Time orders (Scotland)

Use this fact sheet to: 

• understand your options if you have missed payments under your credit agreement;

• understand what you can do if your creditor is threatening court action after you have missed payments;

• help you to ask the court to agree to affordable monthly payments; and

• help you to ask the court to change the period over which you make payments.

What is a time order?

A time order is a way of asking the court to give you more time to pay a credit agreement if you have fallen behind with the payments. It can change:

• the amount you have to pay each month;
• how long the loan will last; and
• in some cases, it is also possible to change the interest rate.

A time order is particularly useful if you have a secured loan and your lender is threatening to repossess your home.

Up until now, applications for a time order have not been made very often. However, there have been some recent changes to the rules which mean that time orders may now be helpful to more people.  Because there have been so few time orders in the past, you may find that your local advice agency, or even the sheriff clerk at your local sheriff court, has not dealt with an application before. 

What credit agreements are covered?

If you have a loan agreement it should state whether it is covered by the Consumer Credit Act.  The agreement should have a heading that says, ’Consumer Credit Agreement regulated by the Consumer Credit Act 1974’.

You can apply for a time order if your credit agreement is regulated by the Consumer Credit Act 1974. This depends on when you took out your agreement and how much you borrowed at the time. Your loan will be regulated if you borrowed less than the following amounts.

• £15,000 if you took out your credit agreement before 1 May 1998.

• £25,000 if you took out your credit agreement between 1 May 1998 and 5 April 2008.

There is no financial limit if you took out your credit agreement from 6 April 2008 (except for some loans for business purposes).

From 21 March 2016, secured loans are no longer regulated by the Consumer Credit Act. They are instead regulated mortgage contracts. You may be able to apply for a time order for a regulated mortgage contract, including your first mortgage. Contact us for advice if you are not sure about whether your loan is covered.

When can you apply for a time order?

There is no charge for making an application to the sheriff court for a time order, although a fee will be payable to sheriff officers for serving the notice on the creditor. You can only apply when certain things have happened.

When an arrears notice has been issued by your lender

The lender usually has to send you an arrears notice if you have missed two or more payments. It should tell you how much you owe under the agreement, how much the arrears are and if any interest or charges are being added.

You can apply for a time order after you have received the arrears notice. You must write to your lender and give them 14 days' notice that you are going to apply for a time order.  You must include in the letter details of the offer of payment you are going to make in your application.

Depending on the type of agreement you have, you may only be able to apply for a time order against the arrears.

Don’t forget to keep a copy of your letter, as you will need to show this to the court when you apply for a time order.

The procedure and forms you need to use depends upon whether you have a secured loan, a hire purchase agreement, conditional sale agreement or an unsecured loan. See the later sections for details of how to apply.

When a default notice, calling in notice or termination notice has been issued by the lender

The lender can issue a default or termination notice and call in the loan if you have fallen behind with payments. Once you have received this, you can make an application to the sheriff court for a time order. You don’t need to write to your lender to give notice that you are going to apply at this stage. See the later sections for details of how to apply.

When court action has been taken

If a creditor has already started court action against you then you can still apply for a time order. You can do this when you reply to the claim. See the later sections for details of how to apply.

What is time to pay

Since 28 November 2016, there are two different sheriff court procedures.

• Simple procedure (for debts of £5,000 or less).

• Ordinary cause (for debts over £5,000).

Claims for child support, personal injury, defamation and mortgage or rent repossession do not use the simple procedure. If a claim for a debt of up to £5,000 was started before 28 November 2016, the procedure may be different so contact us for advice.

If you are using the simple procedure you just need to apply for time to pay. The court can make a time order if this is necessary but may decide to make a different sort of order that still gives you time to pay. See our Simple procedure time to pay fact sheet.

If you are using ordinary cause, or other older court processes, it can be confusing because there are three different applications that can be made to the sheriff court about time to pay. This fact sheet is only about time orders, but it might be helpful to understand a little bit about the other procedures.

You can apply for a ‘time to pay direction’ if a creditor starts court action for an unsecured debt and you want to pay the ‘decree’ at a rate you can afford. If you keep up with the payments, it stops the creditor from taking most types of action to enforce the decree. Enforcing a decree is called 'diligence'.

