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Is Bankruptcy Right For You?

The majority of people we speak to will often have heard about one or two of the available debt solutions. Yet, there are a variety of different debt solutions which a person could be applicable for and consider. Each debt solution is designed to help resolve outstanding unsecured debts and regain control of personal finances.

For some people, bankruptcy is the only debt solution they are aware of so they believe they may need to enter this solution. However, in many instances bankruptcy isn't suitable and a full review should be completed before debt advice can be provide. Some people are surprised to hear that they actually have two or three different debt solutions which they could enter. So, at Debt Support Trust, we explain what these solutions are along with the positives and negatives of each route.

The consequences of wrongly entering any debt solution can be severe, especially when it's an insolvency solution, such as bankruptcy. While bankruptcy can be the best debt advice to dealing with a debt problem, it will also have a number of other effects on a persons life.

Consequences of Bankruptcy

There are a number of routes to enter bankruptcy and across the UK the process and costs will vary, but they all have the same consequences once it begins.

  • Income Payment Order: When entering bankruptcy you will be asked to provide a statement of affairs. If it's determined by the bankruptcy administrator that you have disposable income to pay towards your debt then you'll need to pay this for 3 years.
  • Assets: Any savings and realisable equity from assets could be sold to release their value, which will be paid towards the debt.

There are other negatives of bankruptcy which would apply, such as a negative credit file. Some employment contracts restrict a person from being made bankrupt and retaining their job, so it's worth checking in advance.

However, for some people the best advice is bankruptcy. The reason is often because they have little or no assets, low levels of income or solely state benefit income and an inability to repay the outstanding debts within a reasonable period of time.

Choosing Your Debt-Free Route

There are other solutions to resolve problematic debts and the correct solution will depend on your personal and financial circumstances. Debt plans like token payments, trust deeds, debt management plans and IVAs are solutions which you may be applicable for.

In a conversation with a Debt Support Trust debt advisor and a person contacting the helpline, the caller believed her only option was bankruptcy, however it was soon clear this would not be the best option for her.

She worked full time, had a property which had accumulated a substantial equity and a disposable income of over £200 per month. While the debt was £35,000, bankruptcy would have meant she would likely lose her property and be asked to repay at least some of the debt from her disposable income.

We considered all available debt solutions and explained what would happen in each debt solution. The caller wanted to retain her house and still pay back her debt. We helped to set up an affordable payment plan and get the debts back under control.

Which Debt Solution?

Before entering any debt solution it's important to speak with a not for profit organisation to give you the best possible debt advice.

They should explain each debt solution you are suitable for along with the benefits and consequences of entering it.

If you are unsure how the solution is run, the associated costs or the impact it could have on you, then seek a second opinion. You can call Debt Support Trust on 0800 085 0226 for debt advice and information about dealing with your debt.

Friday, January 29, 2016
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1 in 4 Cut Spending on Heating and Food To Afford Christmas

Nearly a quarter of Brits have said they would cut their spending on food and heating to afford the cost of Christmas, according to new research.

The report from Confused.com found 22% of credit card holders said they would spend more than they intended to during Christmas. 13% would cut down on their food expenditure, while 10% would cut down on heating to pay off debt.

Last year saw a record amount spent during "Cyber Week" with consumers spending a total of £3bn during the run up to Christmas. 12% of credit card holders said they would spend more than £1,000 during the festive season, with the average person spending £528.

Stuart Carmichael, Chief Executive of Debt Support Trust said:

"The thought that people will sacrifice food and heating to repay their debt is frightening, even more so as the majority of people contacting Debt Support Trust have children too."

Stuart implored people to seek help,

"There are options available to resolve money worries and people don't have to struggle alone. If credit cards are a problem then a balance transfer could offer time and the affordability needed to resolve the situation."

7% believe they will struggle with their finances during 2016, with 1 in 5 admitting their financial circumstances are worse than in 2014.

The report also highlighted 27% of people would cut down on eating out, 23% on holidays and leisure activities and 7% on using their car.

Credit Transfer Tuesday

New credit card data suggests January could be a record month for balance transfers, following record online sales on Black Friday last month.

The comparison website believes January 12th could see the highest ever number of balance transfers, due to the record spending during Christmas last year.

68% admitted to not balance transferring, with 12% believing it's too complicated, 5% fearing it could damage their credit rating and 7% unaware it was even an option.

Debt Advice After Christmas

While balance transferring can help some people resolve their debt problem, for many people, their financial problems require a more in depth review.

Some people may find they had a debt problem prior to Christmas, which they were only just managing and the cost of the festive period is the final straw.

If someone isn't able to deal with their debt with a single balance transfer, they may require debt advice and/or a debt solution.

For anyone who is unsure about the right solution to dealing with their Christmas debt, it is important to seek debt advice for a full financial review.

