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UK Wide Debt Advice Charity
Call us at 0800 085 0226
E-mail: contact@debtsupporttrust.org.uk

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What Happens If I Go Bankrupt

Entering bankruptcy is a popular route in the UK to deal with debt problems. The protection from creditors and resolution to the debt problem can be an attractive option to become debt free again. As a debt advice charity, it's our responsibility to ensure everybody we help is prepared for the debt solution they are about to enter. One question we're asked often is, what happens if I go bankrupt?

For quick debt help you can call Debt Support Trust on 0800 085 0226. You can also get more bankruptcy advice on our advice pages.

Becoming Bankrupt - What Happens to Me?

Bankruptcy lasts for one year and at the end of the year any remaining debt is written off and you are not legally required to pay the money back. This is true for bankruptcy across the UK. However, the implications of entering bankruptcy will vary from person to person. As a result, we've summarised some of the vital points you will want to consider before entering bankruptcy.

Debt Test

Your Job in a Bankruptcy

Before applying for your bankruptcy it's worth checking whether you are in employment. There are two reasons for this. The first is your contract of employment. Some employers don't allow employees to work for the company if they are an undischarged bankrupt or if they were made bankrupt in the last 6 years. This is often true for the financial services world. You should speak to your HR manager or check your contract of employment to be sure.

Secondly, in bankruptcy you can be asked to make a contribution towards your bankruptcy on a monthly basis. The amount you have to pay is determined by your bankruptcy supervisor. While bankruptcy lasts for 1 year, the payment order will last for 3 years. If you are working then another debt solution may be more applicable to you.

If you need help understanding the debt solutions available to you, or what happens if you go bankrupt, please call our debt advisors on 0800 085 0226 for confidential debt help.

Debt Test

Bank account in Bankruptcy

After entering bankruptcy your creditors are notified and all of your accounts where the company is owed money will be frozen. So, for example, if you owe a bank money on a credit card then they would freeze all of your bank accounts, even your accounts which are in good standing, such as an overdraft account.

This means that prior to entering a bankruptcy you will need to apply for a new bank account, with a bank you don't owe money to, and transfer your income and direct debits. You can't open a bank account with a sister company of another bank you owe money to.

For help with your bank account and what will happen in bankruptcy to your bank accounts, please call 0800 085 0226.

Bankrupt: what about my credit file?

A bankruptcy will last on your credit file for 6 years and at the end of the period it will be removed. The default added will mean applying for credit will be difficult. During the period of the bankruptcy you should not apply for credit, however thereafter any application for finance will likely have a high interest repayment rate.

What Happens to my house in bankruptcy?

Your assets will be reviewed under bankruptcy. This includes your house, car and other assets like stocks, shares or bonds. If your asset has a realisable value then you could be asked to sell this for your creditors.

If you live in a mortgaged property which has equity after selling the property, then your bankruptcy supervisor will proceed to sell your property. They will take selling costs, fees and charges into account too.

If your assets do not have any realisable value then you will be allowed to keep these.

Get Bankruptcy Advice

Entering bankruptcy to resolve a debt solution is an important step. Before deciding to proceed with bankruptcy it's often advisable to speak to a debt expert to get their opinion. This means you can be sure you're making the right decision and be fully aware of what bankruptcy will mean for you.

You can call Debt Support Trust on 0800 085 0226 or why not complete our online debt analyser for online debt help.

Debt Test

Thursday, October 10, 2013
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Credit Fix: Resolving Debts

To become debt free again is what anybody struggling to manage their credit agreements want. The freedom to know that debts are being, or have been, resolved is a weight of the shoulders. After resolving debts it's then about fixing your credit file and repairing any damage caused.

If you need help with your debt or credit questions, call Debt Support Trust on 0800 085 0226.

analyseyourdebt

Fix Debt Problems and Improve Credit Rating

If you fail to pay any of your contractual obligations then it could affect your credit file. In this instance a default would be added which would last for 6 years.

A large percentage of people we help at the debt charity ask about their credit file. Most often than not, their credit file has already been impacted because of the debt problems. When you enter a debt solution and include your unsecured debt to fix your credit problems, you're failing to maintain your financial agreement. This means your creditor can place a default onto your credit report.

Before you can improve your credit file you must resolve outstanding debt problems!

Credit fix: resolving your debts

Finding a route to resolve your debts takes an experienced debt advisor. Thankfully we have a knowledgeable debt team at Debt Support Trust that can help. Resolve your credit problems with our debt help.

You could be suitable for:

-          Token payments

-          Debt management

-          Debt arrangement scheme

-          IVA

-          Trust deed

-          Bankruptcy

To find out what debt solution you would be best suited to you should speak to one of our friendly debt team. You can telephone our charity debt advisors on 0800 085 0226.

