprise. Usually, you won’t know that you have such an order against you until it’s too late. It makes it a fairly underhand tactic, and as we’ll see, there are plenty of downsides to having them.  

Can they freeze my bank account?

Unfortunately, the answer to this question is yes, they can. Usually, when a creditor is applying for such an order, they first apply for an interim third party debt order. Basically, this instructs your bank or building society to freeze your account. Once this happens, a judge decides (within 28 days) whether the creditor can take money from your account. 

When a creditor takes this action against you, you’ll not be able to access any funds in your account, up to the amount you owe. Of course, this could mean that other bills and payments go unpaid, which can make life extremely difficult. 

How do you end up with a third party debt order form? 

The process leading to a company to use 3rd party debt order form is a long one. It usually starts with an unpaid debt that goes outstanding for a long time. A creditor may transfer your account to a debt collector, who will continue to chase you for money. 

If you continue to refuse to pay your debt, it may eventually go to court. Once you’ve got a CCJ against you, you’re legally required to pay what you owe. However, if you don’t, it’s at this point a creditor may use a 3rd party debt order against you. 

How do they work? 

The first thing that happens is that the creditor applies to a court for the order. It costs £110 to do so, and this is added to the cost of your debt. To get the bank to freeze your accounts may also cost you £55. A week after the order has been sent to your bank, you’ll receive an N349 Interim third party debt order. Basically, this is a notification that your account has been frozen. 

It’s worth noting that only the funds in your bank at the time the N349 form is processed is frozen. And, it only applies to the amount up to the value of your CCJ and costs. 

You’ll also get a court date set (at least 28 days in advance), at which time a judge will decide whether to process the final third party debt order. If they agree, the bank will send the frozen funds to your creditor. 

What is a hardship payment order? 

All of this sounds very serious, and it is. However, they aren’t allowed to leave you without money to live. So, you can appeal the order if it will freeze funds that you need to live. Similarly, if you need the frozen funds to cover your living costs, you can use a hardship payment order to unfreeze some of your money. It usually costs £255 to do this, but in extreme circumstances, they might waive the fee. 

What about joint debts?

If your money is in a joint bank account, the court cannot freeze the funds if only you owe the money. However, if you’ve got a joint debt with someone else and both of your names are on the account, they can apply for a third party debt order. 

Can I stop a third party debt order? 

Thankfully, there are several tactics you can try to stop a third party debt order from being processed. However, many of these depend on your financial situation, and each has to be proven in court. 

Some examples of circumstances where a judge won’t apply a debt order include: 

  • Your money is in a joint account, but only you owe the debt 
  • The amount they’re trying to claim is only small, and you can pay it in instalments 
  • A third party debt order will bring hardship on you and your family 
  • The money in your account belongs to someone else
  • Your bank account is overdrawn 

Where can I get help? 

If you’re struggling with debt or are facing a third party debt order, you might want to seek out some help from a professional. There are also several resources you can turn to that might help you deal with the situation. Citizens Advice is a good place to start, as they have a lot of information about many subjects related to debt and money.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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