Understanding Missed Payments and Arrears
When you miss a payment on a debt – such as a loan, credit card, mortgage, rent, or tax bill – you are said to be “in arrears.” Debt arrears simply mean you have fallen behind on your agreed repayments. This can happen for many reasons, including unexpected expenses, changes in income, illness, or job loss.
Missing payments can have serious consequences. Lenders or landlords may charge extra fees, add interest, or take steps to recover the money you owe. If arrears are not addressed, you could face court action, damage to your credit rating, or even the risk of losing your home in the case of mortgages or rent.
You have rights and responsibilities when you fall into arrears. For example, under the Consumer Credit Act 1974, lenders must send you a notice of sums in arrears before taking further action on certain types of loans or credit agreements. If you owe tax and cannot pay on time, HM Revenue and Customs (HMRC) offers guidance on how to get more time or arrange instalments.
It’s important to act quickly if you find yourself in arrears. Ignoring the problem can make things worse, but seeking help early allows you to explore solutions and avoid escalation. Understanding your options for managing debt can help you regain control and protect your financial future.
Common types of arrears include missed payments on loans, credit cards, mortgages, rent, and taxes. Each type of debt may have different rules and consequences, so knowing your rights is key to finding the best way forward.
Common Types of Debt Arrears
When it comes to arrears, some of the most common types people face are mortgage arrears, rent arrears, and tax arrears. Each of these can have serious consequences if not addressed promptly, and there are specific rules and protections in place for each type.
Mortgage arrears occur when you miss payments on your home loan. Falling behind on your mortgage can eventually lead to repossession, but lenders must follow certain steps under the Financial Conduct Authority (FCA) rules before taking court action. You have the right to be treated fairly and to be offered options to help you get back on track.
Rent arrears happen when you miss payments to your landlord or letting agent. If you rent from a private landlord, a housing association, or the council, your landlord must follow the correct legal process before evicting you. The Housing Act 1988 and related legislation set out your rights and the steps your landlord must take.
Tax arrears refer to unpaid taxes, such as Council Tax or income tax. Local councils and HM Revenue & Customs (HMRC) have the power to take enforcement action if you fall behind, including court proceedings or instructing bailiffs. However, you have the right to receive notice and the opportunity to make arrangements to pay.
Understanding the differences between these types of arrears – and your rights in each situation – can help you take the right steps to deal with missed payments and avoid more serious consequences.
Mortgage Arrears (Unpaid Mortgage Payments)
If you fall behind on your mortgage payments, this is known as being in mortgage arrears. Missing payments can have serious consequences, including the risk of your lender starting repossession proceedings to take back your home. Most lenders will follow a set process if you miss payments – usually starting with reminder letters and escalating to formal arrears notices and possible legal action if the situation isn’t resolved.
It’s important to contact your lender as soon as possible if you’re struggling to pay, as they are required under the Financial Conduct Authority (FCA) rules to treat you fairly and consider reasonable repayment arrangements. Early communication can help you explore options to manage your arrears and avoid further action.
For more detailed guidance on your rights, the steps lenders must follow, and practical ways to deal with missed mortgage payments, visit our dedicated page on mortgage arrears.
Rent Arrears (Unpaid Rent Payments)
If you fall behind on your rent payments, you are considered to be in rent arrears. This can put you at risk of eviction, as your landlord has the legal right to seek possession of the property if arrears are not resolved. However, tenants have important rights and protections under laws such as the Housing Act 1988 and the Protection from Eviction Act 1977. Landlords must follow proper legal procedures before taking action, and tenants have the opportunity to negotiate payment plans or seek support.
To learn more about your rights, your landlord’s responsibilities, and practical steps you can take to manage unpaid rent, visit our detailed guide on rent arrears.
Tax Arrears (Unpaid Tax Payments)
Falling behind on tax payments can lead to tax arrears, which means you owe money to HM Revenue and Customs (HMRC). If you don’t pay your tax bill on time, HMRC may add interest and penalties, and could take enforcement action to recover the debt. The rules around tax arrears are set out in the Taxes Management Act 1970, which outlines your responsibilities and the powers HMRC has to collect unpaid taxes.
If you’re struggling to pay, it’s important to contact HM Revenue and Customs (HMRC) as soon as possible. They can often help you set up a payment plan or give you extra time to pay, which may help you avoid further charges or more serious consequences.
For a step-by-step guide on what to do if you have tax arrears, including how to work with HMRC and what to expect if you miss payments, see our detailed page on tax arrears.
Your Rights and Responsibilities When in Arrears
Your Rights and Responsibilities When in Arrears
If you miss payments on debts like loans, credit cards, mortgages, or rent, it’s important to understand both your legal rights and your responsibilities.
Your rights:
You have the right to be treated fairly by your creditors. They must follow the rules set out by regulators such as the Financial Conduct Authority (FCA) and give you clear information about your arrears and any charges. In some cases, you may have rights to change or end your agreement – knowing about cancelling a credit agreement can help you avoid further arrears or make more informed decisions.
Your responsibilities:
Once you fall behind on payments, you must communicate with your creditors as soon as possible. Ignoring letters or calls can make the situation worse. You should explain your circumstances honestly and keep copies of all correspondence and payment records. Always check your original credit or tenancy agreements so you understand what you have agreed to and what your options are.
Potential legal consequences:
If arrears continue and you do not make arrangements to pay, your creditor may take legal action. This could result in a County Court Judgment (CCJ), which can seriously affect your credit rating and lead to enforcement action. To learn more about what happens if your case goes to court, see this guide on County Court.
