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Monthly Archive for December, 2009

Time Order – a viable solution when you need more time for loan repayment

Published on December 14, 2009 in Get Out of debt. 1 Comment

What is a Time Order?

A time order is a process by which you can ask the court to give you more time to pay back your loan if you have trouble to make the payments. Following parameters may change with a time order:

  • Loan repayment period
  • Monthly repayment amount
  • Interest rate

If you have a secured loan against your home and you are defaulting with the payments, your lender may threaten to repossess it. Here, a Time Order can be an effective solution.

Apply for a time order – things to check?

You can apply for a time order only if your credit agreement is governed by the Consumer Credit Act 1974.  This depends on when you took out your agreement and how much you borrowed at the time.

It covers a loan of:

  • £15,000, if you had your credit agreement before 1 May 1998;
  • £25,000, if you had your credit agreement between 1 May 1998 and 5 April 2008;
  • Any amount, if you had your credit agreement on and after 6th April 2008 (unless it was a business loan).

However, if you have taken building society mortgages and bank loans to buy your home then it will not be applicable in a time order. Your loan agreement must state that it is covered by the Consumer Credit Act. (Check if your agreement mentions “CONSUMER CREDIT AGREEMENT REGULATED BY THE CONSUMER CREDIT ACT 1974” or not)

When to apply for a time order?

1. When an ‘arrears notice’ has been issued by your lender.

Starting from October 2008, it is a mandate for the lender to send you an arrears notice within 14 days if you have missed two payments as per your agreement. It should tell you how much you owe as per the agreement, the arrears and the added interest charges. You can apply for a time order after you have received an arrears notice according to the new rules. You must write to your lender and give them 14 days notice that you are going to apply for a time order. You must include in the letter details of the offer of payment you are going to make in your application. Do not forget to keep a copy of your letter as you will need to show this to the court when you apply for a time order.

2. When a ‘default notice’ or ‘calling in notice’ or ‘termination notice’ has been issued by your lender.

The lender can issue a default or termination notice if you falter to make payment on time. When you get this notice, you can make an application to the county court for a time order. In this situation, you do not need to write to your lender to give notice that you are going to apply at this stage.

3. When creditor takes court action.

You can still apply for a time order if the creditor starts taking court actions against you.

The procedure and forms you need to use depends upon whether you have a secured loan, a hire purchase/conditional sale agreement or unsecured loan. Normally they charge you for your application. If you are on a low income or certain benefits you may not have to pay the fee.

Loans covered by Time Order?

1. Unsecured credit

If you have an ordinary credit agreement which is not a secured loan/second mortgage then you normally do not need a time order. If your creditor takes court action, then you should apply for a time order so that you can pay back under considerable terms.

The court makes the order for you to pay in affordable installments. Normally, interest is frozen by the Court under the Consumer Credit Act.

If your creditor issues a default notice and refuses either to accept your payment, or to freeze the interest rate then you can apply for a time order. If your creditor shoots up interest on your debt and refuses to take court action then applying for a time order is the only way to freeze the interest. If the court makes a time order and you keep up to date with payments, a creditor cannot apply to a county court.

It will not be shown as a judgment on the county court register or on credit reference agency files. This is applicable even if the creditor had reported the default on your credit file.

How to apply before court action

You have to fill up a claim form called N1 with supporting information known as “Particulars of Claim”. You also need to produce a personal budget sheet and details of your circumstances.

Application fee for Time Order is £150. If you are on a low income or on certain benefits, you may not have to pay the fee.

The creditor can object to your time order application in the court. There will be subsequent hearing where the district judge decides whether to make a time order in your case or not.

How to apply after court action

You need to fill up N244 if your creditor takes you to court. You need to pay £65 as fee unless you have some benefits. You also need a personal budget sheet and details of your circumstances. There will be subsequent hearing where the district judge decides whether to make a time order in your case or not.

In a situation where a creditor takes action against you in a county court elsewhere you can apply for the case to be transferred to your local county court.

2. Secured Loans

If your lender threatens to take possession of your home, time order can be the most effective way out.

How to apply for time order before court action

You have to fill up a claim form N440 and apply to a country court. You also need to fill in details of your income, expenditure and personal circumstances on a “schedule”. You will have to pay a fee of £150 with your application unless you have a benefit. A subsequent hearing will decide whether your application for a time order will be accepted or not. If the time order is refused the lender can initiate proceedings to repossess your home.

