With the growing number of individuals suffering from debt related problems the United Kingdom is flooded with debt management companies. The process of luring a debtor into agreeing to the company’s terms starts psychologically. They can induce fear and intimidate you; mislead you and eventually make matters worse for you. You must not fall into a trap:
Heard about cowboy debt advisors? These firms spend a lot in advertising unbelievable offers to clear your debts. Their charges are high but in all probability they will offer you no relief. Any advice that sounds like a miraculous escape from debts may actually be another trap. Avoid such debt management companies.
It is important to check for accreditations and have all your questionsanswered in writing.A lot of debt management firms deceive debtors by having their firms named much alike a reputed and trusted debt management company. The Office of Fair Trading (OFT) recently wrote to eleven debt management companies with ‘look alike’ websites warning them to close them or face legal consequences.
Should you choose a debt management company that does not have proper accreditations, an event may rise where the firm is closed down and your debt management programme is sold or transferred to another firm. The new company may renew your terms and chances are that you might not like it. There will be little that you could do considering the amount of money you would have had already invested to pay off your debt. Worse still, you may find yourself in legal soup if your service provider was not an honest business organization. Avoid debt management firms, companies and organizations without proper accreditations.
Avoiding creditors is not the solution. If you avoid or fail to make payments to your credit card company chances are that your account will be sold out to a collection agency. Collection agencies are more aggressive and are bad news for debtors. Speak with your creditors and explain your constraints. Once they are convinced that you are doing your best to repay them, they may enter into an agreement and waive off a portion of your debt or freeze interests or make other affordable repayment arrangements. You can avoid the court or formal recovery action if you keep communicating with your creditors. Return their calls if you miss them. Avoid severing communication with your creditors.
Watch out for debt management firms that promise to reduce your monthly payments to half the amount or close. It’s not always a false commitment. Here is how it works and how it ruins you simultaneously. If your monthly payments are reduced to half then this reduction has to be reported to your creditor or your set of creditors as reduction in the monthly obligation due to hardship. Consequently, this will be forwarded to the credit bureau which will ruin your credit rating. Be careful before signing up with debt management companies that promise an unbelievable reduction in your monthly payments.
Credit repair firms can’t erase bad debt. There is no company that can clear a bad credit report for you. Companies that claim that they can do that are making false claims. Credit repair companies can only advise you to take actions that will improve your credit rating. They can also dispute any inaccurate information or analysis in your credit report. Credit repair companies are liable to charge you a fee for these services. Actual information can not be removed from your credit report. Avoid firms that claim to erase bad debt or bad credit history.
We hope that this information will help you. If you have suggestions or concerns regarding debt management companies, please write a comment here.
Certain Debt collection agencies or the collection departments of certain banks run a huge business by exploiting customers based on their ignorance in matters of law and order. Some even try to deceive you. Do not become a victim. Fight back these malpractices. Here are 4 legitimate ways to stop debt collectors and collection agencies:
Debts that you do not recognize:
If a debt collection agency contacts you about a debt that you do not recognize here is what you should do to stop debt collectors:
Send a letter to the debt collection agency, that states that you have no idea about any such debt that the agency claims. Mention the account numbers or reference number that they are making the demands for.
According to the guidelines set by the Office of Fair Trading and CUPTR (Consumer Protection from Unfair Trading Regulations) 2008:
It is unfair for debt collectors to demand for payments from an individual when they are uncertain about the debtor/debtors.
It is unfair to track third parties for payments when they are not legally liable.
It is unfair not to freeze collection activity during the investigation period of a queried or disputed debt.
Disregarding or ignoring claims of debts that have been disputed or settled and continual unjustified demands for payments result in psychological harassment and can be subject to prosecution.
Ask the debt collection agency to make no further contact with you regarding their demands for payments without evidence except a letter from them that clearly confirms that the matter is closed. Otherwise you may lodge a complaint with Trading Standards and inform the OFT about the same.