By knowing your rights, communicating clearly, and keeping good records, you can help protect yourself and find a way forward if you fall behind on payments.
Options to Manage and Resolve Debt Arrears
If you’ve missed payments on a loan, credit card, mortgage, or rent, taking early action is key to preventing the situation from getting worse. Here are practical steps you can take to manage and resolve debt arrears:
1. Review Your Finances and Prioritise Debts
Start by checking your income and outgoings to understand what you can realistically afford to pay. Some debts, like rent or mortgage arrears, are classed as “priority debts” because missing payments can have serious consequences, such as losing your home.
2. Consider Informal Repayment Arrangements
As a first step, you may want to approach your creditors directly to explain your situation and ask for more time or reduced payments. Many lenders are willing to help if you contact them early. Learn more about how informal repayment arrangements work and whether they might suit your needs.
3. Explore Formal Debt Solutions
If informal arrangements aren’t enough, formal solutions may be available. A popular option is a Debt Management Plan (DMP), which allows you to make affordable monthly payments to cover your non-priority debts. These plans are usually managed by a debt advice organisation and can help you regain control of your finances.
4. Make Early Repayments Where Possible
If you have access to extra funds – perhaps from savings or a bonus – consider early repayment of your arrears. This can reduce the amount of interest you pay and may help clear your debts faster. However, check your agreement for any early repayment charges.
5. Negotiate with Creditors and Bailiffs
If your debt has progressed to enforcement action, such as bailiffs visiting your home, it’s still possible to negotiate. You can often prevent further action by negotiating with bailiffs to agree a payment plan that you can afford.
6. Seek Advice Early
Don’t wait until the situation becomes urgent. Getting expert advice early can help you understand your rights under laws such as the Consumer Credit Act 1974 and the FCA’s rules on treating customers fairly. Professional support can guide you through your options and help prevent court action or repossession.
Taking these steps can make a big difference and help you get back on track. If you’re unsure where to start, reach out for advice as soon as possible.
Special Considerations and Related Topics
When dealing with missed payments and arrears, it’s important to consider all types of financial obligations that might affect your situation. In addition to loans, credit cards, mortgages, and rent, you may also face fines and penalty charges for late payments or breaches of contract. These can quickly add to your total debt and, in some cases, lead to enforcement action or extra costs.
Another issue to be aware of is gambling debt. While gambling debts are often considered “non-priority” compared to rent or utility arrears, they can still have a serious impact on your finances and ability to keep up with essential payments.
If you are owed unpaid or backdated pay from your employer, this can make it even harder to manage arrears. It’s important to understand your rights around claiming unpaid wages, as resolving these issues may help you get back on track with your debts.
For those receiving Universal Credit, support is available if you are struggling with arrears. You can find guidance on help with debt and rent arrears on Universal Credit, and further practical advice is available from Debt and rent arrears on Universal Credit – Citizens Advice. Acting quickly is crucial, especially if you risk losing your home or essential services.
If you’re facing any of these special circumstances, exploring the linked guides above can help you understand your options and take steps to resolve your arrears.
Understanding Time Limits and Legal Consequences
When you fall behind on payments, it’s important to understand the time limits that affect your debts and what legal actions creditors can take. In the UK, most unsecured debts – such as credit cards, personal loans, and utility bills – are subject to specific rules about how long creditors have to recover money you owe. These rules are set out in the Limitation Act 1980, Section 5, which generally gives creditors six years from the date of your last payment or written acknowledgment of the debt to take court action.
If a creditor does not start court proceedings within this six-year period (or twelve years for some mortgage shortfalls), the debt may become “statute-barred.” This means the debt still exists, but the creditor can no longer use the courts to force you to pay. To learn more about how these rules work and when a debt becomes unenforceable, see our guide on debt time limits and statute-barred debts.
It’s important to remember that not all debts are covered by the same rules, and some – like Council Tax or certain benefit overpayments – may have different time limits. If you don’t resolve arrears before the limitation period ends, creditors may take legal action such as applying for a County Court Judgment (CCJ), instructing bailiffs, or seeking to secure the debt against your home.
Knowing your rights around time limits can help you avoid unnecessary payments or legal problems. If you’re unsure about your situation, understanding these rules is a key step towards protecting yourself and dealing with arrears effectively.
Managing Credit Card and Loan Arrears
Missing payments on credit cards or personal loans can quickly lead to arrears, affecting both your credit score and your ability to borrow in the future. Lenders will usually report missed payments to credit reference agencies, which can make it harder or more expensive to get credit later on. If you fall behind, you may also receive formal notices from your lender, as required under the Consumer Credit Act 1974. These notices outline what you owe and what action the lender might take if you don’t catch up.
If you’re struggling to keep up with repayments, it’s important to act quickly. Start by reviewing your budget and prioritising essential spending. Contact your credit card or loan provider as soon as possible – many lenders are willing to discuss repayment plans or offer temporary relief if you explain your situation. For practical steps and more details on managing credit card arrears, see our dedicated guide.
In some cases, you might be able to reduce your debt more quickly by making early repayment of your loan or credit card balance. Alternatively, if your agreement is still within a cooling-off period or under certain conditions, cancelling a credit agreement might help you avoid further arrears.
Remember, getting help early can make a big difference and may prevent more serious consequences like default notices, court action, or involvement of debt collectors. If you’re unsure about your rights or next steps, don’t hesitate to seek advice.
