Fact Sheet - Selling assets to clear debt | National Debtline (2024)

Usethisfactsheetto:

• findoutwhichassetsyouareallowedtosell;
• understandsomeofthemainreasonsforsellingassetstohelpcleardebt;
• learntheadvantagesanddisadvantagesofsellingyourassetstocleardebt;and
• understandthemainthingsyouneedtorememberwhenusingmoneygainedfromsellingassets.

What is an asset?

An asset is something that you own that is valuable and which you could sell to raise money. For example, your home, car, jewellery, shares and so on are usually treated as assets.

You do not have to sell your assets to clear debt. However, you could consider it as an option. This fact sheet gives advice on important things to take into account. We also describe the advantages and disadvantages of selling your assets to clear debts.

It is very imporant to consider all your options carefully before deciding to sellyourassets.Contactusforadvice.

Reasons for selling assets

Sellingyourassetstohelppaydebtsthatyouowecanhelpyouindifferentways.

• Itcaneasepressureonyouifyourcreditorsarechasingyouforpayment.
• Itmayhelptostopcreditorstakinglegalactionagainstyou.
• Ifyoucan’tpayoffallyourdebts,youcouldreducethemsothatyoucanmanagethemmoreeasily,oraskyour lenderstowriteofftherest.
• Itcanhelpyoutogetoutofdebtifyouhavealowincomeornomoneyavailable.

Methods of selling

There are many different ways of selling assets. For example, you could sell them privately on the internet. There are different websites that allow you to auction your goods. Alternatively, you could advertise in your local newspaper or use a local auction house.

Make sure you understand how each method of selling your assets works and how much it will cost you before you agree to anything. Also, make sure that you sell your assets for their true value. You may want to get some free valuations of your items before deciding what to do.

Some methods of selling an asset may take longer than others. For example, it may take you longer to sell your home through an estate agent than sell an asset such as an antique at an auction. When discussing your plans with your creditors, make sure you agree a long enough period to sell your assets.

Do I have the right to sell an asset?

Insomecirc*mstances,youmaynotbeabletosellassets.

• Ifyouhaveacar,orotheritem,onahire-purchaseorconditionalsaleagreement,youdonotowntheitemuntilyou makethefinalpaymentandcompletetheagreement.Ifyouwanttoselltheitembeforefinishingtheagreement,you needyourlender’spermission.
• Ifyouhaveacarorotheritemonaleaseorrentalagreement,youdonotlegallyowntheitem.Theagreementusually justgivesyoutherighttouseitaslongasyoumaketheagreedpayments.Therefore,sellingaleasedorrenteditem wouldbeacriminaloffence.
• Ifyouhaveanitemsuchasacaronabillofsaleagreement,thelenderownsthegoodsuntilyoupayofftheloan.Itis acriminaloffencetosellanitemthathasabillofsaleagreementattachedtoit,withoutthelender’spermission.
• Ifoneormoreofyourcreditorshastakenactionagainstyoubyusingenforcementagents,youmaynotbeabletosell yourgoods.Thelawaboutenforcementagentsiscomplicated.Contactusforadvice.

How should I use the money I've raised by selling assets?

Youmayhavealotofdifferentcreditorsaskingyouformoney.Somemayputmorepressureonyouthanothers. However,thisdoesn’talwaysmeanthatyoushouldpaythosecreditorsfirst.Beforeyoudecidewhattodowithyour money,itisimportanttounderstandthepowersthatdifferentcreditorshave.

Prioritycreditorsarethemostpowerful.Ifyoudonotpaywhatyouowe,youmayloseanessentialserviceoranessential item.Forexample,ifyoudonotpayyourrentormortgage,youcouldloseyourhome.Ifyoudonotpayyourgasor electricity,yoursupplycouldbecutoff.Ifyoudonotpayyourcounciltax,asalastresortcouncilsinEnglandcouldapply tosendyoutoprison.

