If you’ve been served with a third party debt order, it’s normal to worry about what could happen next and whether you’ll still be able to afford your essential living costs, like rent and bills. However, knowing what a third party debt order is and how it works can help put you at ease.
Essentially, a third party debt order is a way for a creditor to recover money owed by deducting a set amount from your bank account each month until the debt is repaid. There must be a County Court Judgment (CCJ) in place before a creditor can apply for a third party debt order.
What is a third party debt order?
A third party debt order is a court order that gives your creditor permission to recover payment of a debt directly from the third party holding your money (usually a bank or building society).
It can be used to recover most types of debt, such as personal loans, credit cards, overdrafts, and hire purchase agreements. The only condition for a third party debt order is that your creditor must already have a County Court Judgment (CCJ) against you.
The aim of a third party debt order is to freeze any money that would otherwise be withdrawn and spent on anything other than debt repayment. It can also guarantee your creditors receive what they’re owed as opposed to receiving nothing at all.
The third party has a responsibility in a third party debt order to inform both you and the court of the account number, the credit balance, and whether they can hold some of the credit balance to offset debit balances.
Third party debt orders are not used very often. Most creditors prefer to send bailiffs (enforcement agents) to your address to collect payment of the debt or use an attachment of earnings order to take the money directly from your wages before you get paid.
It’s also important to note that only the money in your account at the time the third party debt order is made and the amount equal to the outstanding debt will be frozen. This means that any money paid into your account after this date or above the amount owed will be safe and you will be free to withdraw and spend it as you wish.
How much debt do you have?
What is the process of being issued with a third party debt order?
Creditors must follow a set process when applying for a third party debt order.
We’ve outlined the steps usually involved below:
The judgment creditor applies to the court
The first step in the third party debt order process is your creditor completing form ‘N349’ and submitting it to the court.
There is a fee required to do this, which you’ll need to pay in addition to your outstanding debt. It currently costs £131 but will increase to £135 in April 2025.
The court will then write to your bank or building society and ask them to freeze a set amount of money in your account because you’ve failed to repay your judgment debt. Some charge a fee to do this, which you’ll also need to pay.
If your creditor already has a money claim issued against you in the Civil National Business Centre (CNBC), they must apply to the court that covers your home address.
The court sends you an interim third party debt order
Around a week after your creditor has applied for a third party debt order, the court will send you an interim third party debt order to let you know your account has been frozen.
The document will provide details of your court hearing, which will be held at your local county court hearing centre.
You should be given at least 28 days’ notice of the court hearing to give you enough time to prepare – especially if you’re planning to challenge the order and need to gather financial documents.
It’s important to note that no money will be taken from your account while an interim order is in place. Only if and when a final order is made will the money be withdrawn and paid to your creditor.
You attend a court hearing
The final step in the process is attending a court hearing. During the court hearing, a judge will consider your case and you’ll be given an opportunity to explain why the third party debt order shouldn’t go ahead.
The judge will then review the information you provided and decide whether or not to make a final third party order.
If they agree that a third party debt order is the right option, your bank or building society will be instructed to hand over the frozen funds to your creditors.
Can a third party debt order be applied to a joint debt?
The only time a third party debt order can be applied to a joint debt is if the joint debts are in the same names as the names on the joint bank account.
This means that your creditor can’t apply for a third party debt order or take money from a joint bank account unless the money is owed by all the account holders.
In other words, if your bank account is held jointly with someone else who doesn’t have anything to do with the debt, the application for a third party debt order will likely be rejected.
It’s important to know your rights when you’re served with a third party debt order – especially if you have joint debts with a partner or spouse.
Remember, when you take out joint credit, you agree to the creditor chasing both you and the other party for the full amount owed in the event you default on your payments.
Can I release the money frozen in a third party debt order?
If you’ve received a third party debt order that has left you struggling to pay your rent or bills, you might be able to apply for a hardship payment order, which is a court order to release some of the frozen funds.
It can release a one-off sum of money or set amounts of money over a fixed period until the court hearing.
However, you must be able to prove to the court that the third party debt order is what has directly led to you not being able to meet your essential living costs.
The court might ask to see documentation to confirm that the third party debt order is what has pushed you into financial hardship. This can include copies of bank statements or payslips.
To apply for a hardship payment order, you need to complete form ‘N244’ and submit it to the court. This usually requires a fee, but it can be reduced or waived if you can’t afford it because your money has been frozen.
Can I challenge a third party debt order?
If you or the third party objects to the third party debt order being made, it might be possible to get it set aside (cancelled).
However, you must submit written evidence to the court outlining your reason for the objection at least three days before your scheduled court hearing.
Remember, you’ll always be given a chance to argue against the third party debt order during your court hearing, which can result in the interim order being cancelled and no final order being made.
Here are some of the situations that could be grounds for challenging a third party debt order:
- The debt is too small
- The money is held in a joint bank account and the other party has nothing to do with the debt
- The order would cause serious financial hardship for you and your family
- The money is used for essential living costs
To apply to cancel a third party debt order, you must complete form ‘N244’. It will ask for written proof of financial hardship, which can include wage slips and bank statements.
It’s also important that you explain how anyone else living at the property will be affected by a third party debt order. For example, if you have children or relatives that rely on you financially.
There is usually a fee required to get a third party debt order set aside, but this can be reduced or waived if your money has been frozen and you’re not in a position to pay it.
How can I prepare for a third party debt order?
The best way to prepare for a third party debt order is to settle the debt before it gets to a stage where a CCJ or third party debt order is even considered.
Even if you can’t afford to repay the debt, you may be able to negotiate a payment plan with your creditor where you settle the debt in smaller, more manageable instalments. This can help you avoid legal action altogether.
However, if you’ve been issued with a final third party debt order, the best thing to do is to budget to ensure your essential living costs are covered. Unless you submit written evidence to the court that the third party debt order would make you unable to afford your rent or bills at least three days before your court hearing, it’s unlikely to be stopped.
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Conclusion
Third party debt orders are a form of debt recovery that your creditor can take to recover money owed in an unpaid County Court Judgment (CCJ). If the court thinks a third party debt order should be made, money being held in your bank account or building society equal to your total debt will be frozen and later withdrawn to pay your creditor.
A third party debt order is a serious matter. If you’re worried it will leave you unable to pay your essential living costs, you must let the court know immediately. They might be able to release all or some of the money to ensure you and your family can maintain a reasonable standard of living.
The court might also agree to cancel a third party debt order if you can prove that it shouldn’t have been applied in the first place, for example, if it would cause serious financial hardship for you and your family or if the other party listed on the joint bank account has nothing to do with the debt.
