If you fail to keep up repayments on a debt, your creditor may apply for an Attachment of Earnings Order.
This involves taking money directly from your wages before you have a chance to spend it on anything other than debt repayment.
The thought of money being deducted from your wages when you’re already struggling financially can be worrying, so it can be useful to know a bit more about what the process entails.
What is an Attachment of Earnings Order?
If you have outstanding debt, your creditor may go to the court to apply for an Attachment of Earnings Order.
This is a court order that instructs your employer to make regular deductions from your wages each time you get paid (weekly or monthly) to repay a debt.
The money, which is worked out as a percentage of your net income, is sent directly to the court before being passed on to your creditor.
Usually, an Attachment of Earnings Order is issued if your creditor has attempted to come to an agreement with you over how to repay the debt and believes taking the funds directly from your wages is the only they will recover the money.
Attachment of Earnings Orders can be issued for various types of debt, including:
- Rent or mortgage arrears
- Income tax, VAT, or TV licence arrears
- Credit debts
- Student loans
How does an Attachment of Earnings Order work?
If you’ve fallen behind on your County Court Judgment (CCJ) payments, you may receive a legal document in the post informing you that your creditor is taking further legal action against you in the form of an Attachment of Earnings Order.
This letter will come with a ‘statement of means’ form (N56 form) enclosed which must be completed and returned to the court alongside a copy of your most recent payslip within eight days.
Once the court has received details of your income and expenditure and how much you can realistically afford to pay towards the debt each month, a court officer will use the information provided to draft the order.
When the Attachment of Earnings Order has been made, your employer will receive a letter telling them how much their employee owes and how much money should be deducted from your wages.
What is a consolidated Attachment of Earnings Order?
If you have multiple CCJs, you can ask the court to consolidate them into one monthly payment so only one deduction is made from your wages each month.
The money will be sent directly to the court as a lump sum before being split among your creditors.
However, while there are no court fees required, the court will take 10p for every £1 paid, meaning a consolidated Attachment of Earnings Order can cost you more in the long run.
For example, if you owe £1000 in total and currently pay £50 a month, the court will take £5 a month and pay £45 to your creditors.
To apply for a consolidated Attachment of Earnings Order, contact the court in writing, giving details of the orders you want to consolidate. Once the court has received your application, your creditors will have 14 days to object to the order being made.
How much is deducted from an employee’s pay with an Attachment of Earnings Order?
The amount deducted from your wages depends on how much you earn but should never leave you with than less 60% of your net pay. This is your Protected Earnings Rate (PER) and is the lowest amount of take-home pay you can earn after all other deductions have been made.
If you get paid weekly
- Between £75 and £135 – 3% deduction
- Between £135 and £185 – 5% deduction
- Between £185 and £225 – 7% deduction
- Between £225 and £355 – 12% deduction
- Between £335 and £505 – 17% deduction
- Over £505 – 17% deduction from the first £505 and 50% for the amount above £505
If you get paid monthly
- Between £300 and £550 – 3% deduction
- Between £550 and £740 – 5% deduction
- Between £740 and £900 – 7% deduction
- Between £900 and £1,420 – 12% deduction
- Between £1,420 and £2,020 – 17% deduction
- Over £2,020 – 17% deduction of the first £2,020 and 50% for the amount above £2,020
When can a creditor not apply for an Attachment of Earnings Order?
Your creditor can’t apply for an Attachment of Earnings Order if you:
- Earn less than £75 a week or £300 a month
- Owe less than £50
- Are self-employed
- Are unemployed
- Are in the army, air force, or navy
- Are employed on a boat (except a fishing boat)
What if I can’t afford an Attachment of Earnings Order?
If you think too much money would be taken from your wages and an Attachment of Earnings Order would put you at risk of extreme financial hardship, you must tell the court that you don’t agree with the amount proposed within 14 days.
The court will then arrange a hearing with a district judge which you must attend with evidence to support your claim, including details of any other debts you have and your personal budget.
If the Attachment of Earnings Order has been in place for more than 14 days but your circumstances have changed, the court may still agree to arrange a hearing to discuss amending the terms of your order. This might happen if your wages have been cut or your outgoings have increased for reasons beyond your control, for example.
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Will my deductions ever increase?
Because your deductions are based on how much you earn, any changes to your wages can have a direct impact on your monthly payments.
For example, if you work overtime, earn extra commission, or get a bonus, this can result in a pay increase and therefore a larger deduction from your wages.
This also works in reverse, so if you work fewer hours or get a pay cut, your deductions will be recalculated based on your new net pay.
How an Attachment of Earnings Order can affect your job
If you work in certain industries
Depending on your line of work, there can be serious consequences if your employer discovers an Attachment of Earnings Order has been made against you.
For example, some organisations, especially those in the financial sector, have a policy of dismissing employees who are experiencing severe financial difficulty or that have had court orders issued against them.
This information can usually be found in your employee contract or by asking a member of your workplace’s HR department.
If you change jobs
If you change jobs, you must give the court details of your new employer as soon as possible.
There can be a delay in the time it takes for certain information, such as tax codes and Pay As You Earn (PAYE), to be passed from your former employer to your current employer, so informing the court can prevent any backdated payments from being taken from your wages.
The Attachment of Earnings Order will simply pick up from where it left off and stay in place until your remaining balance has been repaid.
If you lose your job
If you lose your job or get made redundant, deductions will stop. However, that doesn’t mean the Attachment of Earnings Order is cancelled and you will still owe the money.
When you get a new job, you must provide the court with details of your new employer as soon as possible so deductions can pick off where they left off. If you know you are going to be out of work for a long period of time, however, you may be able to apply to have the order cancelled altogether.
What happens if I’m off work?
If you’re off on paid sick leave and no other changes are made to your income, deductions will continue as normal.
However, if your take-home pay is reduced, because you’re on statutory sick pay for example, then your deductions may decrease. Furthermore, if your earnings drop below the minimum threshold for an Attachment of Earnings Order (£300 monthly and £75 weekly), deductions will be stopped altogether.
The rules for maternity pay are a little different. For example, deductions can’t be made from statutory maternity pay but can be taken from contractual maternity pay.
Can I stop an Attachment of Earnings Order?
When you receive a letter informing you that a creditor has applied for an Attachment of Earnings Order, you may still be able to get it stopped.
On the N56 form, select the option for a ‘suspended Attachment of Earnings Order’, giving your reasons for why you don’t think the order should go ahead. This could be because you can’t pay your bills or you are worried you will lose your job.
The court may also accept your reasons if you agree to come to an alternative agreement with your creditor over how to repay what you owe.
When an Attachment of Earnings is stopped at this stage, your employer won’t be informed and no deductions will be made from your wages (unless you fail to make payments to your creditor as agreed).
Can my employer refuse to make deductions?
Once your employer receives an Attachment of Earnings Order for you, they are legally required to make deductions as instructed.
If, for whatever reason, your employer willingly refuses to make deductions or enforce the order, they can receive a court summons and may be be issued with a fine.
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Conclusion
An Attachment of Earnings Order is a way for your creditor to take the money they are owed directly from your wages to repay a debt, such as a CCJ or an outstanding council tax bill.
Being served with an Attachment of Earnings Order can be daunting, but there is no need to panic. Complying with the order can help you avoid further legal action.
Your monthly payments are worked out on a sliding scale based on how much you earn, but you can rest assured that you will never be left with less than 60% of your net earnings.
When you receive an Attachment of Earnings Order, it’s important to respond with details of your financial situation as soon as possible. Ignoring an N56 form or providing false information is classed as an offence.
