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Monthly Archive for May, 2009

Property Charging Order – Even unsecured debts can take your home away

Published on May 29, 2009 in Get Out of debt. 2 Comments

It is not a myth; it is a reality. With a charging order your creditors can actually sell off your home to acquire what you owe them. And statistics say that almost £230 billion of the United Kingdom’s personal debt is unsecured.

Now, if you fail to make repayment on time your creditors will certainly go to the court for a County Court Judgement against you. With a county court judgment your creditors can apply for a charging order to sell off your home and settle the debts.

What is a Charging Order?

A charging order is issued by the court to the creditor in order to settle debt by selling off your home, land or stocks, shares etc. Charging orders are issued only against unsecured debts and after a county court judgement.

This kind of order acts in favour of the creditors securing them with the repayment. With this order the creditor can force you to sell your home and pay them.

However, an instalment order is issued after CCJ that allows the debtor to pay off their debt in instalments. If they keep up with the instalment schedule, then a charging order cannot be issued against them. Here are some ways to stop a charging order.

The interim charging order:

The creditor applies for a Charging Order in the court and the court makes an Interim Charing Order. This Interim Charging Order is validated by the fact that you have a share in the property in question.

However, you do not need to panic. This Interim charging order is not the final one. It is made without a hearing date. This copy will be sent to you with a hearing date. The court ultimately decides whether to approve the Charging Order or not.

The property charging order:

If the creditor registers the Interim Charging Order as a “Caution” on your property with the Land Registry, you cannot sell it prior to the hearing. It is only after the court decides to make a permanent charge on your property, that the order is deemed as a final Charging Order on property.

But this does not mean that a debtor is at the mercy of the Charging Order. Debtors can raise an objection to a Charging Order being made final. The debtor needs to write to the creditor and the court giving a reason behind the objection against charging order.

The written notice should be sent at least 7 days before the hearing date. The District Judge will take up your account during the court hearing. It is important that the debtor is physically present during the court hearing. However, if a debtor fails to attend the hearing, the decision might go in favour of the creditor.

You can apply on an application form called an N244 explaining why you can’t go to the hearing, e.g. due to the distance, travel or childcare costs. There is a fee for doing this.

Procedure of a charging order

The application and issuing of a charging order is done in two basic steps. Primarily the creditor has to apply for a charging order if he has a CCJ against the debtor. If the court is satisfied with the application they will issue an interim order. This interim order is made without a hearing from the debtor. After the date of hearing is set by the district judge the debtor will receive a court notice of 21 days before the final hearing. This hearing takes place in the district Judge’s private rooms where the judge decides on whether to make the interim charging order permanent or not.

This interim order gets registered at the Land Registry by the creditor in order to inform the debtor that he will not be able to sell off his property before the hearing date.

The next stage of the application includes the issuing of the final charging order. Before the hearing of the final charging order the debtor can object stating the reasons in writing to the court and the concerned creditors. This should be done at least 7 days before the final hearing. The debtor’s arguments will be considered while issuing the final charging order.

It is important for the debtor to go for the hearing. However, the debtor can contact the court and arrange for a suitable date if he cannot turn up at the specified date. If he fails to attend the hearing at all then the court can issue order on the request of the creditor.

In such a situation, it is better to request for an instalment order at the time of hearing. An instalment order will act as an impediment to selling of the home for the time being.

Student loan management basics

Published on May 28, 2009 in Student Loan. 5 Comments

Are you worried about repaying your student loan?

If you have taken up a student loan from the Student Loan Company (SLC) you do not need to pay it off as early as possible like other loans. Student loan acts more like a grant rather than a normal loan. It is the cheapest form of loan that you’ll ever get. You may even get a refund if you have a low income during the next tax year.

Got a student loan! From September 2009 onwards 0% interest rate will be applicable on your loan.

If you have taken up the loan before 1998 then the current interest rate will be around 3.8% but it will be reduced to -0.4% from September 2009. This will actually reduce your loan.

If you have taken up the loan after 1998 (current rate of interest is 1.5%) the interest rte will decrease to 0% from September 2009. Thus you will only require paying off the principal amount if you are at all willing to pay.

How does student loan affect my credit rating?

