How to deal with a default notice

If you pay what the notice asks by the date it gives, the law treats the breach as if it had not happened, so the lender cannot end the agreement or demand the full balance because of it. If you cannot pay, the notice is still worth acting on straight away: lenders must consider lower payments and frozen interest, and a default on your credit file is not the end of the road.

What is a default notice?

A default notice is a letter in a set legal form that a lender must send before it can end a regulated credit agreement, demand early repayment, repossess goods or enforce a security because you have broken the agreement (section 87). You are most likely to get one for a credit card, store card, personal loan, catalogue account or car finance.

The notice must tell you:

• what the breach is (usually missed payments, and how much is in arrears)
• what you need to do to put it right, and the date to do it by
• what will happen if you do not

It must also come with the Financial Conduct Authority’s default information sheet, which explains your options and where to get free advice.

Not every “final demand” is a default notice. Council tax, energy bills and rent arrears have their own processes, and some letters headed “notice of default” are just reminders. If you are not sure what you have received, a debt adviser can tell you.

How long do you have to pay?

At least 14 days after the notice is served on you. The period was 7 days until October 2006. Advice that you “only have about 8 days” is wrong. If the date in your notice looks shorter than 14 days, keep the letter and envelope and ask a debt adviser to check whether the notice is valid.

What happens if you cannot pay by the date?

The lender can then end the agreement and ask for the whole balance, not just the arrears. Most will also record the account as defaulted with the credit reference agencies. There is no legal rule on exactly when that happens: Information Commissioner’s Office guidance says an account is normally defaulted when it is 3 to 6 months in arrears.

After that, the usual path is:

1. The lender, or a collection agency it hires or sells the debt to, contacts you for payment.
2. If it wants to go to court, it must first send a Letter of Claim. You have 30 days to reply, and longer if you tell it you are getting debt advice.
3. If you still cannot agree a way forward, it can issue a court claim, which can lead to a county court judgment (CCJ).

A default does not have to mean court. Lenders regulated by the FCA must treat people in arrears with forbearance and due consideration, and those rules were strengthened from 4 November 2024. That can include suspending or reducing interest and charges, accepting reduced or token payments for a period, or agreeing an affordable plan. Once you are keeping to an agreed arrangement, the lender must stop interest and charges pushing the balance up.

If it is car finance

With hire purchase or conditional sale, the lender can take the car back. If you have paid at least a third of the total price, the goods are “protected” and the lender needs a court order to repossess them (section 90).

Asking the court for more time

After you have received a default notice, you can apply to the county court for a “time order”, which lets the court set instalments it considers reasonable given your means (section 129). A court fee applies, so talk to a debt adviser before doing this.

What should you do when a default notice arrives?

1. Read it carefully. Check the agreement, the arrears figure and the date. Keep the envelope.
2. Work out what you can afford. Write down your income and essential spending. Keep paying priority debts such as rent, mortgage, council tax and energy first.
3. Contact the lender before the deadline. Say what you can pay now and each month, ask for interest and charges to be frozen, and ask them to confirm in writing what they will report to the credit reference agencies.
4. Do not borrow to clear the arrears with a payday loan or credit card, and do not skip priority bills to do it. That usually moves the problem somewhere more expensive.
5. Get free advice if you have more than one debt you are struggling with. Free, impartial help is available from MoneyHelper, StepChange, Citizens Advice and National Debtline: see where to get free debt advice. An adviser can also start a Breathing Space in England and Wales, which pauses most creditor action and freezes interest and charges for up to 60 days.

If several debts are in the same state, a single plan may make more sense than dealing with each lender separately. Debt solutions compared sets out the options, from an informal debt management plan to formal insolvency.

How does a default affect your credit file?

The notice itself does not appear on your credit file, but the missed payments that led to it do. If the account is then defaulted, the default stays for 6 years from the date of default, whether or not you pay it off. When you clear it, the entry is updated to show it as settled, and it drops off completely at the 6-year point.

If the information is wrong (a default on an account that was never behind, a duplicate entry when a debt is sold, or the wrong date), ask the lender to correct it. If it will not, write to the credit reference agency. The agency must reply within 28 days, and if it does not remove or change the entry you can add a notice of correction of up to 200 words to your file (section 159).

What do people commonly get wrong?

• “A payment plan stops the default.” Not necessarily. Only doing what the notice asks, by its date, meets the notice. An arrangement may still see the account defaulted, so ask the lender to put in writing what it will report.
• “Defaults disappear after six months.” It is six years, from the date of default.
• “Paying it off wipes it from my file.” It changes to settled but stays until the six years are up.
• “I have to ignore it until I can pay the lot.” Silence is the worst option. Lenders have to consider affordable arrangements, but only if they know what is going on.

What is changing?

From 15 July 2026, buy now pay later (deferred payment credit) agreements became regulated, but the default notice rule in section 87 does not apply to them. Separately, the Treasury published plans on 18 May 2026 to repeal the default notice sections of the Consumer Credit Act and replace them with FCA rules. That needs new legislation and FCA rules first. As at September 2026, the 14-day default notice rule is still the law.

What to do next

1. Check the date on your notice and contact the lender before it passes, even if you can only pay part.
2. Write a simple budget so you can show what you can afford.
3. If you have other debts too, speak to a free debt adviser about a single plan and whether Breathing Space would help.
4. If a Letter of Claim or court papers follow, reply by the deadline. Our guide to satisfied and cancelled CCJs explains what happens after a judgment.