Advice on getting debt free

Our debt help and credit fix support is available on a confidential basis. We do not share your information with anybody else. You can telephone for advice on 0800 085 0226 or email contact@debtsupporttrust.org.uk and we'll call you back.

The debt analyser can also help you with solutions to debt and takes about 5 - 10 minutes.

 

analyseyourdebt

Tuesday, October 08, 2013
Debt Support Trust
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In debt: help and advice

In debt Money AdviceIf debt is a problem for you and you're in debt to a point where you have no idea where to turn, then getting debt and money advice is essential.  Understanding your financial problem can give you the first step towards becoming debt free again.

You can get debt help by calling 0800 085 0226.

Debt Support Trust is a registered not for profit charity and our advice is completely confidential. The help we provide people in debt is designed to guide them towards potential debt solutions, but in the end it will always be your decision.

Where to seek help when In debt?

There are many places to seek debt help, including debt charities and for profit debt companies. We're explaining the differences so you can make an informed decision on how to progress.

Debt charities

Organisations which provide not for profit debt advice do so, usually, with grants and donations. There are two types of debt advice with charities, face to face or telephone.

Telephone: A telephone based charity will give you instant debt help. You can pick up the telephone at a suitable time for you and receive debt advice. The telephone advisor will be friendly and support you with every aspect of your debts. You can expect to receive complete debt advice within 15 - 25 mins, however this can be quicker depending on the complexity of your situation.

Face to face: You can also seek debt help face to face via a local money advisor. They would provide the same service as the telephone advice, but you would set up an appointment to meet and discuss your debt problems.

For profit companies: Other organisations providing debt advice do so with the intention of making a profit. This can sometimes mean there is a fee to pay for the advice.

Solutions to Debt

There are solutions to debt which meet every financial situation. You may even have two or three options to choose from. The solutions available when you're in debt depend on your personal and financial situation.

Debt solutions available include:

Debt management plans: An agreement to pay one monthly payment to one company who will manage your debt.

Debt arrangement schemes: A formal agreement to pay one monthly payment in Scotland and have all your interest and charges frozen.

IVAs: Usually a 5 year solution to repay what you can afford. Any remaining debt is written off.

Trust Deeds: A Scottish debt solution to repay what you can reasonably afford towards your debt each month. At the end of the solution any remaining debt, interest and charges is written off.

Bankruptcy: A debt solution which will last for one year, although you could be asked to pay into the solution for 3 years.

All of the above debt solutions have their own positives and negatives and these should be explained before you enter any debt solution.

In Debt Help

When you're in debt it's imperative that a debt advisor is both knowledgable and supportive. At Debt Support Trust our debt advice team care about getting you back out of debt. If you want help to resolve your debt problems and wish to speak to a telephone debt advice charity, then Debt Support Trust is here for you.

Call our advice charity now on 0800 085 0226 and we will help with honest and practical advice when in debt.

Monday, October 07, 2013
Debt Support Trust
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Changes to Payday Lending

From April 2014, the payday loan industry will be changing with tighter regulation to crack down on unscrupulous lenders. At present, the Office of Fair Trading regulates the finance industry, however from April 2014 this role will move to the Financial Conduct Authority (FCA).

Ahead of the change, the FCA has outlined what it expects from payday lenders and for many their business practice will have to change.

Changes to Payday Loans

Under new rules starting from April 2014, the FCA will expect all payday lenders to

  1. Only allow for a maximum of two role over periods. This is the number of times a loan can be taken out. For example, a £100 loan could be repaid at £125 on the following payday. If you couldn't afford the £125 this would "roll over" and the loan would continue but the level of debt would increase too. Some companies allow for continual roll over of loans so the debts continue to increase. The worst example we have experienced at Debt Support Trust was a £700 loan which turned into £12,000!
  2. Signpost people who roll over loans towards a free debt advice service. This will help people get impartial debt advice if they need it.
  3. Make risk warnings clearer on marketing materials.
  4. Stop payday lenders taking money unfairly out the banks of consumers.
  5. Conduct affordability checks for every single loan to ensure the person borrowing the money can in fact afford the loan.

It's understandable that the FCA would want to place restrictions on the short term loan industry as complaints about untrustworthy lenders grow. While many payday lenders may act ethically, many do not.  This is a concern when large numbers of people are using short term lending. Research from consumer group Which? shows that almost 1 million households take out a payday loan every month and that almost 40% are using the money for every day essentials such as food.

Payday Lending Criteria

It's fair to say that many payday lenders follow the above criteria already, so the changes being implemented will remove the unethical element of the payday loan industry.

MPs such as Stella Creasy have been campaigning vigorously for tighter regulation and the changes from the FCA certainly bring us closer to a fairer short term consumer credit market.

