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Hire Purchase and Debt

HP Debt

From the onset a HP agreement is considered as a debt. The goods become yours when the HP agreement is paid off. Until then the goods belong to the creditor or lending company. HP agreements normally include items such as a car, furniture and other household goods.

HP differs from other credit agreements in that, you cannot sell the goods, as they are not yours to sell until you own them. If you fall behind on your payments, the creditor can ask to have the goods returned, in which you are obligated to do so.

Fallen behind with HP Payments?

If you are struggling to keep up with your payments on a HP agreement the lender may possibly demand the goods back. However, if you've paid more than a third of the total debt, the lender has to go to the County Courts first (or the Sheriff Courts in Scotland).

If your creditor takes you to court

The courts are there to help both you and the creditor. If you can pay back the debt in reasonable instalments, the court may let you keep your goods and set this in place.

If you've paid more than a third of your debt

If you have paid more than a third of your debt and the creditor wants to try and get the goods back they may try to get a 'Return Order' from the court. This is to force you to return your goods.

There will be a court hearing first (probably in your local County Court). Before the hearing, the court sends you a 'Claim Form', which gives you the chance to return the goods yourself. They will also send you an 'admission form', which lets you: explain your financial situation and suggest an alternative offer of monthly payments. The court then talks to the creditor to see if they'll accept your terms. If they do, the hearing is cancelled; if not, or if you don't send back the form, the hearing will go ahead.

The court then decides whether or not to enforce the Return Order or 'suspend' it (meaning it will be enforced if you miss another payment later on). If you're allowed to keep your goods, the court will set up your new monthly payments.

If you don't attend the hearing, the judge usually grants the Return Order.

If you've paid less than a third of your debt

In this case, you can ask the creditor to agree new terms (if you can afford the monthly instalment plus something toward the arrears, creditors are often willing to help) or apply to the court for a 'Time Order'. This enables you to maybe alter the monthly payment, the length of the loan, or the interest rate.

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