1m people are missing out on tax credits – are you?
It’s estimated that one million people in the UK are missing out...
9 indisputable debt facts
This page contains information about debt solutions available in England, Wales and Northern Ireland. Debt advice in Scotland involves similar but different solutions. Before considering an IVA as a debt solution, please make sure you fully understand the risks involved when entering an IVA.
Facts not fiction
Debt law can easily be mis-understood, below are 9 things people often get confused about.
We’ve made sure that these are the facts, and that they shouldn’t be confused with debt fiction or debt myths.
Fact: Your credit rating is based on you, not someone living with you
Your credit rating is based on you as an individual and is not affected by anyone you live with or share a property or postcode with, unless you have any joint accounts or have acted as a guarantor. This article has more information about how your credit report works.
Fact: A CCJ payment can be changed
If you have a change in financial circumstances – either in your income or expenditure – you can ask to amend your county court judgment (CCJ) using the form N245 and paying a small fee. The repayments set out by a CCJ can be varied.
Fact: Debt management plans affect your credit rating
A debt management plan is an informal arrangement between you and your creditors through a third party like us.
In addition, you make reduced payments to your creditors on a DMP and this means you will default against the original terms and conditions. Any defaults or further enforcement action (such as a county court judgment) as a consequence of making reduced payments through a DMP will affect your credit rating.
DMPs aren’t currently registered on credit reports as standalone entries but lenders can highlight any special arrangements or circumstances like these on the entries as ‘flags’. For more information read a similar post on the Experian website. [Thanks to Focus Insolvency and James Jones for clarification.]
Fact: You can reclaim mis-sold PPI for free
It’s been widely reported that banks have to refund mis-sold payment protection insurance (PPI). On the back of this, many companies now advertise a service where they promise to do the ‘hard work’ and ‘help you’ claim your money back.
If you’re thinking about putting in a claim, don’t pay for someone to do it, do it yourself for free using our guide.
We even did it ourselves!
Fact: Your bank can take money from your account without permission
This catches out a lot of our clients. If you have debts with the bank that your income is paid to, they can take your money to pay towards your debts without warning.
For example if you have a current account and a loan with the same bank and are behind on payments, they can take money that’s in your account at any time. Also remember that a lot of banks are connected nowadays (Lloyds with the likes of Halifax and Bank of Scotland, for example). So it’s always worth checking with us if you’re not sure which accounts are connected.
This is called the right of offset (point 4) and the way around this is to open a basic bank account (PDF) with a completely impartial bank.
Fact: It’s not free to go bankrupt
Contrary to popular belief it’s not free to go bankrupt – it costs £700 to petition for your own bankruptcy. In England and Wales you pay £175 fee to the court and £525 to the official receiver*.
If you’re on a low income or in receipt of certain benefits the court fee may be waivered but the official receiver’s fee must always be paid.
There are certain trust funds that sometimes help people with bankruptcy fees when they have a particular set of circumstances. Call us for more advice about these.
*If you’re in Northern Ireland the court fee is £115, the official receiver’s fee is £345. There is also an additional solicitor’s fee of £7. If you are in Scotland please contact us for details about sequestration.
Fact: There is no such thing as a joint personal bankruptcy
While some financial solutions can be obtained jointly, bankruptcy isn’t one of them, unless it’s between business partners.
If both partners in a relationship go bankrupt they have to petition individually, filling out two sets of forms and paying two fees (£1,400). Read more on joint bankruptcy.
Fact: IVAs don’t always last 5 years
Most individual voluntary arrangements (IVAs) last between five and six years (although they can last seven years or more). Each IVA is different and sometimes the time frames can vary based on the individual’s circumstances.
However, there’s a lesser known type of IVA called the ‘lump sum IVA’, which can be completed in a very short time frame.
As its name suggests the lump sum IVA involves a client offering a one off payment to creditors through an IVA proposal. You can learn more about this lesser known form of IVA by reading our article on this subject.
Fact: You don’t have to pay a fee for debt advice
UK-based fee-charging debt management companies that promote their solutions as “free” are breaking strict rules introduced by the Financial Conduct Authority.
This came after some organisations had been guilty of misleading the public, claiming to offer “free” help and advice in their advertising even though a typical plan from a fee-charging debt management company could cost around £5,000.
Make sure you never pay for debt help. We provide free, impartial debt help and advice.
Other organisations offering genuinely free debt advice include:
