Is your income paid into a bank or building society account?
If the answer is no, go to Step 2.
If you have a bank loan or overdraft with the same bank that you use to deposit your money, your bank or building society has the right to take money from your account to pay your bank loan or overdraft.
If your bank or building society does take money from your account for loans or an overdraft it makes it even more difficult for you to pay your bills. You may even be left with nothing in your account to live on.
Open a new bank account
The best advice is to open a new basic bank account with a bank or building society that you do not owe any money to. You should then have your income paid into this new account.
If you do open a new account, you must make sure you send your new account details to everyone who pays you money, such as the company you work for, the Department for Work and Pensions (if you receive any state benefits), and so on. You must also give your new details to all the companies who collect money from your account through direct debits for rent or council tax, for example.
If you get a new account you can treat any overdrafts or loans as non-priority debts (see step 4 for information on the difference between ‘priority’ and ‘non-priority’ debts). Please remember that interest and charges will still be added to your overdraft or loan and will need to be dealt with as soon as possible.
If you can’t open a new account
If you have to continue using your current bank account, you have the right to choose who to pay with the income that goes into the account, even if your account is overdrawn. This is called the ‘first right of appropriation’.
You should tell your bank or building society that money going into your account is to be used to pay for specific items such as your rent or council tax. This is called ‘earmarking’ and your bank or building society should not refuse to let you do this, even if you are overdrawn. Write to your bank to tell them who to pay and how much. There is an example letter on the publications page that tells you what you need to say.
- Your bank or building society may not let you earmark for long, and may close your account.
- Your bank or building society will continue to add interest and charges, usually until a payment arrangement is in place.
The Money Advice Team are able to help you to open a basic account or you can see what other accounts are available here.