Non-prioritycreditorscannotimmediatelytakeawayanessentialserviceoranessentialitemifyoudonotpaythem. Thesecreditorsaremorelimitedinwhattheycandotocollectwhatyouowe.Forexample,creditcards,unsecuredloans, storecardsandunsecuredoverdraftswouldnormallybenon-prioritydebts.

Whenyoudecidehowtousemoneyfromsellingassets,youcouldfirstputsomemoneyasidetopayforyouressential livingcosts.

• Youcouldthenchoosetoclearprioritydebtsfirst.
• Ifyouhavealumpsumofmoneyandwanttouseittoreduceyournon­prioritydebts,weusuallysuggestdividingyour moneybetweenyourcreditorsonapro-ratabasis.Thismeansthattheyallgetafairshare.Contactusforadvice.
• Youcouldmakefullandfinalsettlementofferstoyournon-prioritycreditors.Thismeansofferingeachcreditorafair shareofyouravailablemoneyandaskingthemtowriteoff therest.Thereareimportantthingstoconsiderwhenmaking fullandfinalsettlementoffers.See our Full and final settlement offers fact sheet for more information.
• Youcouldconsideranindividualvoluntaryarrangement (IVA).Thisisalegallybindingagreementwithyourcreditors topaypartofyourdebtsback.AlthoughIVAsareoften basedonmakingregularpaymentsoveranagreedperiod, youcouldalsosetupanIVAbasedonsellingyourassetsto raisealumpsum.Creditorsvoteonwhethertoagreetothe arrangement.Inorderforthearrangementtobesetup, therearerulesabouthowmanycreditorshavetoagree. Therealsofeestopay.See our Individual voluntary arrangements fact sheet for more information.
• Theremaybesomelimitedcirc*mstanceswhereyouchoosetoclearcertainnon-prioritydebtsbeforeothers.For example,somenon-prioritycreditorsmaythreatentotakelegalactionagainstyoutorecoverwhattheysayyouowe. Justbecausecreditorsthreatenthis,doesn’tmeanitwillhappen.Somecreditorsthreatentotakefurtheractionbut don’tcarryitout.However,someaggressivecreditorscouldtakecourtactionagainstyouquickly.Iflegalactionwill haveseriousconsequencesforyou,youcouldreduceorclearthesedebtsfirst.Forexample,yourcontractof employmentmaysaythatyoucouldloseyourjobifyougetacountycourtjudgmentagainstyou.Contactusfor advice if you have debts that you want to clear before others.
• Somecreditorsmaybecharginginterestatamuchhigherratethanothers.Thismeansthatthosedebtsare increasingmuchmorequickly.Inthissituation,youcoulduseyourmoneytoreduceorclearthesedebtsfirst.This mayhelptomakeyourremainingdebtsmoremanageable.Contactusforadvice if you have debts that you want to clear before others because of the interest they are charging.

Effect on benefits

Ifyouusemoneyfromsellingassetstocleardebts,itcanaffectyourbenefits.

• Ifyoualreadyclaimbenefits,youmusttelltheDWPorcouncilaboutthemoneyyoureceive.Thiscanaffecthowmuch youareentitledto.Becareful,becauseyoumaystillbetreatedashavingthemoney,evenafterusingittoclear debts.Contactusforadvice.
• Ifyouclaimbenefitsafterusingyourmoneytocleardebts,youmaystillbetreatedashavingthemoneyforthe purposeofworkingouthowmuchyouareentitledto.Thisisacomplicatedarea.Contactusforadvice.

Effect on tax

Insomesituations,sellingassetscanaffectyourtaxposition.Thisdependsontheassetyousellandhowmuchyousellit for.Youmayneedtogetprofessionaladvicetohelpyouunderstandhowsellingyourassetscanaffectyourtaxposition. Wecansuggestwaysforyoutofindtherighttypeoftaxadvice.Contactusforadvice.

