In Scotland, if you owe money and a Sheriff Officer is instructed to recover that money from you, one of the most likely ways they will do this is by arresting your bank account.
This effectively means they will attach the funds in your account and instruct your bank to transfer them into a holding account.
Bank arrestments often come as a shock for most people, as they normally only learn about them once it has happened.
When can Sheriff Officers arrest your Bank Account?
A Sheriff Officer can only arrest your bank account in certain situations. If you know what these are, this can help you understand when you are at risk of it happening.
Bank Arrestments and Summary Warrants
The most common situation is when you owe money for council tax arrears or to HMRC for income tax arrears or other debts, such as VAT.
What makes these debts similar is the procedure that is used to enforce them, which is known as the summary warrant procedure. This means local authorities and HMRC do not need to take you to court, but instead just request a summary warrant from the courts. There is no hearing in front of a judge and the summary warrant is issued automatically on request.
The summary warrant has the same effect as a court order and the full amount you owe becomes payable. The local authority or HMRC can then pass this debt to sheriff officers for recovery, which means they can use legal means of enforcement.
However, because there is no hearing in front of a judge, the first step a sheriff officer must take before executing a bank arrestment is to serve a Charge for Payment on you. This is a legal demand that gives you 14 days to pay the debt in full. If you receive a Charge for Payment, you should seek advice immediately.
If you do not pay the debt, the sheriff officers can then execute the bank arrestment.
Bank Arrestments and Non-Summary Warrant Debts
Where the debts that your creditors are pursuing you for is not council tax arrears or a debt owed to HMRC, then normally your creditors need to take you to court. Once they obtain a court order, known in Scotland as a “decree”, they can then execute the bank arrestment, without giving you further notice. They are not required to first serve on you a Charge for Payment.
How does a Bank Arrestment work?
When a sheriff officer arrests your bank account, the arrestment takes effect immediately, but it only seizes the funds in the account at that point. It also only freezes funds over £494.01, which is known as the Minimum Protected Balance. This is the amount the bank must leave in your account.
The remaining funds in the account are then transferred into a holding account by your bank, which you cannot access.
The bank will then write to you to inform you that your funds have been arrested and will also provide you with a mandate that you can sign to release the funds to the sheriff officers. If you do not sign the mandate, the funds remain frozen in the holding account for 14 weeks. This period is allowed to give you time to object to the arrestment on the grounds it is incompetent or you will suffer undue hardship as a result of the arrestment.
If additional funds are then repaid into your bank account the next day, the funds are not attached unless the sheriff officers execute another bank arrestment. There is no limit on the number of times sheriff officers can execute arrestments on your bank account and can keep doing so until the full debt has been paid. For this reason once your bank account has been arrested it is advisable to move your account to another bank.
When does a Bank Arrestment Fail?
Bank arrestments will fail if you have less than £494.01 in your account when the bank account arrestment is executed. They will also fail if your account is overdrawn. However, this does not mean it won’t cost you anything, as bank’s routinely charge £25 for administering a bank arrestment.
It is also worthwhile remembering even if a bank arrestment fails, there is nothing to stop the sheriff officers trying again on another day, in the hope there will be more funds in your account then.
For this reason, once your bank account has been arrested, you should seek advice immediately.
How do you Prevent Bank Arrestments?
The easiest way to avoid a bank arrestment is to seek advice from a licenced insolvency practitioner or a money adviser. They will provide you with advice on how best to address your debts and if they believe you may be at risk of a bank arrestment, can register a statutory moratorium for you. This is a legal document that is registered for free and prevents anyone arresting your bank account or wages for six weeks, to allow you to get advice and look at options for dealing with your debts, such as entering the Debt Arrangement Scheme, a Protected Trust Deed or Sequestration (bankruptcy).
People who are in these formal debt solutions are protected legally from getting their bank accounts arrested for debts that have been included into the solution.
If you have had your bank account arrested and want advice on what to do, or how to avoid another one, or if you are worried you may be at risk of a bank arrestment, speak with a Carrington Dean adviser on 0141 326 0418.
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