A ‘time to pay order’ allows you to pay the decree on an unsecured debt at an affordable rate.  It also stops any action to enforce the decree. You can only apply for a time to pay order after a decree has been granted and you have received a charge for payment. See our Time to pay directions and orders fact sheet.

Time orders have wider powers than time to pay directions and time to pay orders because the court can also change the interest rate. However, it is more difficult to get a court to agree to a time order.

What type of debt can you have a time order on?

Unsecured credit

If you have an ordinary credit agreement you may not need to ask for a time order to be made. An application for a DAS debt-payment programme might be a better option, see our Debt Arrangement Scheme fact sheet. An ordinary credit agreement would not include:

• a secured loan;

• a second mortgage;

• a hire purchase agreement; or

• a conditional sale agreement.

However, you may want to ask for a time order if an arrears notice or a default notice has been issued, but the creditor is refusing either to accept your offer of payment or to freeze the interest.

If interest is still being added on to the debt and the creditor refuses to take court action, then applying for a time order may be the only way to ask for the interest to be frozen. If the court makes a time order and you keep up to date with the payments, a creditor cannot insist on having a sheriff court decree against you.

Hire purchase or conditional sale agreement

Hire purchase and conditional sale agreements are unlike ordinary credit agreements because the goods bought do not belong to you until you have paid off the credit agreement. Hire purchase and conditional sale are very similar and this fact sheet uses the term ‘hire purchase’ to describe both types of agreement.

If you fall behind with the payments under a hire purchase agreement, the lender can ask for the goods to be returned and then sell them to reduce the debt. If the goods are not returned voluntarily, the lender can take court action to get the goods back.

If your creditor goes to court to get your hire purchase goods repossessed this is called an ‘action for delivery’ and they will ask for a ‘decree of delivery’. 

If a time order is in place the lender cannot terminate the agreement or repossess the goods. Time orders can be useful to reschedule hire purchase agreements as both the arrears and future instalments can be rescheduled.

There is confusion in Scotland about whether or not a creditor always has to get a court order to repossess hire purchase goods. In England it is not always necessary for the creditor to have a court order before repossessing but, because Scottish law on this is unclear, you may want to point out to the creditor that they should seek a court order before repossessing goods.  If the creditor seizes the goods without a court order, the law on this point can only be made clear by going to court.

When a creditor goes to court to try to get hire purchase goods back, you can ask for the decree of delivery to be suspended on the condition that you pay a fixed amount per month. This will usually be to pay the normal monthly instalment plus an amount on top to clear the arrears.

You can ask the court to make a time order if you cannot afford to pay the full instalments. The court will often make a court order to let you keep the hire purchase goods and pay off the agreement at a reduced amount without stating they are making a time order.

See Applying for a time order on a hire purchase agreement later in this fact sheet. 

Mortgages and secured loans

You may be able to use a time order to reschedule the payments on a loan that is secured on your house. You may be able to stop the lender repossessing your home.

You may not be able to apply until your lender takes court action, and a time order may not be your best option.

See Applying for a time order on a mortgage or secured loan later in this fact sheet.

Applying for a time order on an unsecured debt

The procedure you have to follow to apply for a time order if you have an unsecured debt depends upon whether you apply before or after court action has started. Whether you apply for a time order before or after court action, there will be a sheriff court hearing to decide on your application. The creditor can object to the time order being made and the sheriff will decide whether to make a time order in your case.

1.  Applying before court action

Applying is complicated and you will need help from a money adviser or a solicitor to complete the application and serve it.  See the Useful contacts section at the end of this fact sheet for information about how to find an adviser or a solicitor.

2. Applying after court action

You can still apply for a time order after your creditor has started to take court action.

The simplest way to apply for a time order if your creditor has started court action is to use the application form which you will receive along with the claim. Remember, if you are using the simple procedure, you will just need to apply for time to pay.

What if the creditor has started enforcement action?

Even if your creditor has started diligence or enforcement action it is not too late to make an application. You will know that enforcement action has started because a ‘charge for payment’ or ‘bank arrestment’ will have been served on you.

If you are using ordinary cause or other older court procedures, you may be better off applying for a time to pay order rather than a time order. Contact us for advice first before applying.

