Will debt affect your employment?

Some people who have been facing employment problems, like being unemployed or having their working hours reduced, find themselves having to borrow money to keep up with their expenditure. This means that in some circumstances employment situations can affect how much debt a person gets into. However, being in debt can also affect your employment, as in some cases their employer will be notified, or they may be limited to which industry they can work within.

If you are worried about your personal debt, you can get in touch with us to talk about if an IVA would benefit your financial circumstances. Any information you share with our advisors is confidential, therefore it will not be shared with your employer.

We frequently get asked the following questions about personal debt:

  • “Can debt payments be taken from my wages?”
  • “Can my creditors contact my employer?”
  • “Will my employment be affected by my debt?”
  • “What debt solutions are available to help me, including debt management plans and IVA’s?

Let’s take a look into these.

How to find out whether debt will affect your employment

There are a wide range of debt types which you may owe, from council tax arrears to payday loans, but whether these debts will affect your employment is dependent on your personal employment and financial situation. In general, many lines of may be unaffected by personal debt. We recommend that you read over your employment contract if you have one, so that you are clear on your employment status . This will help you understand if your employment will be affected by your debt.

IVAs

If you work in law or the financial industry, bankruptcy may affect your employment. Usually, it will be outlined in your employment contract if bankruptcy will affect your employment. Therefore, you should examine your contract for any information about this before choosing it as a debt solution.

Another option is an IVA, this is a formal debt solution which means you can pay affordable monthly payments on your debts. Often, the funds still owed at the end of the IVA are written off. When considering debt solutions and the effect they can have on your employment, you can contact us to talk about whether an IVA is a good option for you. Any advice we give to you will be based on your individual circumstances and your personal debts. We will also always consider your employment status and the industry you work in when advising you.

Can your creditor contact your employer?

According to Money, it is illegal for creditors to share your financial information with anyone without having your permission to do so. This means that they cannot share your debt situation with your employer, unless your debt is a business loan.

Can debt be recovered from your wages?

Sometimes creditors may seek a court order to collect debt repayments directly from your wages. This is formally called an “attachment of earning order”. However, there are some circumstances in which your creditor cannot apply for an attachment of earnings order. For example, if:

  • You are self-employed;
  • You owe less than £50 to your creditor;
  • You work for the navy, armed forces or air force;
  • You are currently unemployed

In the case that the above exceptions do not apply to you and your creditor sends you the “replying to an attachment of earnings application”, a “N56 form” or just lets you know they applying for an attachment of earnings order, this means your creditor has applied to take your debt repayments directly out of your wages. If this happens to you, we recommend you reach out to your creditor to discuss this immediately.

If you’re struggling to balance multiple payments and calls from creditors, an IVA may be a good solution for you. Talk to us about your employment and financial circumstances to see whether this is the right solution for you.