Dealing With Debt

What should I do if creditors are chasing me to increase my repayments?

If your creditors are chasing you to increase your repayments, in essence you have two choices. You can simply refuse, or you can negotiate and agree and increase. It really depends upon your circumstances. If you genuinely can't afford to increase the amount you're paying, then why not stick to your position? If, actually, you can afford more, maybe you should.

What are the main solutions to debt problems?

There are lots of different solutions to debt problems and it's a really good idea to make sure that the one that you've chosen is the one that's right for you. The main choices are bankruptcy, individual voluntary arrangements, creditors or informal arrangements and full and final negotiations.

Do I have limited time to pay back my debts?

The time you have to pay back your debts depends, really, upon the current status. Clearly, if you're still making repayments then, yes, that's a period that you have to pay back. Clearly if you have a counter court judgment and they're required a certain amount each month, you have to pay that. However, if you have a debt which has defaulted, then there's no particular timetable by which you have to repay that.

Can a creditor demand I pay the entire balance at once?

There are two answers. If you've been paying normally and you haven't defaulted, then no, they can't demand that you pay at once. If you stop making payments, your account will default and then yes, they can then request that you pay the whole amount that you owe.

Do I have to pay for debt advice?

There are two answers. You know you can get advice which is free, both on the web or through the free services. But, again, some advice comes with strings, and perhaps as often in this life, you get what you pay for.

Will being in debt affect my tax benefits?

Tax benefits really don't have any impact one way or the other in relation to debt; however, if you are self-employed its a good idea to go and speak to your accountant about it.

What is a bailiff?

A bailiff is somebody who is appointed by the court and who has the power to come to your home, take your possessions, and sell them.

Can a bailiff come into my house and take my possessions?

A bailiff can't actually break into a house, at least not without specific court permission. However, if they even get their foot through the door or over the threshold, then yes, they can force their way in. Actually if you left the window open they can climb in through that. Once a bailiff is in the house very often what they'll do is what's called taking walking possession. That's when they'll make a list of everything that you owe, ask you to sign it, and then leave. However, they can come back at any time, force an entry, and then sell those possessions.

What should I do if a bailiff comes around?

If a bailiff does come around, don't let them in. Phone someone for advice and help. You may actually be able to go straight round to the court and take some action which resolves the problem that you've got. Very often the bailiff will be calling in relation to uncollected council tax. In that case, you can't actually go to the court, but you can negotiate with the council. As a debt doctor, I do from time to time get called by people who have a bailiff standing outside and we can't deal with that. However, it does my blood pressure and yours a lot of good if you get in touch and you get things sorted long before you reach the bailiff stage.

Can I make a negotiation settlement with a creditor?

It's often possible to negotiate settlements with a creditor as a one-off cash payment. The way it works, is that for example a family member makes some funds available and then you phone up and offer a one-off payment. Interestingly, often credit card and loan companies will start out by swearing blind that they never, ever offer settlements. But in reality, many do. The sort of results you are going to get depends a lot upon your circumstances. If you have no income and no property, your negotiating position is good. If you have a decent salary and lot of equity, your negotiation position is less good and the company is likely to accept a less exciting offer. There are many companies that offer to do settlements for you. As a debt doctor, I do many. A reputable company will agree to be paid by results, rather than advance.

What is a default notice?

A default notice is when you stop making payments on a loan and the company then contacts you and say because you've missed payments, the loan has defaulted and the full amount becomes due. And this may be a precursor to going on to taking further action such as a county court judgement. However if you have not been making payments, it doesn't have much of a practical impact. Interestingly, many companies have insurance policies which kick in when you default which means that you can negotiate better settlement terms.

Who issues a default notice?

A default notice is issued by the company that you borrowed funds from.

What happens if I have been issued with a default notice?

Once you have a default notice, your credit card or loan company can then apply to the court for county court judgement.

I'm now living overseas. What will happen to my debts in the UK?

Where you live has no effects on your debt. So if you're living overseas, your UK debts remain. If, however, the company that you've borrowed from hasn't contacted you for more than 6 years, you may be able to write the debt off. Now, whether they can contact you depends a bit on where you are. If you're in the EU, they may well be able to contact you. If you're in a yurt in Outer Mongolia, probably not.

What is debt consolidation?

Debt consolidation is typically where you have a number of different loans and credit cards, and you take out another loan to amalgamate, to bring all those debts together. There is really two sorts. There is unsecured consolidation loans, for example, you may be able to get a 0% credit card, although, be aware that there are increasingly large transfer fees. Also, there are many companies that advertise consolidated loans that are actually secured against your home. Think very very carefully before you agree to one of these. It's true that the amount of money that you pay per month may go down, but if you can't afford to keep up the payments you will lose your home. So, before you take out a consolidated secured loan, check there isn't a different debt solution which would be better for you.

Should I consolidate my existing debts?

Consolidation of existing debts can be a good idea, particularly if you can actually afford the debts, but you're actually just looking around for a better deal. But do be careful about consolidating unsecured debts with a secured loan. There are lots of companies that advertise these products very heavily, for example on TV, and they make lots of money out of selling them. However, very often they're not the best debt solution, so check and think carefully before you go down that route.

If I am self employed am I liable for business debts?

If you are self employed you are still liable for all your business debts. And the reason for this is that legally there is no separation between you and your business. So really good idea if you are self employed to check out if a limited company would not pay a better route. If you are a director of a limited company, unlimited company because under then often, then always you have liabilities.

What is a personal guarantee?

A personal guarantee is typically when you're in business and you want to borrow some money and is a way of safeguarding their interests, the company lending you the money requires you to sign a personal guarantee. And there are two sorts, secured and unsecured and for obvious reasons think carefully, particularly before you sign a guarantee which puts your house up with equity against a personal guarantee.

Is it a good idea to get an emergency loan?

Emergency loans, you should be very, very wary of anybody offering emergency loans. Very often you'll find the interest rates are horrendous. And again, be particularly careful if you're providing anything such as your home as security. If you've got debt problems, look for a debt solution that doesn't involve borrowing more money unless you're absolutely sure what you're doing.