However, some people question whether it goes far enough or if more should be done to restrict payday lenders. The FCA said in response to the question, should the interest and charges to capped? "We will look at issues [relating to capping] once we take over in April", so there's scope for the FCA to go further with their power.

The changes are a welcome sign and greeted positively at the charity. Our charity already supports some payday lenders with their indebted clients and we will continue to work alongside the ethical short term lenders to support their business and providers money advice, where necessary, to people with payday loan debts.

Thursday, October 03, 2013
Debt Support Trust
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I Can't Pay My Credit Card Bill

There are many reasons why paying a credit card bill could be a problem. The important factor is to understand why paying the credit card is a problem. Is it a short term finance problem? Or, is it a long term issue which isn't resolving itself?

If you need credit card debt help, call our friendly charity advisors on 0800 085 0226.

Can't Pay Credit Card

credit-card-billYour credit card is a form of unsecured credit which allows you to purchase items and pay for them when the bill comes in, either through the post or email.

When the bill arrives you have a designated amount of time to make sure the payment reaches the credit card company. If the payment doesn't arrive on time you will be charged an additional fee. You could also lose any introductory benefits, such as a 0% interest period.

What Happens If You Don't Pay Your Credit Card?

Credit is lent by companies . If you don't get in touch with the credit company they will initially contact you via letter and telephone. It's their responsibility to remind you that you have to pay at least the minimum payment towards your debt each month.

If they fail to get a satisfactory response, or you miss multiple payments, you could receive letters and visits from debt collectors.

Failure to maintain your credit agreements could mean a default being added to your credit file which would last for 6 years. You cannot have this removed once it's on your credit file before the designated 6 years, unless it was placed on their unfairly.

Short Term Credit Card Debt Problems

For some people, their credit card debt problem is a short term issue. For instance, they have become stretched beyond their financial capabilities for one month and can't afford the payment

Some people can forget to pay their credit card because of one off events, such as a family bereavement or the credit card statement not being delivered. Usually telephoning your credit card company after the event and paying the necessary payment will be fine. The credit company may even remove their charges for the first occurrence.

Short term money problems, which are not debt related, can usually be fixed quickly. We would not recommend taking out a short term or payday loan to help pay other credit, such as your credit card. Speaking to the company you owe money to can often resolve short term money problems without high interest rates.

Long Term Credit Card Problems

If your monthly credit card repayment is being missed and it's a long term problem (e.g. it's not the first time) then it's worth considering the reason for this. By understanding the reason for the missed payment you can take action to address the debt issue.

There are common reasons for long term credit card debt problems, such as,

Over - Stretched on Credit

There's only a certain amount of money available each month. As debt repayments increase with interest and charges being added monthly, it can be difficult to repay the debts as they fall due. Multiple credit agreements and different interest charges can leave you over-stretched each month and unable to repay all of your debt. If this is the case, get debt help on 0800 085 0226.

When you can't repay your minimum payments to all of your debt each month it can mean a debt solution is required. If you're over-stretched then a debt solution would help you find an affordable monthly payment to repay your debt.

Unemployment

Another reason for long term credit card problems and being unable to pay the minimum payment is because of unemployment. Being unemployed means your monthly income will likely have reduced, however your credit liabilities will remain the same.

In this instance, our charity can give you help and advice to negotiate with your creditors to create a short term agreement so your creditors give you time to get back into employment. By resolving your debt problems you are free to then focus on getting back into work.

Credit Card Debt Solutions

There isn't one debt solution which is suitable for credit cards, but all debt solutions take into account all unsecured debts. This means any debt solution you apply for will include all debts including overdrafts, credit cards, unpaid council tax, bank loans, payday or short term credit, gas and electricity arrears among others.

If you want debt advice to deal with any kind of credit card problem please call our friendly advice team on 0800 085 0226. This is a free telephone call from a landline. If you're telephoning on a mobile please let us know and we'll call you back.

You can also email our support team at contact@debtsupporttrust.org.uk

Wednesday, October 02, 2013
Debt Support Trust
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Trust Deed Changes

One debt solution available in Scotland is a Protected Trust Deed. Around 7,000 Scottish people enter this insolvency solution to resolve their debt problems every year.

It is believed by the AiB that there have been 'abuses of Protected Trust Deeds' in the past which they want to eradicate in the interest of creating a more transparent and fairer debt solution.

This positive step ensures that people in debt in Scotland, and being advised of a Trust Deed, are being given the right debt advice. Many people who may have been better suited to a MAP or Certificate of Sequestration route into bankruptcy, may have only been given the Protected Trust Deed option.

The Trust Deed is an ideal solution for some people, however, there are other debt solutions which are often ignored by some organisations. At Debt Support Trust, our charity advisors are obligated to provide the pros and cons of every debt solution to ensure you can accurately decide which option Is right for you.

What are the changes to Protected Trust Deeds?