Selling your home

Yourhomeislikelytobeyourmostimportantasset.Sellingyourhomecouldbeasuitableoptionifthereisenoughvalue inittopayoffwhatyouoweandleaveyouwithenoughtobuysomewherecheaper.Thisisoftenreferredtoas ‘downsizing’.However,thereareimportantthingstothinkaboutbeforedecidingwhattodo.

Carefullyconsiderthecostsinvolvedandhowthiswillaffectyou.

• Youmayhavetopayforyourpropertytobevalued,althoughmanyestateagentsofferfreevaluations.Checkbefore makingyourappointment.
• Estateagentswillchargeyoufeesforsellingyourhome.Youusuallypaythesewhenthesaleprocesshasfinished.
• Yoursolicitorwillchargeyoufeesfortheworktheydoinsellingyourproperty.
• Ifyoustillhaveamortgage,yourlendermaychargeyoufees–forexampleifyouareinafixedinterest-rateperiod.

Checkthatthereisenoughvalueinyourhometopayoffyour mortgageandanysecuredloansandalsotheseextracosts.

Checktomakesurethatyoucanaffordthebillsinyournew home.Completeapersonalbudgettocheckthatyoucanafford allyourregularoutgoings.Ifyoucan’t,youriskgettingintodebt again.Contactusforadvice.

Jointly owned property

Ifyoujointlyownyourhomewithsomeoneelse, youhavetogetthejointowner'spermissionto selltheproperty.

Think carefully

If you sell your home, your financial future may be less secure. You will no longer have that asset for the future. So consider all your options carefully before deciding what to do.

Individual voluntary arrangements

Anindividualvoluntaryarrangement(IVA)isalegallybinding arrangementtopaybackpartorallofyourdebtsoveran agreedperiod,usuallyfiveyears.Itissetupbyaninsolvency practitioner.CreditorsvoteonwhethertoagreetoyourIVA.If youhavepaidoffsomecreditorsbutnotothers,creditorsare likelytotakethisintoaccountwhentheydecidewhetherto agreetoyourIVA.See our Individual voluntary arrangements fact sheet for further information.

Debt relief orders

Adebtrelieforder(DRO)stopsmostcreditorsfromtakingfurtheractionagainstyouandcanhelpyoutogetafresh start.Youhavetomeetstrictcriteriatoqualify.ADROisnotusuallysuitableifyouhaveassetsworthmorethan£2,000. Somelimitedassetsarenottakenintoaccount.

AnofficialreceiverwilldecideyourDROapplication.Theywillconsiderwhetheryouhavemadeanytransactionsat undervalueorshownpreferencestoanyofyourcreditors.Specifictimescalesapply.

• Atransactionatundervaluemeansthatyouhavegivenawayanassetforlessthanitsfullvalue.
• Apreferencemeansthatyouhavetreatedacreditormorefavourablythanothers.Forexample,youdidnotworkout pro-ratapaymentsfornon­prioritydebtsbecauseyouwantedtopayoffonedebtbeforeothers.

Iftheofficialreceiverthinksthattherehasbeenatransactionatundervalueorapreference,theycouldrefuseyourDRO application.

IfaDROismade,buttheofficialreceiverbelievesthatyouhave been dishonest or irresponsible either before orafteraDROis made,theycanplacefurtherrestrictionsonyou.These restrictions can last beyond the year of your DRO, for up to 15 years in serious cases. See our Debt relief orders fact sheet for more information.

Bankruptcy

Bankruptcy is a way of dealing with debts that you cannot pay. Whilst you are bankrupt any assets that you have might be used to pay off your debts. After a period of time (usually one year) you are released from liability for most of your outstanding debts and you can make a fresh start. This is known as discharge from bankruptcy. There are advantages and disadvantages to consider carefully before you decide to go bankrupt. See our Bankruptcy fact sheet for more information.

If you have made any transactions at undervalue or given any preferences to your creditors, further restrictions could be placed on you which last beyond your discharge. In some situations, the undervalue transaction or preference may be reversed, so that you and the creditor are put back to the same position you were before the transaction took place. For example if you paid a large lump sum to a family member to clear a debt you owed them, but paid nothing to other creditors. In this situation, the trustee may seek to recover the money you paid to the family member.