If you require debt advice please call Debt Support Trust on 0800 085 0226 or alternatively you complete our online debt test.

Monday, January 11, 2016
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Insolvency Figures Rise For First Time In A Year

Personal insolvency figures have increased for the first time in a year, according to The Insolvency Service.

In the three months to the end of September, 19,683 people across England and Wales were declared insolvent.

While the number of people entering insolvency solutions decreased 18.5% from the same quarter last year, it increased 2.8% from the previous quarter this year.

The increase has been driven by individual voluntary arrangements (IVAs), which was the only insolvency debt solution to increase.

Insolvency Statistics

The insolvency figures produced by The Insolvency Service show:

  • Bankruptcy: 3,857 people entered bankruptcy in the third quarter of 2015, down from 3,987  in Q2 and is the lowest figures for 25 years.
  • Individual Voluntary Arrangement (IVA): 10,197 people entered an IVA, this was up from 9,333 in the previous quarter.
  • Debt Relief Orders: 5,629 people entered a DRO, down from 5,832 in Q2.

Reason for Bankruptcy Decrease

As unemployment figures decrease it's likely the number of people entering bankruptcy will also fall. If someone has a disposable income they may be more suitable for an IVA, or an informal debt solution, allowing them to repay their debt in an affordable solution.

This would also explain the rise in the number of people entering an IVA, however it could be the figures averaging out over the year.

Stuart Carmichael of Debt Support Trust said:

"While it's positive bankruptcy figures are down, it is concerning that overall insolvency figures have increased. The number of insolvency cases were declining recently and this could be a sign figures are levelling out.

It's important people seek debt advice before proceeding to enter a debt solution."

Bankruptcy Changes

In October there were changes to the traditional bankruptcy debt solution which meant creditors can only apply to make someone bankrupt if they owe £5,000 or more, up from £750.

This is likely to further decrease the number of people entering bankruptcy, as creditor applications may also fall.

Monday, November 02, 2015
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Preparing for Christmas While in Debt

It's almost that magical time of year again but for many people struggling with debt it can be extremely stressful

Christmas is an expensive time of year for everyone but for those with debt problems it can be even harder to manage.

Parents want to give their children the latest toys or gadgets and no one wants to have to explain they can't afford presents due to debt problems.

People who are in a debt solution such as an IVA or Protected Trust Deed in Scotland will have a strict budget which is managed by an insolvency practitioner or trustee.

Christmas With Debt Problems

There are techniques and tips which people can use to make Christmas more affordable.

  • Save: Saving just £10 a month from the start of the year will give people a £120 budget for Christmas. Most people won't notice £10 a month being removed from their budget but it can have a significant impact come the end of the year.
  • Online Discounts: Throughout the year special discounts online will be available from a number of websites. Subscribing to get the latest deals can help people buy presents throughout the year without spending a lot of money.
  • Customise Presents: If someone's budget is extremely tight, making customised presents is probably the least expensive method to managing the cost of Christmas. Creating custom designed cards, glasses or ornaments will show loved one's they still care without having to spend a lot money.

Get Debt Advice

If you're worried about the cost of the upcoming festive period due to debt or money problems speak to Debt Support Trust today.

Entering a debt solution may reduce monthly debt payments and help find additional money for Christmas presents.

You can call Debt Support Trust on 0800 085 0226 or complete our online debt analyser to assess the best way to deal with your debt problem.

Tuesday, October 27, 2015
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Payday Loan Adverts Could Be Restricted

The Broadcast Committee of Advertising Practice (Bcap), which sets the code of conduct for TV advertising is considering placing restrictions on payday loan advertising.

Bcap said it has begun a consultation process on whether payday loan adverts should have "scheduling restrictions".

The committee said they don't believe any restriction would lead to a loss in revenue for broadcasters.

It's considering whether payday loan companies should be banned from advertising during programs primarily viewed by four- to 15-year-olds or 10- to 15-year-olds.

Although Bcap have said they aren't yet convinced restrictions will be required,

"We believe that there are gaps and inadequacies in the evidence base we have seen. Particularly, that the precise harm that scheduling restriction might help to prevent has not been articulated."

Dangers of Payday Loan Adverts

The concern over payday loan advertising has come due to a number of reviews by Bcap and Children's Society last year.

Children's Society, chief executive, Matthew Reed said:

"We are pleased that regulators appear to be listening to the many parents who share our concerns about the damaging impact of adverts for high-interest loans on their children,"

The concern is that children, who aren't yet old enough to understand the dangerous of payday loans, will grow-up influenced by the adverts.

However according to Ofcom payday loan adverts only account for 0.6% of all commerciasl seen by 4 to 15 year olds. Although the media regulator also found children see 1.3 payday loan adverts per week.

Dealing With Payday Loan Debt

Payday loan debts can be more difficult to resolve because of the interest and charges which are added when a borrower defaults.

Someone with a payday loan debt should seek debt advice quickly, ideally before they default, to help find a solution.

If you or someone you know is struggling with payday loan debts, contact Debt Support Trust 0800 085 0226 or complete our debt analyser.

Tuesday, October 20, 2015
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UK Bankruptcy Changes: Who Will Benefit

New bankruptcy rules are coming into effect from next month which should make it easier for people to enter the debt solution.

The changes to bankruptcy have been introduced to help people on low/no income and with limited assets to declare themselves insolvent.

Bankruptcy Rule Changes

Creditor Petition: Creditors are currently able to apply to the courts to have a person declared bankrupt if they owe a minimum of £750 but that will rise to £5,000.

Debt Relief Order (DRO): A DRO is considered a cheaper route into bankruptcy because it costs £90 to apply for, instead of paying the £705 for government and court administration fees.

The maximum debt allowed to enter a DRO is £15,000 and £300 in assets, but from next month people will be able to apply for a DRO if they owe up to £20,000 and have £1000 in assets.

Who's Most Suitable For Bankruptcy

While anyone can apply to be declared bankrupt through their local country court, it's not always the best debt solution everyone.

It's important to get debt advice before entering any debt solution, especially one as serious as bankruptcy because of the consequences associated with it.

If someone enters bankruptcy with assets they may lose them to recoup money for creditors and if someone is in employment an income payment order may be applied.

Standard Bankruptcy:

The changes will affect who is applicable for bankruptcy and which route into the debt solution is most suitable for them.

Anyone who is unemployed, has debts above £20,000 and who doesn't have sufficient assets which could be realised to pay the debt.

DRO:

If someone has debts less than £20,000 and assets worth less than £1,000, they may be suitable for a debt relief order. Although it's worth noting if they were working and have a disposable income, they might be better suited to entering an IVA.

Considering Bankruptcy?

If you're considering entering bankruptcy it's crucial to get debt advice before starting the process because you may risk losing income, assets and more.

You can get debt advice from Debt Support Trust on 0800 085 0226.

Tuesday, September 29, 2015
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Debt Management Company Has Closed

What should you do when your debt management company goes out of business and closes? There has been some debt management providers who no longer provide the service and as such have informed their clients to seek debt advice from a registered charity.

At Debt Support Trust, we've experienced an increase in the number of people contacting our advisors seeking debt help after their debt management company closed. We help people across the whole of the UK. As a registered not for profit charity, Debt Support Trust can help you with debt advice and to enter a suitable debt repayment plan.

We're always happy to help people with debt advice through our registered charity. You can seek debt advice on 0800 085 0226.

Help with Free Debt Management Support

If you've been informed your debt management company is no longer helping people in debt it's vital to get advice.

Your creditors will be informed that your debt management plan has been cancelled and will begin to contact you again. You are able to enter another debt management plan, or your situation may have changed and you could be suitable for another solution.

There are a number of different debt routes to resolve debts and you're not alone.

What Should I Do?

When you're ready, take a positive step and seek advice and support. You can call Debt Support Trust on 0800 085 0226 and speak to a debt advisor between 8am and 7pm Monday to Friday.

You can also take our debt test application and receive online debt help.

TakeTheDebtTest

After you complete your debt test you will be provided with options to resolve your debts.

If you've lost money because of a debt management company closing and are looking for compensation you should contact the FCA. They will be able to put you in touch with the administrator managing the closure of the firm.

What Will Debt Support Trust Do to Help?

When you contact us for debt help we will listen to your personal and financial situation. Based on your information we will then discuss every applicable debt solution, along with the pros and cons of each option.

As a registered charity we won't send you a bill for our advice, but you'll receive the help and support to get back on track and become debt free.

You can start by completing our debt test, or by calling 0800 085 0226.

TakeTheDebtTest

Monday, September 21, 2015
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Mortgage Debt: Repaying Interest Only Mortgage

Almost 1 million people face losing their home when their interest only mortgage term finishes, according to new figures from Citizens Advice.

An interest only mortgage allows a home buyer to pay only the interest accrude each month but doesn't include the capital. If someone doesn't repay the capital by the time the mortgage term ends they will still be liable to repay the full amount owed.

While an interest only mortgage can be cheaper than a capital repayment agreement, it can also be dangerous if the loan isn't repaid at the end of the term.

It's expected by 2017 a large number of home owners will be unable to repay their mortgage, as endowment mortgages from 1990's end their term. In 2027 the interest only mortgages which were taken out in the early 2000's will reach their term, leaving many people with a large mortgage debt.

Citizens Advice are calling for mortgage lenders to do more to help borrowers who are at risk of being left with a large mortgage debt. The charity want lenders to call customers, send letters and set arrangements to have the capital repaid before the term ends.

