StepChange, a debt charity has warned about a ‘personal debt tsunami’ worth £6billion due to the pandemic which has affected 4.6million homes.
With 1.2million people estimated to have fallen behind on utility, Linda Dodge, energy expert from energy comparison site SaveOnEnergy, has provided key advice to homeowners on what to do if you’re in debt to your energy supplier.
Should I be worried about getting into debt with my energy supplier?
Getting into debt to your energy supplier can be a frightening prospect, but you’re not alone. As energy prices rise, millions of people find it increasingly difficult to keep up with their monthly bills, leading to energy debt. However, your energy supplier will be able to help you put together a plan to get you out of debt.
Can I change energy supplier if I’m in debt?
Yes, although it depends on the length of time that you’ve been in debt. If you’ve been in debt for 28 days or less, you can switch provider and your outstanding balance will be added onto your final bill. This can be a good option if you choose to switch to a cheaper energy plan, as you’ll start paying less for energy, making it easier to pay off what you owe to your old supplier.
If you’ve been in debt for longer than 28 days, you will not be able to switch provider. Legally, you are obligated to pay off what you owe to your supplier before you can switch to a different energy plan with a new provider. At this point, you should get in touch with your energy supplier.
Paying off your debt through a repayment plan
If you’re in debt with gas and electric, your first call should be your energy supplier. Either call or write to your supplier to discuss the situation and find out what help you can receive. After all, it’s in your supplier’s interest that your gas and electric debt is resolved as quickly as possible. If you’re not communicative with your energy suppliers, they might send debt collectors after you. If you keep ignoring your energy supplier, they may even get a CCJ against you. Having a CCJ would mean that you’d be prone to getting visits from bailiffs such as Rossendales Bailiffs. It’s a good idea to not let it escalate to this point. Don’t let it get to where you’re trying to figure out how to stop Rossendales Bailiffs; Contact your energy supplier immediately if you’re having trouble making payments towards your debt.
One of the main ways that your energy supplier will help you resolve your energy debt is with a repayment plan, giving you the option of gradually repaying your debt. In most cases, you’ll pay monthly, fortnightly, or even weekly until your energy debt is all paid back. Some of the money will go towards your energy debt, while the rest will pay for the energy that you’re currently using.
In rare cases, people who have organised a repayment plan will not be able to keep up with payments. At this point, it’s possible that you can renegotiate your repayment plan with your supplier so that the payment schedule is more manageable. Citizen’s Advice has a useful letter template that you can use to request a new repayment rate for your energy debt.
Paying off your debt through a prepayment meter
If you’re paying off your gas and electric debt through a prepayment meter, you can switch to a new supplier (assuming you owe less than £500 for electricity and £500 for gas). This is called the “Debt Assignment Protocol.” Basically, your new supplier takes on the debt and you’ll continue to repay it.
In addition, you can ask your current supplier to fit a prepayment meter so that you can pay off your energy debt over a longer period. In some cases, your supplier can receive a court warrant to enter your home and fit a prepayment meter. If you do switch to a prepayment meter for debt, you may be put on a more expensive tariff, so it’s a good idea to talk to your supplier to see if this is the right move for you.
The main benefits of prepayment meters are the fact that they give you much more control over your energy spending. You can’t spend more than you put in the meter (usually through some sort of top-up system), which stops you from running up a significant energy debt.
Plus, installing a prepayment meter is more likely to lead people to pursue other energy-saving initiatives, such as keeping the lights switched off or installing energy-saving bulbs, all of which reduces the amount you spend on energy and makes it easier to pay back your gas and electric debt.
Of course, if you do run out of credit, you won’t be able to receive electricity or gas, which means that it’s very important to stay on top of your prepayment meter debt.
Paying off your debt through your benefits
Yes, in some cases you may be able to make small deductions from your benefits that go towards paying off your gas and electric debt. This is known as the Fuel Direct Scheme or third-party deductions. Essentially, a fixed amount will be deducted from your weekly benefits to cover the amount you owe, as well as your current use. To benefit from the Fuel Direct Scheme, you must be receiving one of the following benefits:
- Income Support
- Pension Credit
- Income-Based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Universal Credit (if you’re unemployed)
There are a couple of other schemes that can contribute to your energy bills. Although they aren’t specifically designed for people who are in debt with gas and electric, the Warm Home Discount, Winter Fuel Payment, and Cold Weather Payment schemes can be a useful way for low-income or elderly people to get some assistance with their bills.
What happens if the energy supplier I am in debt to closes?
Even if you’re in debt with gas and electric to a supplier that shuts down before you’ve finished repaying what you owe, you still need to keep making payments unless you’re told otherwise. In some cases, your new supplier will have arranged to take on your debt, so you’ll need to pay back the energy debt to it.
Can my energy supplier disconnect me?
Yes, as a last result, your energy supplier may apply for a warrant to disconnect your energy supply. Before disconnecting you, you’ll be sent a disconnection notice at least 28 days after your bill. In addition, suppliers are legally required to give you seven days’ written notice. Once you have received a disconnection notice, there is usually very little that you can do as it represents the final straw for the energy supplier. However, if you are disabled, have serious financial problems, or long-term health problems, there are extra measures to help protect you from being disconnected.