Can a creditor force me to sell my assets?

TheFinancialConductAuthoritysetsrulesabouthowmostcreditorsshouldbehavewhencollectingdebts.Oneofthese rulessaysthatcreditorsshouldnotpressuriseyoutosellyourassetstoraisemoneytorepaythedebts.Ifyourcreditors areputtingpressureonyoutosellyourassets,contactusforadvice.Youmaybeabletomakeacomplaint.Wecan adviseyouhowtodothis.

Insomesituations,creditorshavealegalrighttosellyourpropertythemselves.

• Ifyouhaveanitemonhire-­purchaseorconditionalsaleand youfallbehindonpayments,thecreditorhastherightto repossesstheitems.Therearesetproceduresthatthey havetofollow,whichdependuponhowmuchoftheoriginal agreementyouhavepaid. See our Hire purchase debt fact sheet for more information.
• Ifyouhaveacarandyoutakeoutabillofsaleagreementon it,thecreditorbecomestheownerofthevehiclewhilstyou repaytheloan.Ifyoufallbehindonpayments,thecreditor canrepossessthevehicle.Theyhavetofollowcertain procedures.Ifthevehicleissoldformorethanyouoweto thebillofsalelender,youwillgetwhat’sleftoverafter everythinghasbeenpaid.See our Bill of sale fact sheet for more information.
• If you have a mortgage or secured loan on your home and you fall behind on payments, the lender could take court action to repossess your home. It could be sold to repay what you owe. You would get any money left over after everything has been paid. Contactusforadvice if you are behind on mortgage or secured loan payments.
• Ifacreditorhastakencourtactionagainstyoutheymayhavegotachargingordertosecurethedebtagainstyour property.Ifso,theycouldaskthecourttoallowthemtosellyourhome.Thisisrare,anditisuptothecourttodecide whethertograntthisrequest.Therearethingsyoucandototryandpreventthis.Contactusforadvice if a creditor is taking court action or already has a county court judgment and is applying for a charging order.

Advantages of selling assets to clear debt

• Itcanhelptorelievepressurefromsomecreditorswhomaybechasingyouforpaymentorthreateninglegalaction.
• Itcanhelptostopprioritycreditorstakingactiontoremoveanessentialserviceoranessentialitem.
• Youmaybeabletopayoffthosecreditorswhochargeinterestatahigherratesothatyourotherdebtsareeasierto manage.
• Clearingyourdebtshelpsyoutogetafreshstartandreducestress.

Disadvantages of selling assets to clear debt

• Ifyoudon’ttreatcreditorsfairly,itcancauseproblemsifyouchoosecertaininsolvencyoptionsinthefuture.
• Youarelikelytohavelessmoneyforyourfutureandretirement.
• Iffinancialemergenciesoccurinthefuture,youmaynothaveenoughmoneyorassetstodealwiththem.
• Youmayonlybeabletoleaveareducedinheritancewhenyoudie.
• Insomesituations,youcouldstillbetreatedashavingmoneyyouhaveusedtocleardebtswhentheDWPoryour councillookatyourbenefits.

Thisisnotacompletelistofalltheadvantagesanddisadvantagesofsellingassetstocleardebts.Theremaybeother thingsyouneedtoconsiderinyourparticularcirc*mstances.Contactusforadvice.

Credit reference issues

The way you have managed your credit accounts and debts will be recorded on your credit reference file. If you have fallen behind with payments, this may affect your ability to get further credit. If you choose to sell assets to clear your debt, this will not remove any negative information from your credit file.See our Credit reference agencies fact sheet for more information.

Other fact sheets that may help you

Bankruptcy fact sheet

Bill of sale fact sheet

Credit reference agencies fact sheet

Debt relief orders fact sheet

Full and final settlement offers fact sheet

Hire purchase debt fact sheet

Individual voluntary arrangements fact sheet

Ways to clear your debt fact sheet