Doorstep visit threats from debt collectors:
If a Debt Collection agency threatens you to make a doorstep visit then draft a letter that states that you will communicate only via mails. Let them know that you have logged their constant attempts to contact you by telephone which includes the time and date of every call they have made so far. This should stop most debt collectors.
If they make an attempt to further contact you over phone it would be considered as harassment and will be dealt with accordingly.
If they intend to organize a ‘door step call’, advise them that under the rules set by the Office of Fair Trading (OFT) , they can only visit you at your home if you wish to make an appointment and you have no such wishes.
Under English Common Law for people in the United Kingdom, they can not visit you on your property without your permission. Inform them that you may revoke the implied license under English Common Law (that allows people to visit you on your property without your conveyed permission) for them and any of their representatives. If they still visit you on your property then they will be trespassing and action will be taken against them; in police attendance if necessary. Please remember never to sign your name on the letter.
Statute barred (debts older than 6 years):
If you receive demands from creditors in regards to debts older than 6 years then you can write a letter to your creditor stating that the last payment/acknowledgement on the account referred to was made 6 years ago and under section 5 of the Limitation Act 1980, your creditor can not take any court action against you to recover the alleged amount. Do mention that the OFT states that it is unfair to pursue a statute barred debt.
If the creditor persists to press for payments after the debtor has declared that he/she will not pay the debt because it is statute barred then it is harassment according to the OFT.
If you are to follow Scotland law norms then you need to mention that under The Prescription and Limitation (Scotland) Act 1973 Part1 Section 6 the obligation of paying the debt shall be considered to be extinguished if there were no acknowledgement on that particular debt made within 5 years.
Record telephone calls to stop debt collectors:
In case of continual harassment you can record telephone calls that you can use against a debt collecting agency or your bank in the event of any court action. It will serve as legitimate evidence. It is not illegal. Though this will not help you immediately but you can definitely stop debt collectors in the long run. Sometimes if you say them that you are recording their harassing calls, they may stop.
Do not let Debt Collectors or Collection Agencies intimidate you into paying money. Fight back these malpractices. It is true that going up against the Debt Collectors, Debt Collection Agencies or the banks is like facing ‘goliath’ but remember that as long as the law is on your side you can stop debt collectors.
Need suggestions on how to stop debt collectors in a specific situation? Write a comment here or let us know about your situation via the Ask a Question Box.
Did you know that approximately in every 3.5 minutes somebody is entering into an IVA in the United Kingdom (June 2009 Statistics)?
It does not mean that IVA is the best option for you. In a previous article we compared IVA and Bankruptcy. In this article we will compare IVA to debt management. After reading this article you may be in a better position to decide between IVA and Debt Management.
An Individual Voluntary Arrangement (IVA) is a way to manage your debts. Court and the Official Receiver’s fees are normally less than that you would have paid for bankruptcy. If you owe over £15,000 to three or more creditors and can’t afford to repay then you may be eligible for an IVA.
Debt management involves a company assisting you to get your debt under control. Many companies offer paid debt management services except services like debt advices or preparing a personal budget sheet for you. You will also find many non-profit organizations that offer free debt management services.
IVA will provide you with the opportunity to write off a portion of your debt, whereas a debt management plan makes your payments more affordable, but it will not write any debt off.
IVA would help if you consider
That certain detail will be recorded on the Individual Insolvency Register. A debt management programme is private.
To make monthly payments that must be for at least £200-250. You can make monthly payments as low as £80-100 per month if you opt for debt management.
To safeguard your assets. Debt management is completely informal so your assets can still be financially affected.
To have yourself debt free in 5 years. The debt management schedule may last longer.
To write off debt. Up to 75% of your debt can be written off in an IVA. In a debt management programme all of your debts have to be paid back.
To involve yourself in a legal binding. A debt management plan is not legally binding.
That Debt management plans have upfront fees which can be quite high. This will leave you with less money to pay off your debts. Some Debt management plans are subject to the first month’s payment being a fee. This makes your account overdue or past due by a month or more. These arrears may affect your credit rating.
Debt management can be helpful
Where the person owns investment properties.
Where the person is on low surplus income
Where there is an uneven or unpredictable income such as a person with more than 20% of his/her income coming from bonuses or commission, or an unemployed person.
When a person is on benefits. A debtor with more than 20-25% of their income coming from benefits should consider debt management.
If you need more information, please write a comment here or ask us directly via the “Ask a Question” box.
The moment you decide to lodge your own bankruptcy petition:
You will need enough time to plan ahead. You will need around four to six weeks to save approximately one month’s worth of cash to see you through a very difficult transitional period.
You will not be able to keep this in a bank. It will need to be kept in a safe place at home. I cannot stress enough how important this is. I am not joking when I say you may not have enough money to buy a loaf of bread the minute you walk out of the bankruptcy court. Stock your freezer to the brim.
This article is written by Joanne Wood who declared herself bankrupt in February 2006. From the age of 17 Joanne worked as a court reporter at the Central Criminal Court. She is the author of Bankrupt 130 of 2006 – a remarkably candid account of what happened to a family after bankruptcy.
You need to be able to feed your family, put petrol in the car and have enough money to buy a train ticket to work. Nobody tells you about this and quite frankly nobody really cares. It is vital that you continue to work after the bankruptcy hearing if you can. Make sure you have considered all your domestic outgoings for a month, at least, and that includes the dog food and baby’s nappies. If you are on an electric meter ensure you can afford to heat your home. More importantly you will need to have the bankruptcy fee (currently £495) to take with you on the day of your bankruptcy hearing.
How can I save that sort of money? I hear you ask. Next step:
During the weeks before the hearing only pay the most important bills, that is, your mortgage, rent, buildings insurance and home contents cover, home boiler insurance and your council tax.. Stop paying everyone else the moment you have decided this course of action (bankruptcy). You are wasting your money – fill up the fridge. Buy a second freezer.
Forget the gas, electric, water, Inland Revenue, and so on. These overdue bills can be listed as creditors and written off in the bankruptcy. You can start again from scratch. I did not do this. I continued to pay as many bills as possible before the petition was lodged. But that was a mistake: I would have been better saving my cash for food. The only thing I did do – which I still stand by – was pay the creditors threatening debt agency action in an attempt to keep bailiffs from my door. I had children and it was vital that they were protected as much as possible. I even drew cash from one credit card to pay another rather than pay nothing. Do not pay any unsecured creditors – credits cards bills.
If I had my time again I would have used any credit I had left on my credit cards to put four new tyres on the car, buy an extra school uniform in the next size up for the following school year and taken the whole family to the optician, dentist and hygienist. These are all luxuries and you will not be given a sufficient bankruptcy allowance to fund these. Any extras such as these will inevitably come out of your food budget which is determined by the Official Receiver, depending on the size of your family.
I know there will be critics who will frown upon this attitude but trust me, especially if you are self employed. You will have NO money and food will always be the main topic of conversation in the household during the bankruptcy period. There were many occasions when we struggled to feed ourselves and the children were always fed first.
For months I suffered with an infected tooth because I could not afford the dental bill. I really could not justify the dentist fees when we had so little food in the house. They were frightening times.
Honestly, it is outrageous. If I had gone to prison for murder I would have been fed every day. The meagre shopping allowance is not sufficient and food really is a luxury for some bankrupts.
You need to telephone the court for your bankruptcy hearing date. We phoned four weeks ahead. You may be able to book earlier, but be prepared that the court could be inundated with petitions, and you may have to wait several months. But the longer you have to wait the more time you have to save your money. This really is a case of survival.
Ask for the forms to be posted to you. These take a couple of days to arrive. These forms are to be taken with you on the day of your hearing so there is no need to rush them. Fill in the forms using a pencil first. You will make mistakes. Alternatively, you can fill the forms in On-Line. This may be a better option as you can start preparing them straight away.
