- My bank has told me to use a company that is free (does not charge a fee). Should I?
- The creditor says it will not deal with third parties. What do I do now?
- I am worried about my credit rating. Will it be affected/shot to pieces/ruined forever?
- What is a priority debt?
- After my secured debts, which payments take priority?
- My Mortgage, personal loan, credit card and overdraft are with the bank. Will I lose my home if you contact them?
- Am I liable for my partner's debts?
- How can I find out what is on my credit file?
- If my circumstances change, how will this affect me?
- Can my creditors make me bankrupt?
- Will I lose my house?
- Will I lose my job?
- What is the difference between secured and unsecured debts?
- Will my student loan be included in an IVA or DMP, or written off if I am made bankrupt?
- Will bailiffs be involved?
- I am getting lots of phone calls from my creditors at work and at home and on my mobile. What can I do about this?
- I am getting lots of letters from my creditors?
- Do I need to open a new bank account?
- I used a company and applied for an IVA but it was refused. What do I do now as I do not want to use that company again?
- I was so upset until you came to see me but even so I forgot about a creditor. What should I do?
- Is Debt Write Off for me?
- What can I do to stop interest and charges being added to my account?
- If I am made redundant can I ask my bank to stop interest charges?
- I feel I am being harassed, put under undue pressure, by my lender or collection agency. What can I do about this?
My bank has told me to use a company that is free (does not charge a fee). Should I?
There is no such thing as a free service (apart from the Citizens Advice Bureau of course). Sometimes companies claiming to offer a free service are in fact working on behalf of your creditors where the priority is to reclaim as much money as possible to repay your creditors. The creditors then pay these companies in the guise of a donation. See the Mail on Sunday (Financial Mail), December 30th 2007 and read the article titled "The charity boss reaping profits from debt misery". Amongst other things, one of the directors invoiced the charity for an extra £140,000 (for 'research and media relations'). Do you think that this person is taking a staggering amount of money from people that are having a hard time of it? Can you afford to pay toward his package?
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The creditor says it will not deal with third parties. What do I do now?
Local offices of creditors may say they don't deal with third parties: their head office will and that is who will be contacted.
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I am worried about my credit rating. Will it be affected/shot to pieces/ruined forever?
Some clients think that entering into a debt management plan will ruin their credit rating. You probably have an impaired credit rating already. Of course at first it will not help your credit rating but in time your credit file will improve. You should not be worried about your credit rating at this stage; but you should be thinking about getting your life back and getting debt free. Remember, having a default or IVA (Individual Voluntary Arrangement) noted on your credit file is a lot better than having BANKRUPT noted on your credit file.
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What is a priority debt?
Secured loans (eg mortgage and Hire Purchase) are priority debts. This means that they get paid before any of your unsecured debts (eg credit card holder, overdraft). See 'After my secured debts, which payments take priority?' for a more comprehensive list of priority debts.
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After my secured debts, which payments take priority?
Priority is given to those creditors who are able to take action against you which could have serious consequences, such as eviction, loss of utilities or imprisonment. This would include things like rent/mortgage arrears; council tax arrears; unpaid income tax, national insurance or VAT; gas, electricity and water rates, including arrears; tv licence; and unpaid fines. Following this your normal essential day to day living expenses (eg phone/s, travel, housekeeping, schooling, health, repairs and maintenance, tv, life cover) are taken into account. What is left is available to be paid over to your creditors.
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My Mortgage, personal loan, credit card and overdraft are with the bank. Will I lose my home if you contact them?
Your secured debt is separate from your unsecured debts. As long as you keep up payments on a secured loan you will not be repossessed even if you have an arrangement with the same lender with respect to your unsecured debts.
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Am I liable for my partner's debts?
If you took the debt together (you took a joint loan) then yes. If your partner does not pay you will be liable for the money. If your partner has debts in his/her own name then NO you are not liable for them. Arrangements are often put in place for one person only. Some clients came together from previous relationships and keep finances separate. This can be accommodated too.
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How can I find out what is on my credit file?
Experian (www.experian.co.uk) and Equifax (www.equifax.co.uk) are two of the main credit reference agencies and you can obtain your credit file from them for a nominal amount. You can dispute the information contained if it is not correct.
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If my circumstances change, how will this affect me?
There are two main types of debt management plan in England and Wales. Informal Debt Management Plan and Individual Voluntary Arrangement (IVA). An informal arrangement is flexible an IVA is not. If you are, say, made redundant your Informal arrangement can be altered until you get back to work. If you are unable to make the correct payments to the IVA for a prolonged period of time you will be put in default of the IVA: the IVA is wound up and you will probably get your default papers and bankruptcy papers together with a letter from the Insolvency Practitioner, saying go bankrupt before one of your creditors makes you bankrupt, in the same package.
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Can my creditors make me bankrupt?
IF you cannot pay your debt to the creditor then Yes it can. However a creditor does not take this step lightly and it exhausts other avenues first (eg Informal Debt Management Plan, an Individual Voluntary Arrangement, placing an attachment of earnings on your salary, placing an attachment of equity on your home or other property you own). It is imperative that you take the appropriate action that is suitable to YOUR circumstances BEFORE your creditors lose patience with you.
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Will I lose my house?
Providing you maintain the correct level of payment to your mortgagee/s you will not lose your home UNLESS a creditor puts an attachment on the equity and then forces a sale (the lowest debt we have seen that this has happened with is £3100 (three thousand, one hundred) but the client had been ignoring all attempts at contact by the creditor). It is imperative that you take the appropriate action that is suitable to YOUR circumstances BEFORE your creditors lose patience with you.