Applying for a time order on a hire purchase agreement

The procedure you have to follow for a time order if you have a hire purchase agreement depends upon whether you apply before or after court action has started.

Applying before court action

If the creditor has not yet gone to court, but has issued an arrears notice or a default notice on a hire purchase agreement, then you can apply to the sheriff court for a time order. The court can look at changing the terms of the whole agreement, not just the arrears, even if the whole loan has not been called in.

If you want to apply at this stage, get help from an adviser or solicitor. See the Useful contacts section at the end of this fact sheet for information about how to find help.

Applying after court action

If you have received court papers telling you that the creditor wants to repossess your hire purchase goods and you are trying to decide what to do, be careful and contact us for advice.

If you are using the simple procedure, you can just ask for time to pay on the forms provided.

Make sure you make it clear whether you want to keep the goods.

If you are using ordinary cause or other older court procedures, you may have received court papers which include a form that you can use to apply for a time order.

If you have received court papers which include an option to ask the court for a time to pay direction, this is not available for hire purchase debt unless the goods have been returned or repossessed. Unless this is the case, you can only apply for a time order.

Applying for a time order on a mortgage or secured loan

Since 21 March 2016, secured loans are no longer regulated by the Consumer Credit Act 1974. Secured loans and first mortgages are now regulated mortgage contracts.

You may be able to apply for a time order on a regulated mortgage contract, but may have to wait until your lender has taken court action to repossess your home. Contact us for advice to find out if you may be able to apply.

Even if you can apply, you may have better options. For more information about how to deal with mortgage arrears, see our Mortgage arrears fact sheet.

Southern & District Finance plc v Barnes

It should be easier to ask the court to make a time order since a decision in the court of appeal in 1995. The case is called Southern & District Finance plc v Barnes. This is very important as the court agreed that the whole amount of money owing on the agreement can be included in a time order.  Also the monthly instalments and the interest rate on the loan agreement can be reduced if the court thinks it is just to do so and it is needed to make the time order work.

Has the whole loan been called in?    

The law has not been entirely clear on what the court powers are when making a time order. Following two court of appeal cases, time orders for Consumer Credit Act debt seem to apply in two situations.

Time orders on arrears only

Sometimes a time order can only help with how much you should pay every month on the payments you have missed, leaving the ongoing monthly payments unchanged.  This might mean the court also needs to look at changing or freezing the amount of interest being added to the arrears and possibly the interest rate on the whole balance you owe under the agreement.

This is the case if the lender has only sent you an arrears notice (or in some cases a default notice) but the whole loan has not been called in. This is more likely where you have only had an arrears notice, as under the terms of most agreements the whole loan is called in automatically when the lender sends a default notice to you.

Time order on the whole agreement

You may have to wait for the loan to be called in before making your time order application, if you want to ask the court to reduce the payments you have to make on the whole agreement and not just the arrears.

Sometimes a time order can be used to change the whole agreement, setting lower payments and interest charges, and in certain circumstances stopping interest being added at all.  This can only be done when the whole loan has been called in by the lender, where the loan agreement has automatically terminated on default.

Do you have to be in temporary financial difficulties?

Anything you can say to show your situation is through no fault of your own will help when applying for a time order as the court will look at your payment record. Make sure you show how you got into debt and why you took the loan out.

It should be easier to ask the court to make a time order following cases in the Court of Appeal called Southern & District Finance plc v Barnes (1995) and Director General of Fair Trading v First National Bank (2001).

As part of the case of Southern District Finance plc v Barnes, the Court of Appeal also said that time orders should only normally be made if someone is in temporary financial difficulty. The court has not been very clear about how they should decide if your difficulties are ‘temporary’.

You may have to show that your case is not a normal one or there is a good chance of your circumstances improving. The court may well only give a time order for a limited period.  You may have to ask for any exceptional circumstances to be taken into account to allow you to have a time order over a longer period.

However, in Director General of Fair Trading v First National Bank the court looked at whether you need to be in temporary financial difficulties to have a time order. They said that section 129 of the Consumer Credit Act 1974 allows the court to make such order as seems just to it in all the circumstances.

• Argue that in your case it is reasonable for the court to make a time order over a longer period.

• Make sure the court takes all your circumstances into account.