If you have to pay court fees then you need to find this cashin advance. They take noform of credit and this payment has to be paid in full on your arrival before the proceedings can commence. We had to pay £920 for both of us. I drew this cash from a credit card. I decided to take this course of action rather than allow someone to make me bankrupt. It was paramount that I retained my dignity. I was adamant that no creditor would haul me into court. We made the decision to lodge our own insolvency petition.
The only benefit to allowing a creditor to make you bankrupt is that they have to pay the costs. But I strongly urge you to make this life changing decision yourself. It will give you time to make financial plans and save the required amount of money to cover your living costs. More importantly you take control of the situation which is vital if you are going to survive this next phase in your life.
On the day of your bankruptcy hearing I would suggest that you dress smartly for your court appearance. Look professional. Clean your shoes. Hold you head high. You are not a criminal.
On your arrival to the court you must check in at reception. This could be embarrassing. But stand tall. It’s no one else’s business. This is their job. They have seen and heard it all before.
The thought of bankruptcy for me was quite terrifying. As a young court reporter, twenty years earlier, I would sit squirming in the press bench at the High Court in London watching businessmen being interrogated about their financial misdemeanours in open court. They were branded incompetent as they hung their heads in shame. It was excruciating to watch. They must have felt so humiliated. Their penalty in those days was measured in years not months as it is today. I have no idea how they recovered from this terrible financial blow.
Thankfully bankruptcy is a different affair nowadays.
Once we had announced our arrival, we were asked to wait for a short time in reception before being invited into a side room.
The next twenty minutes was quite formal. The court official checked through all of the forms we had carefully filled out. Once she was satisfied she had everything, we were asked to swear an oath on the Bible confirming our identity. The large pile of banknotes we had brought with us was then counted. Documents and fees in order, we were then taken up several flights of stairs to a waiting room near to the court.
Fortunately for us, we did not enter the courtroom. We were directed into the judge’s chambers where the rest of the hearing was heard. This will vary depending on where you attend your bankruptcy hearing. Some may only hear the petitions in a courtroom; others will be flexible, as in our case.
The judge did not ask us why or how we had ended up sitting in front of him.
It was just a case of formalities. He was pleasant, sympathetic, and quite supportive. He took time to digest the informative documents, where we had given an explanation of our circumstances.
We sat in silence for most of the brief hearing. It was so quiet that you could hear the clock on the wall ticking. Before declaring us bankrupt, he again asked us if we were definitely sure this was the route we wanted to take. At no time did he judge us. It was so surreal.
Afterwards he wished us well and directed us back to the small office. There the assistant telephoned the Official Receiver’s office, and we were asked to both have a quick chat with them. We confirmed our bankruptcy numbers and arranged to be at home on a date that suited all parties, in approximately two weeks’ time.
Each debtor will be required to either attend an interview at a pre-arranged venue or like us be available at home for a phone call with the Official Receiver.
On the day of your interview make sure you have your copy of the list of expenditure in front of you and a copy of the petition form you filled in, accompanied by the list of creditors. If you have any pension or endowment policies that you still hold, get them out and have them ready in case they ask. But as I remember it, they ask few questions. Probably because they already have all the information you took with you on the day of your hearing.
They will ask you to confirm who you are, your address, if you still work, and very basic questions like this. They are not complicated. Just answer them as honestly as you can. They may ask you to send financial records and paperwork – for example, bank statements, etc. (photocopy everything you send in case you don’t get it back).
They may ask you for additional information about your assets and debts, and the facts and circumstances that led to the insolvency.
But I do stress here: if you have any of your own questions, ask them now. Write them down so you do not forget. It could be some time before you get a chance to speak with them as the Official Receiver’s office is more inundated than ever.
Yes, I know, this is a very daunting experience and you are probably terrified. But the truth is that all court staff are very polite, understanding and at no time judgemental.
You will get through this. Just accept that you cannot right things overnight. Read as much information on bankruptcy as you can. Ask as many people as you can about the procedure and most importantly keep the lines of communications open with loved ones.