How to apply for time order after court action

If your lender makes a possession claim against you in your local county court you can apply for a time order. You will be sent a form (N5) by the court and need to fill in the defence form called N11M. Tick BOX 6 to ask the court to consider a time order and send this to the court with details of your defence, details of income, expenditure and circumstances. You can request for payments to be reduced or for the loan reschedule if necessary.

There will be a subsequent hearing where the creditor may object to your time order. The district judge may decide to make a time order, suspend possession and allow you to stay in your home as long as you pay back the loan. They can also refuse your application and give a repossession order. If you already have a possession order you can still make an application for a time order by using the general application form – N244.

Justified reasons to apply for a time order?

It is very important that your reason for the application is ‘fair’. The court looks into the matter from the perspective of both parties, (the creditor and you).

  • How justified was your reason for taking a loan?
  • Could you make payments on time in the beginning?
  • Is your agreement very expensive or not appropriate to your requirement?
  • Did you take any other loan subsequently? State reasons.
  • Why are you not able to pay on time? (changed circumstances)
  • Did you make a conscious effort to sort out the issue and ask the creditor for a payment arrangement? Mention whether the creditor has refused to negotiate.
  • Is your situation temporary and likely to improve in the future? The court may want to make a time order for a time-limited period.

Starting a claim in the county court can sometimes be quite complex and has associated issues. Hence it is necessary that you take proper legal advice before you proceed.

Bankruptcy Discharge Order – freedom from bankruptcy restrictions

Published on December 12, 2009 in Bankruptcy. 3 Comments

In our last post, we discussed about FTVA as a bankruptcy alternative. There is another procedure that can free you from the restrictions of bankruptcy and debts you owed while getting bankrupt. It is called “bankruptcy discharge order”.

When can I get discharged from bankruptcy?

You get discharged usually after completing one year of bankruptcy order. However if the Official Receiver files a notice in the court before one year gets over, then you can be discharged earlier. You will get a notice regarding the time of your discharge. You need to co-operate with the Official Receiver otherwise, your discharge order may be ceased.

How do I get discharged?

You do not have to apply to get a discharge order granted. You get your discharge automatically. Once you wish to own a Discharge Certificate, you will have to write to the court which was dealing with your bankruptcy proceedings. A Discharge Certificate is a proof that you have been released from bankruptcy. You must maintain a time gap of at least two weeks prior to your discharge date when writing to the court. Make sure you have included details such as name, address as well as your court number (to be obtained from the latest correspondence about your bankruptcy). For getting a Certificate of Discharge, you need to pay a fee of £60. If you want more copies of this certificate, it will cost you £5 each. You can also advertise your discharge order for additional cost and for this you need to ask the Official Receiver.

There are two situations when you cannot get your discharge automatically:

  1. When your discharge period has been suspended. It may happen if you fail to co-operate with the Official Receiver or trustee;
  2. When you are subjected to a criminal bankruptcy order.

You can always consult the Official Receiver for more help and information on your specific situation.

Can I get an early discharge from bankruptcy?

No, you cannot automatically get an early discharge order from bankruptcy.  The Official Receiver reviews your file for 3 months once reports are sent out to your creditors. After 8 weeks of the bankruptcy order, this report is issued. Once the Official Receiver is convinced that your bankruptcy does not require further investigation, early discharge process can begin. For this you need to respond to the queries of the Official Receiver quickly. This early discharge process takes place only when your creditors raise no objection to this order. The process of early discharge takes 6 months to be executed.

What are the after effects of “Bankruptcy Discharge Order”?

  • Once you are discharged from a bankruptcy order, you will be freed from your debt burden. You will never have to mention about your bankruptcy while obtaining credit. There are some debts that are not included in the discharge order such as money owed under family proceedings, personal injury, court fines, debts related to frauds, debts owed after the bankruptcy order and student loan debts.
  • When it comes to mortgage payments, remember that your secured creditors can pursue you for recovering the debts. You must negotiate with your mortgage lenders regarding your payments.
  • Even if you are discharged from bankruptcy, your assets that are held by the Official Receiver or the trustee are not returned to you. Assets like home are dealt with after your discharge. In case your home has not been dealt with for 3 years since the date of the bankruptcy order, the interest might be returned to you.
  • Regarding payments under an income payments order or agreement, you must continue with them even after you are discharged.
  • Once you are discharged from bankruptcy, you can carry out your business without the restrictions imposed during bankruptcy.
  • After you are discharged, you must co-operate with the Official Receiver and trustee if they require any information from you. Any breach of this rule will result in a contempt of court.
  • Record of your bankruptcy will remain in the Insolvency Register for 3 months after your discharge.
  • As for credit reference agencies, they pick up information from advertisements of bankruptcies in newspapers like “The London Gazette” and the Register of County Court Judgments. If there is no advertisement, you will have to inform the credit reference agencies to make changes in their records. For more information, a leaflet called ‘Credit Explained’ is produced by the Information Commissioner’s Office.

