If you’re struggling to repay a debt, the person you owe money to (your creditor) might deduct sums from your wages to ensure they receive the money they are owed. In Scotland, this is known as a wage arrestment or Scottish earnings arrestment.
It’s an important tool used to enforce payment obligations and ensure creditors are compensated for money lended. Payments can be taken monthly or weekly, depending on whether you’re paid monthly or weekly.
What is a wage arrestment (Scotland)?
In Scotland, a wage arrestment (also known as an earnings arrestment order) is a legal process that allows a creditor to recover monies they are owed. It is authorised under law and primarily governed by the Debtors (Scotland) Act 1987, which is the legislation that grants creditors the right to recover debts by instructing the debtor’s employer to make deductions from their monthly, weekly, or daily earnings.
Once a wage arrestment is in place, the employer is required by law to deduct the specified amount until the debt has been fully repaid, for a set period, or until the lender tells them to stop. Failure to do so can lead to the lender taking legal action against the employer.
Usually, a wage arrestment is only used if the lender has failed to come to an agreement with the debtor over how to deal with the unpaid debt and they have acquired a court order to recover the money owed.
The most common type of used collected with a wage arrestment is council tax arrears and benefits overpayments, but they can also be used for personal loans, utility bills, and credit card debts as long as the creditor has obtained a court order first. The money is deducted by your employer and sent directly to the lender (your local authority).
It is similar to an Attachment of Earnings in England and Wales, but with one particularly significant difference: an Attachment of Earnings is based on a debtor’s ability to pay, not their income and expenditure.
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What is the wage arrestment process?
The wage arrestment process typically follows the same set of steps, which we’ve outlined here:
Charge for payment
Before a wage arrestment can be obtained, the lender must first go to the court for a summary warrant, often called a ‘charge for payment’ or ‘charge to pay’. This is a final formal demand to pay a debt that usually gives you 14 days to make up the money owed.
Failure to pay the debt in this timeline will lead to the lender taking further action against you. This stage is typically your last chance to pay the debt before money is taken from your wages.
Notification to employer
If the decree remains unpaid, sheriff officers will serve an earning arrestment schedule to the individual’s employer, directing them to deduct a portion of the employee’s wages on a set basis.
Remember, employers are legally required to follow the instructions set out in the wage arrestment. The amount to be deducted will be clearly communicated to them in a clear and defined strategy. You’ll also be given an information package outlining how payments will be taken from your wages.
Protected earnings and deductions
In Scotland, individuals are entitled to a certain level of income protection known as ‘protected earnings’. These protected earnings are determined based on the employee’s net earnings and the number of individuals who are financially dependent on them.
Current statutory tables outline the deductions applicable depending on your income. In any case, you should never be left in a situation where you can’t afford your rent or mortgage, and bills and certain forms of income cannot be deducted, including some state benefits, redundancy pay, and tax credits. However, if they enter a bank account, they might be seized if an arrestment is placed on that account.
Duration and frequency of wage arrestment
In Scotland, wage arrestments can be continuous or periodic.
For example, continuous wage arrestments remain in effect until the debt is fully repaid, while periodic arrestments are limited to a specific time period. The frequency of arrestments depends on the court order and the outstanding debt.
Exemptions and limits of wage arrestments
If you’ve received a wage arrestment or you’re anticipating one, it’s worth familiarising yourself with the various exemptions and limits. We’ve outlined them below:
Minimum and maximum deduction rates
There are limits to the amount of money that can be deducted from an employee’s wages through a wage arrestment.
The minimum deduction rate ensures that individuals have a certain level of income to cover essential living expenses. The maximum deduction rate places a cap on the percentage of wages that can be taken, preventing excessive deductions.
Exempt income and priority debts
Certain types of income are exempt from being recovered with a wage arrestment, such as social security benefits, student loans, and certain tax credits.
Another type of wage arrestment, known as a Deduction from Earnings Order (DEO) is specifically used for the recovery of payments from the Child Maintenance Service (CMS), while a Direct Earnings Attachment (DEA) is used by the Department for Work and Pensions if you’ve been overpaid benefits.
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What are the consequences of a wage arrestment?
