Understanding a bill of sale

What is a bill of sale?

Simply put, a bill of sale agreement uses a car (or other goods) as security for a loan. Under a bill of sale, your lender will own the goods until you pay the loan off. In the event that you don’t keep up to date with your payments, the lender can take back and sell your goods without going to court. Before taking out a bill of sale, your lender should give you the key facts about the agreement so that you know exactly what you’re signing up to. You’ll also receive a Customer Information Sheet, telling you what a bill of sale is, how it works and your responsibilities during the agreement.

What if I miss a payment?

Under the agreement, a schedule of payments will be in place. If you miss payments, there’s a risk that your goods might be repossessed and sold to repay the debt – unless you come to some sort of payment arrangement with your lender.

I want to end the agreement

You may be able to end the agreement yourself if your lender has not already issued a default notice. If you are currently up to date with the agreement, you may be able to return the goods and not owe any further money, as long as the goods are in a reasonable condition. Make sure you take a photograph to show the actual condition to protect yourself at the point of handover.

My lender wants to end the agreement

Before this can happen, your lender is obliged to send you an arrears notice and a default notice under the Consumer Credit Act 1974. You then have 14 days to make up any missing payments. Before taking the goods back, two scenarios must be in place:

1. Your lender must try to reach a realistic repayment agreement with you.
2. You must also have missed paying an amount equal to the last two monthly payments (or the last four weekly payments if you pay weekly).

If your lender has ended the agreement, they can take back the goods without having to take you to court. It’s a good idea to check your bill of sale to read the small print for this scenario.

What happens when my lender repossesses the goods?

Your lender must wait a minimum of five days before selling the goods – this rises to 14 days if the lender is a member of the CCTA (Consumer Credit Trade Association), an organisation representing businesses who provide credit to consumers. If you still owe money to your lender after the sale, you can treat this debt as a non-priority debt and make an offer of payment according to your budget. If the lender does not accept your offer, they can apply for a CCJ for the amount you owe.

I want to keep the goods

If you don’t want the goods to be repossessed, you’ll need to arrange to pay off the arrears. Show them what you can afford, according to your budget. We can help you with this. What’s more, if you can prove you’re in contact with debt experts (like us) for advice on settling your debts, your account might be suspended for 30 days to give you some time.

Stopping your lender from recovering the goods

If you haven’t agreed repayments with your lender, there are a few things you can do:

1. Check to see if the bill of sale is in order (there’s more about this below in Checking your bill of sale). If it isn’t, the lender has no right to take the goods.
2. With legal support, you can apply through the High Court to strike out the bill of sale from the register. If you are successful, the lender won’t be able to repossess the goods.
3. With legal support, you can apply for an injunction through the County Court to stop the lender taking the goods.
4. You can apply for more time to pay in the County Court using an N440 form. This is rather complicated and involves paying a court fee to make the application. If you are successful, the court can reschedule and reduce your payments, as well as stop the lender from taking the goods away.

Check your bill of sale

To be effective and binding, make sure your bill of sale is set out correctly and includes certain elements. If they are missing or wrong, the bill of sale will not have been created properly. As a result, your lender will not have the right to take the goods away, even if you are not up to date with your payments. Remember that even if the bill of sale is not valid, you may still have to repay the money you owe on your credit agreement. Here are a few definitions and things to check.

Consideration

This refers to the total amount of money the lender gave you, also known as the ‘amount of credit’ in the agreement. You should check that this figure is just the money loaned.

Schedule of items

This should set out the goods that the bill of sale is secured against. For example, if this is a car, it will include things like the registration number.

Restatement of consideration

This must be the same figure as the amount of money the lender gave you – the ‘amount of credit’ as stated in the Consideration.

Statement of interest

This should be a simple percentage rate – it’s not the same as Annual Percentage Rate/APR.

Repayment instalments

These are the instalments set out in the bill of sale that you must pay under the agreement.

Witness to the bill of sale

An agent or employee of the company must witness the bill of sale.

Check the registration

For it to be valid, your lender must register the bill of sale in the High Court within seven days of the agreement being made. If the loan term is longer than five years, the bill of sale must be re-registered every five years to remain valid. If you wish, you can contact the Royal Courts of Justice to confirm whether a bill of sale has been registered.

Challenging your bill of sale

If you have doubts about the validity of your bill of sale and your lender is threatening repossession, this is what you should do next:

• Write to your lender, using registered post or recorded delivery.
• Explain why you think that the bill of sale is not effective.
• Ask the lender to confirm that they understand that the bill of sale does not secure the goods and that they won’t try to take your goods away. If your lender agrees that the bill of sale is not effective, get this in writing.

Removing the bill of sale from High Court

You can ask the court to strike the bill of sale from the High Court register. Getting legal advice is a wise idea if you’re serious about this option – and it could be expensive if you end up paying for the lender’s costs.

Applying for an injunction

In some cases, the court can grant an injunction to stop your lender taking your goods. Again, it’s a good idea to take legal advice if you’re considering this option because it’s complicated.

Get free debt help

If you are self-employed and worried about your finances, or find yourself in the early stages of debt, we may be able to help you find a solution. Running your own business can be lonely, especially when you’re facing money problems – we’re here to support you, by giving you free debt advice and a clear idea of your options. All you need to do is call 0800 316 1833 .