More information and help:

By telephone: 0845 015 0010.

By email: publications@berr.gsi.gov.uk

By fax: 0845 015 0020

You can also write to:

The Insolvency Service Publications Orders
Records Management
4th Floor East
Ladywood House
Birmingham
B2 4U

10 don’t do tips to manage your credit card debts

Published on December 9, 2009 in Credit Card Debts. 1 Comment

UK government has made changes in credit card rules to benefit customers who are struggling to manage their finance. The credit card industry has agreed upon a ‘breathing space’ concept to help their customers. Risk based re-pricing rules have also been changed.

What does ‘breathing space’ mean to you?

As a customer if you are in discussion with a debt adviser on a debt repayment plan, you should notify your credit card company(s). The credit card company will then stop all its collection attempts for the next 30 days. A further extension of 30 days can be granted if discussion continues with a considerable progress. This ‘breathing space’ may put off some pressure.

How will the changes in ‘risk based re-pricing’ help you?

As a customer, you are entitled to a benefit of information according to the new regulations. If the credit card company makes any changes to your credit card due to risk re-pricing, then they will have to:

  • Give you a minimum 30 days notice before increasing your APR.
  • Give you an option to close your credit card account and repay the outstanding balance at the existing interest rate within a scheduled time.
  • Not increase the APR of your card for the first twelve months or more than once in every six months after that.
  • Explain the reasons to change your APR.
  • Offer an alternative product or solution at a lower interest rate.

With these new changes, you stand a better chance to manage your credit card and credit card debts. These are good news but you must take the initiative to stay out of excessive credit card debts as long as possible. Here are 10 things that you must not do to stay out of credit card debt related problems.

Don’t Do 1. Forget to get your credit report.

Make it a point to get your credit report each year from the primary credit bureaus. This helps to keep you updated with your credit status and gives you ample opportunity to check if your transactional details are accurate and up-to-date.

Don’t Do 2. Co-sign with someone with a credit risk.

If you co-sign with someone who is a bad credit risk, e.g. your spouse, you must be aware that you are responsible for the account if the other person involved fails to repay a loan.

Don’t Do 3. Deny giving same individual information for identification in every loan application.

It is a good practice to give same identification information e.g. name, telephone number, social security number etc. each time you apply for a credit. In this way you can ensure that you don’t land up getting duplicate files. Tips: If you use a middle name, either use it always or never use it.

Don’t Do 4. Neglect to form your own credit information

Sometimes it may happen that you don’t have a credit report by your name. After marriage you get to use your spouse’s account as an authorized user. In this scenario if you ever plan to file a divorce, then you might lose all the benefits. So, it is very essential to get credit on your own name right from the beginning.

Don’t Do 5. Load your bag with too many credit cards

Often credit card gives you a false sense of achievement, but in reality you achieve nothing but debt. Ideally you should use credit cards only in emergency. It is always better to use cash to cover regular expenditure. You may carry as few cards as possible to track your expenditures and avoid running into a bad debt.

Don’t Do 6. Repay minimal amounts

Are you happy to repay the smallest amount possible each month against your loan? The only person who is benefiting form this is your creditor. The lesser you pay, the longer you take, thus incurring high interest amount on your actual loan money. Ultimately you land up paying a lot more.

Don’t Do 7. You think it is not so important to fix errors on your credit report.

However slight the error may look, it is important to fix it up. Check all incorrect balances and closed account printed as open or vice-versa. This might lead to a lot of discrepancies in the long run. Keep your credit report error-free to live a trouble-free life.

Don’t Do 8. Names are matched in your family

If your family has members with same names with different titles like, Jr, Sr or post-fixes like I, II and III, then make sure that your credit histories are not mingled together. If there is any discrepancy, report it to the concerned department immediately. Beware of anyone trying to misuse your credit.

Don’t Do 9.  You think that late payments don’t reflect on your credit report.