Individuals who got student loan after 1998 and have income contingent loans will have no affect on their credit score even if they are not repaying the loan on time. The income contingent loan is a kind of graduate tax. At present if you are earning more than £15,000 your repayment will be 9% a year.

However, people who got the loan before 1998 and have a mortgage style loan may have a little affect on their credit rating. The SLC has announced that they will give a 28 days notice [32 kb; PDF file] to all the defaulters to contact them immediately and inform why they are not paying. Otherwise SLC will directly report it to the credit rating agencies. However there is no need to worry. If you are earning less than £25,936 a year you can keep on deferring your loan repayments. If you have a reason for not paying your loan SLC will not inform your case to the credit record agencies. They will also defer your payments.

What if I never pay my student loans?

You may not repay the loan at all if you fulfil certain conditions.

For borrowers before 1998 may not need to repay if:

  1. You are over 50 years of age as of today
  2. You are unfit for work
  3. It is more than 25 years since your repayments were about to start.
  4. Death

For borrowers after 1998 may not need to repay if:

  1. You are over 65 years of age
  2. You are unfit for work
  3. Death

Can I include student loan in a trust deed?

A trust deed does not cover student loans. Trust deeds generally cover debts like unsecured loans, rent arrears and credit card loans. You are supposed to pay off your student loan when you have reached the income threshold.

Tell me one thing; do you really need to worry about student loan repayments if you are not in a favourable financial situation!

Trust Deeds, Edinburgh Gazette and an Imaginary Social Stigma

Published on May 26, 2009 in Trust Deed. 3 Comments

Are you worried about the fact that your neighbours may get to know that you have obtained a Trust Deed via Edinburgh Gazette? Well, they have a faint chance of knowing it because The Edinburgh Gazette is not a regular newspaper like The Guardian or FT. It is a specialised bulletin that publishes different legal notices.

The Edinburgh Gazette is published twice a week on Tuesdays and Fridays and it is priced at £88.20, quite expensive than a regular magazine. To add, it is generally circulated among the creditors, people in judicial services, libraries, researchers, and other voluntary sectors.

The Edinburgh Gazette was first published in 1699. Like the London Gazette it is also an official news bulletin of the UK government and it is published from The Stationary Office on behalf of Her Majesty’s Stationery Office in Edinburgh, Scotland.

There are different categories in the Edinburgh Gazette under which legal notices are published. Some of these categories are Parliament, State, Public Finance, Companies & Financial Regulations, Personal Insolvency, Corporate Insolvency, Partnerships, Post & Telecom, Personal Legal, Societies Regulation, Ecclesiastical, Health, Planning, Environment, Water, Energy, Agriculture & Fisheries etc. All these categories have different other sub categories which are formed according to the notice types. Trust Deed is only a sub category under the personal Insolvency.

Thus we can assume that, an individual will go through the Edinburgh Gazette regularly only if he has any vested interest on them. Is there any reason to think that someone other than your creditors and your legal associates would like to know about your trust deed! And is there any reason that your neighbours will regularly buy this gazette regularly to track your financial status?

Another important thing is that though the notices are available online (http://www.edinburgh-gazette.co.uk/) it does not contain information on the amount of debt or the reason behind filing for insolvency. It follows a general format that is targeted towards the creditors (so that they can object to a notice if they wish to do so).

Here is the General Format of a Trust Deed published in Edinburgh Gazette

Trust Deeds have been granted by Mr. XYZ, 55 ABCD, and previously residing at 8 MNOP, and previously residing at 22 QRST, on 12 May 2009, conveying (to the extent specified in section 5(4A) in the Bankruptcy (Scotland) Act 1985) their estates to me, Mr. EFGH, Mr. IJKL, 375 UVWX, as Trustee for the benefit of their Creditors generally.

If a Creditor wishes to object to the Trust Deeds for the purposes of preventing them becoming Protected Trust Deeds (see notes below on the objections required for that purpose) notification of such objection must be delivered in writing to the Trustee within 5 weeks of the date of the publication of this notice in The Edinburgh Gazette.