The big question is not a ‘can I survive bankruptcy’, but ‘can my marriage last the distance with possibly no job, home’ and secure family unit?
All I hear when I turn on the television or radio is finance this and finance that. Can bankrupt Britain drag its self out of this global rut? And how, at an alarming daily rate unemployment figures are rising.
This article is written by Joanne Wood who declared herself bankrupt in February 2006. From the age of 17 Joanne worked as a court reporter at the Central Criminal Court. She is the author of Bankrupt 130 of 2006 – a remarkably candid account of what happened to a family after bankruptcy.
But what the experts are failing to address is how can we help debt ridden Britons hold together their relationships, retain their dignities and keep a tighter rein on their dysfunctional offspring?
Behind closed doors families in debt are distraught, mentally and physically exhausted with worry for their future and, in many cases unable to share their fears with their loved ones. For those individuals who remain in denial inevitably the outcome will be a negative one. Reports of divorce figures on the rise and debt agencies themselves now receiving marriage related calls can not be ignored.
Bankruptcy, or even just been up to your eye balls in debt, can be a very isolating experience. Feelings of failure can force many to retreat into the safety of their shells, inciting anger and frustration from their partners.
At first only swords are crossed and through gritted teeth hissing bitter exchanges played out of earshot of little ones. Desperate to protect your young from the unfolding nightmare you try to contain your terror and tantrums. But, soon the boiling pot will explode and what, at first seemed to be a bit of a financial pickle, has now become a full on tsunami fallout. The battle to stay solvent has well and truly begun.
I was so desperate to save my kids from this sort of carnage but it was soon apparent that the tension in the air could be severed with a blade. Never underestimate your children. However young, they feel it before they see it. If mummy or daddy are angry or sad, they’re aware it.
At the time of our bankruptcy in February 2006 my children were in their early teens. And yes, they saw the tantrums alright. From beating hubby with a wet mop about the torso to emptying the entire contents of my dishwasher on the kitchen floor amid horrified gasps from the onlookers. I struggled to cope with being branded a bankrupt. My better half on the other hand was content with stuffing his head in the sand and pretending it had never happened.
My husband and I have known and worked together on a daily basis for the past 27 years. I would describe us as a strong team and never short of conversation. We are very vocal and have always encouraged evening gatherings at the family dining table for open discussion with our children.
But from out of the blue along came this thick dark smog which draped itself like a blanket over my head. I felt as if I was drowning. I could not breathe. I was ashamed, alone and a failure. No one could help me. I did not want any sympathy.
At the flick of a switch a once very contented life becomes a thing of the past with no understanding of what the future held. It was a frightening time for all of us. There was shouting, screaming and crying, that was me by the way. There were empty threats of divorce, and that was me too. I did not mean it. I just wanted to blame someone. It is human nature to cast blame elsewhere. But no one was to blame.
So you see I am concerned for the credit crunch Britons. They are limited to how they can now deal with their financial mess. It really is out of their hands to some extent. But we must help them to save their relationships through what will be one of the hardest phases of their lives.
We cannot allow our children to be badly affected during this unhappy period. My two kids definitely did suffer educationally as we just spent every waking hour trying to put the pieces of our lives back together.
But I did discover towards the end of the bankruptcy year that by talking openly to my children about the difficult financial time helped enormously. We suddenly felt like a team again. It is not always right for your children to think that life is a bed of roses. They too must understand that they must take life’s lows as well as enjoying the highs.
My children learnt an important lesson as they watched us work ridiculous hours around the clock in an attempt to rebuild our lives. If anything I think they are proud of us and that has to be a good message.
I hope people can take comfort in knowing that they are not alone and that they have done nothing wrong. You must start talking to your partner. If you are going to win this war you need to be united, talking honestly, positively and most importantly physically fit. Insolvency is very draining. For goodness sake eat properly and get some sleep. You are going to need it.