• Explain how your circumstances are likely to improve, even if this is some years away.

• Point out that in the Barnes case, one of the time orders was made over 15 years and this was considered ‘just’.

What should you ask for?

If you cannot afford the full instalments you need to ask for the loan and arrears to be re-scheduled.

• For the court to be able to make a time order you must be able to afford to make an offer of payment. The court will consider whether you can afford to pay what you have offered, or if you are offering as much as you realistically can afford.

• The court has to look at the position of the creditor as well as your situation when deciding if it is ‘just’ to make a time order. This means if you cannot make an offer at all, or are unlikely to ever be able to pay off the loan, the court may decide not to make a time order.

• If you have asked for a new instalment rate but want to repay the debt within the same period of time, then you can ask the court to change the interest rate to allow you to do this. Also, the interest may be so high that your reduced payments will have no effect unless the interest is reduced.  You will also need to ask for any default interest and charges to be frozen.

• If you can afford to make the normal monthly payment you need to ask for a time order to fix payments on the arrears only. If you get a time order on the arrears only, you may want to ask the court to reduce or freeze the interest in order to let you repay the debt over a reasonable time. This will be necessary where the interest to be added on to the arrears is the same or more than the amount you can afford to pay towards clearing the arrears.

Is it ‘just’ to make a time order?

The court needs to look at the creditor’s position as well as your circumstances. Make sure you add any points that may help the court decide that your case is just.

• Was the reason you took out the credit a good one?

• Could you afford the payments when you first took out the agreement?

• Was your agreement very expensive or not appropriate for your needs at the time? Point out a high interest rate and how much you would have to pay back over the whole period.

• Have you taken out further credit since? If so, then was there a good reason for this?

• Have you had a good payment record until the point you stopped paying?

• What is the reason for your non-payment? Have your circumstances changed? Explain the background to your situation.

• Have you tried to sort out your problems and ask the creditor for a payment arrangement (showing that you haven't ignored the debt)? If the creditor has refused to negotiate, point this out. Start making the payments you have offered as a gesture of goodwill.

• Is your situation temporary and likely to improve in the future? The court is likely to want to make a time order for a time-limited period.

Costs

You need to be careful with time order applications in relation to secured loan agreements. The secured lender is usually allowed to add possession costs and charges to the outstanding balance you owe on your loan.

If your time order is refused you may have lots of extra costs added to your debt. This will usually happen automatically.  If there is a good reason that you feel the costs are unfair, you can ask the court to refuse the lender’s costs. This might be if the creditor has been unreasonable in some way.

Unfair relationships

If you feel the interest rate charged on your agreement is excessively high, or that the terms and conditions of the agreement are unfair, you may be able to take action against your lender.  This may also apply if your lender has behaved unfairly in the way in which they have dealt with your agreement. It will be up to the lender to prove that the agreement is not unfair. The court will have wide powers to alter the terms of the agreement or even order the lender to pay money back to you. The Competition and Markets Authority (CMA) provides guidance about unfair terms in consumer contracts.     

You may be able to use the unfair relationships test. This applies to all agreements since April 2008, even if they are not regulated under the Consumer Credit Act. It doesn’t matter when your agreement was first taken out. You can apply before your lender takes you to court. You can also ask for the court to look at this issue as part of an existing court case.

There is no set list of what is an unfair relationship. This means that taking court action using these rules is complicated. You must get proper legal advice. Contact us for advice about finding legal help.

The rules cannot be used for regulated mortgage contracts. Regulated mortgage contracts include first charge mortgages and secured loans. The rules can be used for some secured loans that were taken out before 21 March 2016. 

Useful contacts

Citizens Advice Scotland (CAS) Offering independent and confidential advice on issues such as debt, money problems and welfare benefits. www.cas.org.uk

consumeradvice.scot Phone: 0808 164 6000 www.consumeradvice.scot

Law Society of Scotland You can search for a solicitor on their website. Phone: 0131 226 7411 www.lawscot.org.uk

Money Advice Scotland You can find a local money adviser through a link on the website. www.moneyadvicescotland.org.uk/

Other fact sheets that may help

Debt Arrangement Scheme fact sheet

Mortgage arrears fact sheet

Time to pay in simple procedure actions

Time to pay directions and orders