Notes: The Trust Deeds may become Protected Trust Deeds unless within the period of 5 weeks of the date of publication of this notice in The Edinburgh Gazette a majority in number or not less than one third in value of the Creditors notify the Trustee in writing that they object to the Trust Deeds and do not wish to accede to them.

Briefly, this has the effect of restricting the rights of non-acceding Creditors to do diligence (ie to enforce court decrees for unpaid debts) against the Debtors and confers certain protection upon the Trust Deeds from being superseded by the sequestration of the Debtors’ estates.

So, if an imaginary social stigma is bothering you, forget about it. Take it as a fresh beginning and move on with your life.

4 myths about debt consolidation loans

Published on May 23, 2009 in Debt Consolidation. 0 Comments

If you are facing severe financial problems, debt consolidation is not the only option. However, it is very popular in UK and other countries. Especially if the borrowers are finding it difficult to pay even the minimum amount on their monthly loan payments, they start thinking about a debt consolidation loan.

Debt consolidation is not a permanent solution to your debt problems. Apparently it may seem that the consolidation is benefiting you in more than one way but does it really help you save money in the long run?debt-consolidation

Did you overlook these issues?

  1. Secured debts – When you take up a debt consolidation loan you convert all your unsecured loans into a secured loan. This actually means that the new creditor is making him secured. Thus if you cannot pay on time they can take away your property. To put it simply, you would end up losing your home to your lenders.
  2. Low monthly repayments – This is a tricky statement that many borrowers often fail to understand. While you consolidate your debt you extend the loan tenure to 25 years. Now, even if you are getting lower monthly payments you are paying much more than your actual loan amount.
  3. Lower interest rate – Debt consolidation enables you to have a lower rate of interest. But we often come across situations where you have only 2 loans with high interest rate out of 5 or 6 loans. You need to compare if on an average you are paying less interest or not after opting for debt consolidation. Otherwise, there is no point in getting a debt consolidation loan for the sake of lower interest rate.
  4. The interest rates are not fixed – When you obtain a debt consolidation you get a secured loan with a variable interest rate. Primarily the rate may seem to be quite attractive but later on it may increase at a steady rate. Read the offer document carefully before signing up for a debt consolidation loan.

We are not saying that debt consolidation is a poor choice. What we are trying to say is that, it entirely depends on your actual financial status. For example, if you find that with a lower monthly loan payment you will be able to run things smoothly, you can go for debt consolidation. You should always consult a professional or an expert before going in for any debt solutions.

Office of Fair Trading Warns Debt Collectors for unfair business practices

Published on May 22, 2009 in Get Out of debt. 5 Comments

Yesterday we published an article titled “How to stop Debt Collectors“. Today we are ready to show you an example that if you act according to the rules, you can change a lot of things.

There is no doubt that debt collectors try different unfair tactics to recover money. They even talk to the neighbours of the debtor while chasing him or her. Recently some similar cases have been reported against a company and the OFT has said that this is an unacceptable practice and it will take enforcement action against the collection agencies if it continues. The company in question has changed their collection policy accordingly.

It is also reported that the debt collectors are asking the neighbours to pass messages to the borrower. Nigel Cates, OFT Deputy Director for Consumer Credit, said, “…Using neighbours to pass on messages to trace subjects is an unacceptable practice that contravenes our debt collection guidance”. He also added that if such practices continue they will not hesitate to use their “licensing and enforcement powers”.

The Office of Fair Trading has clearly implemented some debt collection guidance in 2003 (updated December 2006) to protect the debtors from unfair business practices:

  1. Communication – The debt collector should not use any abusive language or methods to communicate with the debtors
  2. False representation of authority or legal position – The debt collectors cannot use any false or look a like government identity or logos to frighten debtors.
  3. Physical or psychological harassment – Violence or abusive methods are unacceptable. The debt collectors cannot come knocking at the debtor’s door anytime they wish.  They should not compel the borrowers to sell their property or borrow further. Threatening statements cannot be used while negotiating with the debtor.
  4. Deceptive and unfair methods – Using deception such as calling up individuals who do not owe any debt to any lender is considered an unfair practice. The debt collector cannot force an individual to prove that he is not the person in question.
  5. Charging for debt collection – Unfair charges should not be levied on the debtors. A debt collector cannot charge a debtor if there is no contractual provision. The debt collector must clarify everything about the charges before proceeding with the case.
  6. Debt collection visit – A debt collector cannot visit borrower if he is psychologically or physically ill. The debt collector should provide adequate notice to the debtor before visiting his or her place. Visiting the debtor at work or at hospital is considered as an unacceptable practice.