Look at your partner. You are with them because you love them. Things used to be good together before the bills started stacking up. They can be good again. Get help if you need it. Go to the doctor, talk to family and friends or perhaps make inquiries about relationship counseling. True, you will not solve this problem overnight. It may take a couple of years. But make the decision to take control of your own life and start right this minute. Good Luck!
The last article offered a brief idea on student loans. In this article we will try to answer some of the most common questions like “How to pay back the student loans?”
Well, there are various ways to repay your student loans.
Repaying student loans through PAYE scheme:
If you are working in UK, your student loans can be repaid by the PAYE (Pay as You Earn) system. However, in this scheme you start paying off your debts once you reach the repayment threshold (your gross income reaches either ₤1,250 a month or ₤288 per week).
In this scheme, your employer will subtract your student loan repayments based on your income for that period. At the end of the financial year, your employer will notify HMRC about your repayments. HMRC will send this information to the SLC.
In case you make a job shift, your new employer will continue with the deduction of repayments. You will get a P45 from your previous employer to prove that you are a student loan account holder. You should always keep part 2 and 3 of your P45 safe until you start your new job, and keep part 1A for your own records. Once you enter a new job, pass part 2 and 3 of P45 to the new employer.
Once you submit part 3 of your P45 to HMRC as a confirmation of your new job, student loan repayment amount will be deducted from your first salary. But again, your income must exceed the threshold.
For those who do not have a P45 from their previous job, or those who earn less than PAYE tax threshold or first job, your employer will submit a P46 form to HMRC.
Once you complete your repayments, HMRC will provide the details to SLC. Now SLC will let you know that your student loan is repaid. HMRC will also notify your employer to stop student loan deductions from your salary. Your employer gets a time period of 42 days to execute it.
Paying back student loans through self-assessment:
Do you want to calculate your tax returns by self-assessment? Then you must deduct your student loan from your income. If you are self-employed, then you need send a tax return to HMRC that includes your tax, National Insurance and student loan repayments for an entire year.
Want to pay off your student loans more quickly?
Apart from the repayments through tax system, one can make extra repayments to pay off loans faster. You can opt to make repayments by a credit or debit card like using a Maestro, Solo, and Delta. (Remember that for credit card repayments there is an additional surcharge of 1.5 %.) The minimum amount for paying through a card is ₤5.
How to repay student loans if you move overseas for a considerable time?
The moment you decide to move out of UK for more than three months, inform SLC. After this, you will be required to complete an “Overseas Assessment Form” and provide details of your earnings and employment status. Thereafter, you get a letter from SLC that:
confirms whether repayments are due
if applicable, notes your monthly repayment amount
helps you to arrange direct repayments
What will happen if you do not earn enough to make student loan repayments?
Surely, there’s a way out. You can defer your repayments by sending an application to SLC. This happens when your gross income goes below the current deferment threshold of £2,161 per calendar month (equivalent to £25,936 per year).
Deferments can be made even if you are making repayments. It generally lasts for 12 months. In case you want to continue with this deferment, you will have to make a fresh application every year.
To assess your eligibility for deferment, the Student Loans Company will consider your income alone – you do not need to provide details about the income of spouse, partner, parent or other relatives.
Before you initiate the loan repayment process, you will get an annual statement for the year ending 31st August. As soon as your account becomes due for repayment, you will receive another statement for the period ending 5th April. The next statement will be given to you between a span of 12 to 24 months after that date. This mainly depends on your repayment type and the date assigned by HMRC to SLC to collect the amount.
Special deferment and repayment arrangements for disabled students:
There are many repayment and deferment arrangements for disabled students to pay off student loans. Various disability benefits are:
Disability Living Allowance
Disability Premium
Disability Person’s Tax Credit
Short-term Incapacity Benefit at a higher rate
Long-term Incapacity Benefit
Industrial Injuries Benefit
Severe Disablement Allowance
Severe Disability Premium.
So with all these loan repayment schemes at SLC, why are you feeling stressed out?
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