Can't Pay Your Overdraft? What Happens Next

Written by The My Debt Cleared editorial teamLast reviewed 30 August 2026Jurisdiction England & WalesEditorial policy

If you can’t repay your overdraft, the bank can reduce or withdraw the facility with notice, continue charging interest, and take money that arrives in the account — including wages — against the balance. Left unresolved, the account is defaulted, closed and passed to collection like any unsecured debt, and the default sits on your credit file for six years. Telling the bank you are in difficulty obliges it to consider forbearance, and overdrafts can go into every formal debt solution.

What happens first

Letters, then a formal demand to repay or reduce the balance, usually with notice. Banks rarely move fast on overdrafts — but they do not need court orders to act on the account itself, which is what makes this debt different.

Can the bank remove your overdraft?

Yes — an overdraft is repayable on demand, and the bank can cut the limit or withdraw it with notice. In difficulty, it should give you reasonable time and consider support rather than simply demanding the balance, and a written difficulty notice puts that obligation on record.

Can the bank take money from another account?

Within the same bank, yes — the right of set-off lets it move money from a credit balance to the overdrawn account, usually with notice and subject to leaving you essential funds. It cannot reach accounts at other banks, which is why moving your wages is the single most protective step available.

If the account defaults

The facility is terminated, a default is recorded (six years from the default date), and the balance becomes a standard unsecured debt — collection, possible sale, and ultimately court action follow the same path as a card. From that point the overdraft has no special powers at all.

Your credit file

Arranged overdraft use appears on your file; sustained maxed-out use reads as stress, arrears markers follow missed demands, and a default is severe. None of this is unique to overdrafts — what is unique is how early the bank can act on the account itself.

Overdrafts in the debt solutions

Overdraft debt is unsecured and included in every route: repaid through a DMP, bound and partly written off in an IVA, written off in a DRO within the criteria, discharged in bankruptcy. The account itself will be closed in the formal routes — have a clean basic account open first.

Where to get help

If the overdraft is one strand of wider difficulty, free debt advice exists for exactly this, and the solutions comparison shows what each route does with it.