If you are facing such problems, seek help from the Citizens Advice Bureau or the council’s trading standard department. We will also request you to let us know if you are in such a situation or how you are fighting against them.

How to Deal with Debt Collectors!

Published on May 21, 2009 in Get Out of debt. 1 Comment

There had been a massive growth in calls from debt collection agencies after the recession. It is nothing new; threatening and abusive calls are used by many debt collection agencies to recover money.

Debt problems are normal. But if the collection agencies have started knocking your door, you must take proactive measures to deal with them. They are desperate to recover money and will try every possible way to do that.

Who are debt Collectors?

They are private agencies who generally work on behalf of different credit or lending companies. The creditors hire them directly or sell the accounts of the defaulters to them for a faster recovery. They earn commission from the recovered debt.

If you have serious debt problem try to solve it before the debt collectors knock your door. But if the debt collection agency has already contacted you, it is still not too late to come into a negotiation with the respective creditor. However, do not ignore their calls. It will only make things worse.

Is there any limit to what debt collectors can do?

There are certain rules that they must follow in the collection process. But they often cross the limit as many debtors do not have any clear idea about their rights.

Debt Collection Rules set by Office of Fair Trading:

  1. Intimidation of any form is not allowed. The debt collectors may call or send mails to the debtor but they should not overdo it. Repeated call or mails from any debt collection agency can be reported to the Office of Fair Trading for immediate action.
  2. It is not an obligation to allow any debt collector at your home. Debt collectors generally call a debtor and ask for a meeting at their home. If you agree to this appointment once, they will get the access to your home and will try to turn up anytime they want.
  3. If you do not want to let the debt collectors at your place, you can answer their call by saying that you have not permitted this request. The rules do not allow debt collectors to turn up unannounced.
  4. Debt collectors threaten the debtors to recover debts fast. Answer them confidently and tell them that those threats or harassments will be immediately reported to the Office of Fair Trading. Believe it, this can work wonders for you.
  5. They cannot talk to your neighbours about your financial situation.
  6. Any type of Harassments can be reported to the local council’s trading standards department. Remember to collect as much information about the lenders and debt collectors as you can so that the trading standards can spot them easily.
  7. Debt collectors cannot threat you to make higher payments that you cannot afford.
  8. Abusive and aggressive behaviour along with violence should be immediately reported to the local Police station.

Not responding to a debt collector’s call can put you in further trouble. At the same time, giving in to the debt collector’s threats will only deteriorate your financial and psychological condition. Deal with them smartly.

Bankruptcy procedures in UK – all you need to know

Published on May 20, 2009 in Bankruptcy. 3 Comments

Do you know that almost 2/3 individuals are going bankrupt in Britain under the age of 30? More shockingly, the number is rising very fast. If you are on the verge of a bankruptcy don’t panic, you are not alone. Take it as a new beginning. However, we will recommend you to take bankruptcy as your last option.

We will also recommend you to read the following articles:
1. IVA or Bankruptcy – Which one is a better alternative?
2. Step by Step guide to IVA – How to get an IVA

This article will help you get a clear picture about how bankruptcies are made.

Bankruptcy Procedure

Bankruptcies are either dealt in the county court or at the High Court in London. A bankruptcy petition can be made either by the debtor himself or by the creditors (if the unsecured debt amount is more than £750). However, if you want to file a bankruptcy, you will have to contact the nearest county court. The will inform you about the appropriate county court where your petition will be accepted.

The court will determine the validity of the petition and make an order for bankruptcy accordingly. The court will also appoint an Official Receiver who will be in control of debtor’s property.

The debtor must submit his or her Statement of Affairs to the Official Receiver within 21 days. Depending on the debtor’s Statement of Affairs, the Official Receiver will determine whether a creditor’s meeting is necessary or not. The creditors may also request for a meeting.