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Will I lose my job?
This depends on your employer and its employment policies. Some employers will allow an Informal Debt Management Plan but not an Individual Voluntary Arrangement. Some will not employ a bankrupt person. Others do not have any issues. If you are unsure or work in a specialised career (eg the armed forces, Police, Prison Service or work in Accounts) it may be a good idea to check with your employer before seeking debt advice. There is no need to lose your job.
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What is the difference between secured and unsecured debts?
Secured debts are loans that are secured against a tangible asset (eg property, vehicle, white goods (washing machine etc), furniture). If you default the lender has the right to repossess the asset so that it can sell the asset (normally at auction) in order to get back the money it lent you. If it does not get back all of the debt by selling the asset YOU are liable for the difference. An unsecured debt means that the creditor does not have an asset to repossess and sell if necessary and this is reflected in the interest rate you are charged - the risk is higher for the lender and therefore the interest you are charged is higher.
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Will my student loan be included in an IVA or DMP, or written off if I am made bankrupt?
Student loans are considered one of your priority debts and will be paid before your unsecured creditors get any money. However if you file for bankruptcy then: Student loans taken before 1st September 2004 can be included as a creditor in your bankruptcy. Student loans taken after 1st September 2004 cannot be included and therefore not be written off (if you are making repayments directly through your salary/wages this will continue as normal until the student Loan is paid back).
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Will bailiffs be involved?
Sometimes creditors will threaten to send bailiffs around to your home unless you make a payment - this rarely is the case as creditors must apply for a court order to remove goods. Home visits are mostly done for such debts as council tax but not for such as credit card or loan debts. If a bailiff had knocked on your door it it is probably because the debt had been sold to another company and it wants money and it wants it fast. We can help you - lets face it, you cannot give what you don't have. All of your creditors will be contacted and your situation explained.
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I am getting lots of phone calls from my creditors at work and at home and on my mobile. What can I do about this?
Some creditors use this as a scare tactic. Your creditors will be contacted and your situation explained. They will be told you have sought independent debt advice and that a statement of affairs will follow. You will be given a very short script to quote to your creditors so that when they phone you (or in the case of doorstep loans when they call for their next weekly payment) they are made aware of what is happening. Once a plan is set in place the phone calls should stop: some creditors are very professional and will stop calling you very shortly after you have quoted the script; others will want to try and get you to pay them money whilst negotiations are under way. Don't give way. Take control, quote the script and say nothing else. Allow your debt advisor to do his/her job for you.
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I am getting lots of letters from my creditors?
The letters are designed to obtain money from you. If you get any, pop them in an envelope and post them to your plan manager so that s/he can deal with them for you. Once a plan is in place the letters should stop after a short period of time.
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Do I need to open a new bank account?
If you owe money to your bank (eg overdraft, credit card, personal loan) then you do need to open an account with a bank or building society that you do not owe any money to. Your advisor will discuss which type of account and which bank or building society is suitable for you. Usually a Basic Bank account is needed (click here for the FSA explanation of the types of bank account available). Choose one that gives a debit card if you need to use a debit card (eg paying employer related expenses up front before being able to reclaim or for fuel and the like) (click here for the FSA table of the types of bank account available).
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I used a company and applied for an IVA but it was refused. What do I do now as I do not want to use that company again?
We would suggest an Informal Debt Management Plan and set this up for you.
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I was so upset until you came to see me but even so I forgot about a creditor. What should I do?
Pass the details to us as soon as possible so that we can add this debt to the negotiations.
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Is Debt Write Off for me?
Debt write off is not for everyone.The unsecured debt agreement must have been taken pre 1st April 2007 (and not updated since as any later agreement may supercede the original). You will also need to stop using any credit card or overdraft facility etc you want to transfer and you will also have to pay an upfront fee. The benefits of being able to sell your debt for a fraction of the outstanding balance within a short time frame (normally within 14 working days if you have provided enough proof eg a statement or the loan agreement pre Apr 2007) combined with peace of mind may well outweigh the cost involved. Only you can decide. (click here for the Debt Write Off page) for more details.
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What can I do to stop interest and charges being added to my account?
If an IVA is accepted by your creditors all interest and charges stop. However with an informal debt management plan a creditor does not have to stop interest and charges. It may continue to add these, it may reduce the amount of interest or it may stop interest and charges completely. The choice is entirely the creditor's.
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If I am made redundant can I ask my bank to stop interest charges?
You can certainly ask and the bank may, stop or reduce interest on a temporary basis (and add the interest at the back end of the loan etc) or indeed continue to add interest at the full amount. The choice is entirely up to the bank. A good reason to have adequate income protection insurance in place. If you are still stuck you need to talk to a professional Debt Advice company such as Face 2 Face Debt Help who will approach creditors on your behalf.
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I feel I am being harassed, put under undue pressure, by my lender or collection agency. What can I do about this?
You can call the Office of Fair Trading and discuss this with them since they have issued guidelines of how creditors and debt collectors etc are to behave. There is a whole list of what the OFT considers unfair. For instance calling at unreasonable times and whilst you are at work etc can be seen as harassment. The OFT's 'Consumer Direct' telephone number is 08454 04 05 06. Just as a creditor has rights; YOU HAVE RIGHTS TOO: don't be afraid to use them when necessary (click here for the OFT website).
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