Receiving a wage arrestment can have an impact on several areas of your life, not just your financial situation. Here are some of the other consequences of a wage arrestment:
Your job
A wage arrestment can have significant implications for your job. The amount deducted can affect your disposable income, making it challenging to meet your day-to-day living expenses. This can lead to increased financial stress and hardship, especially if money is already tight.
Additionally, some jobs prevent employees from having wage arrestments, such as individuals serving in the armed forces. To find out if a wage arrestment would affect your job, check your employment contract.
Your credit rating
A wage arrestment may negatively impact your credit rating because it means you’ve failed to repay a debt and the situation has escalated to the point where the court has gotten involved.
The presence of wage arrestment on your credit report can also make it difficult for you to manage future debts, potentially affecting any serious life plans you have.
Your home
The impact of a wage arrestment extends beyond immediate financial concerns. As previously mentioned, a wage arrestment should have no impact on your ability to pay your mortgage or rent and bills. This means that you should be able to continue living in your home as normal while a wage arrestment is in place.
However, it might affect your overall financial stability, which can mean you have less money left each month for these payments.
Can you get a wage arrestment for multiple debts?
Yes, if a wage arrestment is already in place and another creditor wants to recover an unpaid debt from you, a conjoined arrestment order can be applied for at the court.
If granted, the court collects the deductions from your wages and distributes them to each creditor accordingly.
It’s important to note that the amount deducted won’t increase if a conjoined wage arrestment is issued. Instead, the original amount is divided among the creditors.
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What are the alternatives to a wage arrestment?
While a wage arrestment is a common debt recovery method, there are alternatives worth considering, such as:
Negotiating a repayment plan
You can engage directly with your creditors to negotiate affordable repayment plans to repay your debt. This approach allows for more flexibility and may prevent the need for a wage arrestment in the first place.
Applying for a Debt Arrangement Scheme (DAS)
The Debt Arrangement Scheme (DAS) is a government-backed debt management program in Scotland. It enables you to repay your debts in an affordable manner while protecting you from wage arrestments and other forms of enforcement action.
Filing for sequestration (Scottish bankruptcy)
Sequestration, commonly referred to as Scottish bankruptcy, is a formal insolvency process that you can consider as a last resort. It provides relief from unmanageable debts and protects you from wage arrestments, allowing you to make a fresh financial start.
What are the potential challenges and criticisms of using a wage arrestment?
While a wage arrestment serves as a helpful debt recovery tool for creditors, it is not without its challenges and criticisms. We’ve outlined them here:
Impact on low-income workers
A wage arrestment can have a disproportionate impact on low-income workers who rely on every penny of their earnings for essential expenses like bills. This sudden deduction of wages can push them further into financial difficulty and perpetuate a cycle of debt and potentially poverty.
Potential for exploitation
There are concerns about the potential for exploitation by certain creditors who may use a wage arrestment as a means to extract excessive payments. It’s important to ensure that a wage arrestment is only ever used responsibly and, more importantly, within the right legal limits.
Lack of flexibility
Unlike other solutions, like a DAS or informal payment arrangement, there is little to no flexibility with a wage arrestment. However, because the amount deducted is fixed by law and based on the debtor’s income level, the creditor has no power to vary the amount, even in cases of extreme financial hardship.
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Where can I get free help and advice about wage arrestments?
If you’re stressed about debt and worried about receiving a wage arrestment, it’s important to note that you’re not alone. Many places provide tailored advice to help you know your next steps.
For example, a debt advice agency like Citizens Advice Scotland can provide free and confidential guidance on managing your unaffordable debt and dealing with a wage arrestment.
They can help you navigate your individual circumstances, negotiate potential repayment plans, and explore alternative debt solutions.
Conclusion
In Scotland, an earning arrestment is a legal process that can be an effective debt recovery strategy. It provides a mechanism for creditors to recover outstanding debts, but it can have significant consequences for your financial management.
Seeking professional advice and exploring alternative solutions is crucial when faced with the possibility of a wage arrestment. With a specialist understanding of wage arrestments, they can help you deal with your outstanding debts and navigate a path toward financial stability.
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