A bankruptcy petition can also be made when you are not present in the country. Such a situation only arises when you have left the country or have gone out in some business and your creditors want to file bankruptcy against you.

Filing for bankruptcy will cost you £150 as court fee. Another £345 has to be paid to the Official Receiver who will supervise and administer your bankruptcy. Sometimes these fees are waived if the debtor meets certain criteria.

Most your assets and valuables will be sold to pay off the creditors. The remaining debt will be written off by the court order. To add, a bankruptcy affects you credit scores to a high extent but it also focuses on a new beginning. At present it takes 1 year to get discharged from bankruptcy.

bankruptcy

You may also like to know about the following people:

The Official Receiver

To make yourself bankrupt you need an Official Receiver (a civil officer in the Insolvency services). He will be responsible for protecting your assets and administering the bankruptcy properly from the date, the bankruptcy order is approved by the court. If you are not appointing an Insolvency Practitioner, the Official Receiver acts as a trustee to the bankruptcy estate.

The Official Receiver reviews if the debtor’s finances are in place at the time of the order. He is also responsible for reporting to the creditors as well as the court about the debtor’s financial status. He will report any criminal offence in connection to the bankruptcy to the court.

The Insolvency Practitioners

Insolvency Practitioners are specialists in insolvency cases. Primarily they act on behalf of the debtor and after the order is passed they become trustees and report to the creditors.

Majority of bankruptcy proceedings are done in the High Court of London. But if someone is living outside London he or she may file the bankruptcy in an appropriate county court which will be supervised by an Official Receiver. The bankruptcy order is published and advertised in the London Gazette.

How does an Insolvency Practitioner help you with IVA?

Published on May 18, 2009 in Individual Voluntary Agreement (IVA). 0 Comments

Are you thinking about going for an individual voluntary arrangement (IVA)? In that case, you need an Insolvency Practitioner who can review your financial circumstances and draft an IVA proposal.

A qualified Insolvency Practitioner is an accountant who passes numerous rigorous tests to provide insolvency services. They are qualified professionals who deal with all sorts of insolvencies like company liquidations, corporate insolvencies, bankruptcies as well as Individual voluntary arrangement.

iva

Role of an Insolvency practitioner in an Individual Voluntary Arrangement or IVA:

The Insolvency Practitioners play two different roles in an IVA.

  1. Primarily he is a nominee where he acts on behalf of the debtor.
  2. The Insolvency Practitioner acts as a supervisor of the IVA and negotiates a proposal between the debtor and creditors to settle debt.
  3. He collects relevant information like the detail of credits, profile of creditor, details of the borrower to put forward a suitable IVA proposal in an IVA Creditors’ meeting.
  4. The insolvency practitioner changes his role provided that the creditors accept the proposal at the meeting

    Till now, the Insolvency practitioner was acting on behalf of the debtor but after the proposal is accepted by the creditors,

    1. he becomes a supervisor and administers the IVA on behalf of the creditors. An IVA supervisor upholds the proposal throughout tenure of the IVA.
    2. they also track if the debtor is making payments regularly and abiding by the IVA schedule.

      While administering the IVA the Insolvency Practitioner actually represents the creditors. He produces a periodical assessment report on the financial status of the debtor to the creditors. This helps them to keep a track of the IVA schedule so that if there is a problem, they can immediately report to the creditors.

      Debt Management FAQ

      Published on May 15, 2009 in Debt Management Plan (DMP). 2 Comments

      In certain situations, a question-answer format like an FAQ can immediately solve a lot of queries. So, we are planning to develop an extensive knowledge base in question-answer format for all the topics like debt management, debt consolidation, IVA etc.

      In this post we will answer some important and common questions on Debt Management. If your question is not answered in this list or if any answer does not solve your problem, please write a comment; we will make the necessary changes as soon as possible.

      Debt Management FAQ

      1. What is a debt management plan?

      A debt management plan or DMP is a voluntary agreement between the debtor and creditors to manage existing debts. In this process the debtor can repay all creditors in a single monthly payment. For some people it can be an effective way to become debt free in a few years.

      2. Will debt management plan affect my credit rating?

      If you have an existing debt problem, your credit rating is already affected. The debt management plan will not make it worse. However, regular repayments via a DMP will eventually make you debt free and improve your credit rating.

      3. Who are eligible for a debt management plan?

      If you have more than two creditors and finding it difficult to pay them off, you can obtain a suitable debt management plan. The plan will accumulate all your debts into one single debt and allow you to make a single monthly payment to all creditors.

      4. Will it take longer to pay off my debts?

      Yes, it will take longer than usual to pay off your debts with DMP. This happens because you are paying a small amount every month. Nevertheless, DMP also reduces the number of missed payments.

      5. Does a debt management plan cover all my debts?

      No, debt management plan does not cover all your debts. It only covers your unsecured debts.

      6. Will the creditors stop charging interest?

      In a debt management plan the debt advisor negotiates with creditors to freeze your interest on the dues. However, based on your financial circumstances the creditors may freeze or lower the rate of interest on your repayment. It solely depends on the creditors.

      7. Does the repayment amount remains fixed throughout?

      The repayment amount can only remain fixed throughout the tenure if the creditors agree to freeze the rate of interest on the debt. This entirely depends on your specific financial situation as well as the creditor’s decision. Usually the creditors agree upon a very low rate of interest on the DMP.

      8. How can a debt advisor help me?

      A debt advisor can make a suitable plan for you after assessing your income, expenditures and capability to repay debts. They negotiate with your creditors helping you to obtain an affordable monthly repayment scheme.

      9. Will my creditors accept this arrangement?

      Creditors will accept a debt management plan if they see that the debtor is missing payments or not paying on time. Your debt advisor will negotiate with your creditors on your behalf.

      10. What is the information required while applying for a DMP?

      When you are applying for a DMP you need to provide exact information on your financial situation. These include:

      1. Credit card statements, bank statements, or other loan agreements
      2. Complete break-up of your earning and expenses in a month
      3. If you have any CCJ or credit defaults
      4. Details of the creditors, account numbers and balances
      5. Details of your secured loans
      6. Details of Hire Purchase Agreements
      7. Details of any benefits that you receive

      11. Is debt management good for me?

      It depends on your current financial status and future financial projections. For more information please read: Debt Management Plan: Can it help you?

      This post will be updated regularly depending on your needs. If you need more information on debt management, please write to us in the comment box.

      How does a Trust Deed Work?

      Published on May 14, 2009 in Trust Deed. 2 Comments

      In the last post I wrote about 11 consequences of signing a trust deed. In this post we will talk about how trust deeds actually work. If you have any problem, please write a comment – we will try to answer.

      Trust deed is actually a voluntary agreement between the debtor and creditors under the supervision of a trustee (must be a qualified insolvency practitioner). Here the trustee plays a major role as the right of debtor’s legal possessions is transferred to the trustee and he or she executes the whole process. If necessary the trustee may sell debtor’s possessions to pay the creditors.

      Depending on the financial status of the debtor, the trustee drafts a trust deed. While drafting the Trust Deed the trustee enquires and validates debtor’s total earnings. He will calculate debtor’s monthly expenses and the basic cost of living. This will help him to finalize an amount that the debtor can afford to repay debt every month. The repayment amount is calculated on how much you can pay for every £1. For example, if the trustee finds that the debtor can afford to repay 30 pence for £1 he will draft the proposal accordingly and present it to the creditors.

      After that the trustee publishes the proposal on the Edinburgh Gazette to inform all the creditors. The creditors get five weeks of time to decide and object on it. As long as a creditor or creditors who have lent more than 33% of the total amount do not object, the proposal is considered as a legal binding to all the creditors. If no creditor objects within 5 weeks, the deed is treated as approved and protected. Normally, creditors accept the deed if you offer a minimum of 10 pence for every £1.

      A protected trust deed,

      1. prevents creditors to take any other action to recover money. This rule holds true as long as the debtor abides by the rules set by the trust deed.
      2. prevents the debtors from going in for other repayment methods like bankruptcy or another debt management plan.

      After the Trust Deed is accepted by the creditors the trustee begins further proceedings and he will deal with the creditors from then on.

      The rules of a Trust Deed are fixed and the trustee strictly executes them so that the debt is paid off properly. The trust deed normally runs for 3 years and after that all the debts are written off.

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