Are you aware that if you are 30 days late in repaying, your creditor is free to report the delinquency to a credit bureau! This is turn affects you in long run to get a good interest rate or future credit. So, keep a track of payment due dates and follow a ‘spend-less, pay-early’ method.

Don’t Do 10. Last but not the least, failing to pay at all

However small the balance is, not paying it affects your credit report throughout your life. So don’t keep aside a card just because you don’t use it anymore. Pay the dues to every penny.

If you follow these rules it will definitely help you to properly manage your credit card debts and live a free life. Do you have any suggestion on credit card debt management? Please write a comment and help others.

FTVA or Fast Track Voluntary Arrangement to Avoid Bankruptcy

Published on December 4, 2009 in Bankruptcy. 1 Comment

In the last article we discussed about formal and informal debt solutions to avoid bankruptcy. However, if you are already made bankrupt, FTVA or a Fast Track Voluntary Arrangement can be the solution to avoid bankruptcy.

FTVA is a special agreement with your creditors to clear your debts after you have been made bankrupt. This has been introduced to help debtors to avoid bankruptcy horrors in UK.

You need to keep certain things in mind while working out an FTVA:

  • The FTVA proposal must have details of your debts.
  • You must list down your assets that are available to be sold
  • When can you finish making your repayments?
  • Fees and administration costs of FTVA.

FTVA or Fast Track Voluntary Arrangement Process:

In a FTVA, the Official Receiver plays the role of a nominee. He drafts the FTVA proposal to present to your creditors. If the proposal is accepted, the Official Receiver supervises the entire procedure and pays your creditors accordingly.

Once your creditors accept the FTVA proposal, the Official Receiver will immediately apply to the court to remove the bankruptcy order. This will be executed after 5-7 weeks from the starting date of FTVA. After your bankruptcy is removed or annulled, you will be free from bankruptcy restrictions. Even your bankruptcy details will be removed from the Insolvency Register.

Differences between an IVA and FTVA:

An IVA is used as an option to avoid bankruptcy. On the other hand you can resort to FTVA only when you have been made bankrupt and want to come out if it. An FTVA mainly deals with sales and disposals of your assets as well as collecting regular payments. The Official Receiver will act more like a supervisor in an FTVA. You can also make some extra offerings to your creditors while proposing an FTVA.

What are the costs for an FTVA?

You will be charged a fixed fee of £300 by the Official Receiver for acting as a nominee. You will have to make this payment when you propose an FTVA. There can be a situation where the Official Receiver may not agree to act as a nominee. In that situation, the fee will be credited to your bankruptcy estate.

Once your creditors accept your FTVA proposal, the Official Receiver’s fee will be 15% of the amount collected from your assets or collections made from you. Even the administration costs are recovered from the money collected. If your bankruptcy was a result of the petition made by your creditors, you will have to repay their costs. Apart from this, there is a fee of £35 for registration of an FTVA with the Secretary of State.

Making an FTVA proposal:

If you want to propose an FTVA, you will have to inform a member of the Official Receiver’s (OR) staff. After this you will be given some forms to complete. This form will represent your proposal. It will include several standard terms and conditions as well as details of your assets and debts you owe.

After providing all the extra information, you will have to return the form to the Official Receiver along with the fee. For more assistance you can obtain a guidance on ‘Completing your FTVA proposal’ from any OR office. Once you have submitted your proposal, the Official Receiver will decide on whether he should act as a nominee. The Official Receiver acts as a nominee only if he is satisfied that your FTVA proposal stands a chance of being accepted by your creditors.

If the Official Receiver agrees to act as a nominee, he will send a copy of the proposal to your creditors for their vote. It is important to ensure that you inform the Official Receiver about all your creditors. If you forget to name a creditor, that creditor can easily revoke an FTVA once he knows about it. It is mandatory that at least 75% of the creditors vote for FTVA proposal. Once approved, your FTVA will be supervised by the Official Receiver and he or she will realize your assets, collect payments and finally pay off your creditors.

The duration of an FTVA is set out in the proposal. There is a fixed time limit for FTVA. While you are in an FTVA, you must keep up your payments and deliver your assets accordingly. If you fail to do so, the Official Receiver can make you bankrupt once again. In case you are made redundant and fail to make payments, the Official Receiver will call off the FTVA and will not take any action. So it is advisable to get help from a solicitor, a qualified accountant, an authorized insolvency practitioner or a reputable financial adviser or advice centre before you go for FTVA.

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