An FCA spokesman said:

"We expect firms dealing with interest-only borrowers to discuss repayment strategies and propose solutions where there are no plans in place."

Dealing with Mortgage Debt

There are a number of options available to people who are facing mortgage debt problems and the quicker they act, the easier it will be to deal with.

  • Re-Mortgage: If someone is unable to repay the mortgage capital prior to the term ending they may have to re-mortgage. Taking a new mortgage will extend the current term and may the month repayments more manageable.
  • Set Arrangement: If a re-mortgage isn't possible, however a borrower still has enough time to repay the capital, they could set an arrangement to begin to have it repaid before the mortgage term ends.
  • Sell Property: So long as there is equity in the property a borrower may wish to sell the property and repay the mortgage. The problem the majority of people have found since the recession has been the drop in property prices since they signed their mortgage.
  • Debt Solution: If all the above options aren't possible someone may have to consider entering a debt solution. The property would need to be repossessed or sold before any outstanding mortgage arrears or debts could be included.

Get Mortgage Debt Advice

If you are worried about repaying your mortgage by the end of it's term, contact Debt Support Trust on 0800 085 0885.

We will assess your full level of debt and while we can't include a secured debt into a debt solution, we can advise on the best method to deal with it.

Monday, September 07, 2015
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1 in 4 Students Have Payday Loan Debt

Students are using payday loans to cover the cost of living and tuition fees which is leading them into debt, according to a new survey.

Student lender Future Finance surveyed 1,000 students on their financial habits and found 25% owed an average of £342 to payday loans.

More worrying was 54.5% admitted to incurring late charges due to missed payments and due to high interest rates these are often expensive.

Our experience at Debt Support Trust shows once someone incurs their first last charge they are far more likely to incur another. This is generally the point where the loan becomes a spiralling debt problem which is hard to recover from.

Payday loans were just one source of credit for students, with 24% saying they were gambling and 13% taking part in paid clinical trials. 58% were getting financial support from their mum and dad.

Although 64% of the students said they worked part-time, a sixth said they also felt it was affecting their eduction.

Help for Students with Payday Loans

While the cost of living continues to rise the temptation for students to take out payday loans will likely increase but help is available.

  • Budget: Before taking a payday loan students could find extra money by creating a budget. We know it sounds simple but just writing down a list of income and expenditure can help find methods to save money.
  • Low Interest Credit: If a someone does require additional credit, maybe for a short period, searching for a low interest rate credit facility could make it easier to repay and reduce the risk of it becoming a debt.
  • Debt Solution: When a payday loan becomes difficult to repay students may need to consider a debt solution to help deal with it.

Get Debt Advice

If you require further help or advice on dealing with a payday loan debt you can contact Debt Support Trust on 0800 085 0226.

Whether the loan has become unmanageable or you're just considering taking out a loan, we can help advise how best to deal with your financial problem.

Wednesday, August 26, 2015
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Dangers of Guarantor Loans

Guarantor loans differ from standards loans because the lenders will demand a second person assures the credit will be repaid.

Although one person may apply and use the credit facility, another must sign an agreement they will be responsible for repaying it if their friend of family member defaults.

Often companies will offer guarantor loans to people with poor credit ratings, CCJ's and on a low income, similar to payday loan companies.

The APR is usually lower on a guarantor loan than a payday loan, however they are still a lot higher than credit from high street banks.

People who are guaranteeing the loans aren't always aware of exactly what they are agreeing to and how it could affect them.

Citizens Advice have previously warned guarantor loans could be more dangerous than a payday loan, CEO of the charity, Gillian Guy said,

"Guarantor loans carry with them huge risks, and our evidence shows people are getting involved without being fully aware of the dangers."

A report by CAB highlighted guarantors as being at greater risk because they weren't viewed as customers and therefore as protected by FCA regulations.

Why Guarantor Loans Can Be Dangerous

Although the interest rate may be lower on a guarantor loan compared to credit from payday lenders, there are other factors people should consider.

  • Relationships: Whether it's a friend or family member who is guaranteeing the loan, the relationship could be tested if the borrower fails to repay the credit. When someone fails to meet their contractual monthly agreement, the lender may contact the guarantor to make the payment. If they fail to make the payment they could have a default added to their credit rating.
  • Debt Solution: Entering certain debt solutions such as an IVA, Protected Trust Deed or Bankruptcy could be difficult because the lender will likely still demand payment from the guarantor. The borrower and guarantor would both have to enter the debt solutions otherwise a separate arrangement would need to be made from other creditors.

Advice on Guarantor Loans

If you are considering taking a guarantor loan or you're  already struggling to repay a loan, please contact Debt Support Trust on 0800 085 0226.

We can offer advice and support on how to deal with the an outstanding loan or the risks involved should you decide to go ahead.

Monday, August 24, 2015
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