The Scottish body managing Protected Trust Deeds, the Accountant In Bankruptcy (AiB), believes that the success rate of Trust Deeds is too low, the fees are too high whilst creditors are not being  given enough control of the solution.

Based on information released by the AiB, the changes in November 2014 will include:

  • Trust Deeds being accepted from upwards of £5,000 of unsecured debt.
  • The Trust Deed will not be accepted if the debts can be 100% repaid in 48 months or less.
  • Fees from companies that gather paperwork and fact find will not be accepted in the future.
  • Trustee's in a Trust Deed will no longer be able to charge an hourly rate, instead the funding model will move towards a similar model to the English, Welsh and Northern Irish IVA.
  • Before a Trust Deed can be Protected, the creditors must accept the fees proposed by the Trustee. If fees need to be increased, for whatever reason, the creditors must approve these costs before they can be increased.
  • Social benefits, like Jobseeker's allowance, cannot be used to make a contribution towards the debt solution.

Our advice team will be attending the Accountant in Bankruptcy seminar on the Protected Trust Deed changes later in October and we'll share any useful findings on changes to Trust Deeds. We anticipate the number of people entering a Protected Trust Deed will decline as stricter rules are imposed.

Worryingly, many industry experts believe that these new regulations will increase the number of people being forced into a bankruptcy route. This is believed to be the case because the new regulations do not include Certificate of Sequestration.

People already in a Trust Deed do not have to worry. If you are considering entering a Trust Deed ensure you have sought advice to guarantee you're fully aware of all the options.

Thursday, September 12, 2013
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20% UK Employees Earn Below Living Wage

4.8 million employees are earning below the living wage according to new figures from the Resolution Foundation think tank.

The number equates to 20% of all employees in the UK and is up from 3.4 million in 2009.

The living wage is not compulsory like the national minimum wage, instead it's based on the of living. The living wage in the UK is currently £7.45 except in London where it's £8.55.

However despite the increased rate in the UK capital, it was one of the lowest at 16% for paying below the living wage.

Women were more likely to be paid less than the living wage with some 25% or 2.9m currently paid below it. While men only equated to 15% or 1.9m of all those earning below the living wage.

Author of the report, Matthew Whittaker said,

"For most of the working population real wages have been flat or declining for many years and as a result more and more people have dipped below the level of the living wage.

"Britain has a sorry story to tell on low pay. Only a handful of our close competitors do worse and the large majority have much lower rates of low pay - sometimes half as much."

The industry with the greatest number of employees earning below the living rate was hotels and restaurants.

While 16-20 years olds accounted for 83% of those in extremely low paid jobs and 78% of those in low paid jobs.

Those working in the public sector are better paid with only 6% earning below the living wage in that sector.

Based on these figures if you were between 16-20 years old and working in a hotel or restaurant you are more likely to earn an extremely low wage.

In our experience we have found the group most at risk of taking out payday loans are those aged between 18 - 25 years in low paying jobs.

If you fall into the above category and you are struggling to live we would advise you to get money or debt advice.

Even if you don't have debt it's important to find ways or surviving without taking out credit, especially with high interest loan companies.

Thursday, September 05, 2013
Debt Support Trust
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What Does IVA Mean?

A common question asked is "what is an IVA" or "What does IVA stand for"? An IVA is just one of many debt solutions available to people struggling with the burden of unsecured debt, such as credit cards, payday loans, overdrafts or personal loans, among other forms of credit.

An IVA stands for an Individual Voluntary Arrangement.

An IVA is a form of insolvency, which is a formal route to become debt free. A formal debt solution will enable you to pay one monthly payment towards your debt and if you complete the debt solution you will become debt free at the end, with any remaining debt, interest and charges written off.

Take Care with an IVA

The IVA option can be a very efficient method to become debt free again, should it be appropriate for you. It's important to ensure you're entering the right solution because the wrong debt solution can be detrimental to your credit file as well as the time you're in the debt solution.

In the past, we've heard that some people use the letters IVA to try and describe other debt solutions, such as a debt management plan. A debt management plan lasts until all of the debt and any charges are repaid. So, in this scenario below you could be in a debt management plan for at least 11 years, whereas an IVA would be 5 years.

Unsecured debt: £40,000

Assets (like a house): £0

Disposable income: £300 per month

Tips to Ensure You're Entering an IVA

If you've chosen your debt solution and want to enter an IVA there is some information which could help you ensure you're entering an IVA and not a debt management plan. For example:

  • You need a licenced insolvency practitioner in order to enter an IVA. The Insolvency Practitioner (or IP) will propose your IVA on your behalf.
  • There will be a creditors meeting in an IVA to decide whether they want to accept your proposal.
  • Setting up an IVA takes at least 10 weeks, whereas a debt management plan is quicker.
  • Each insolvency practitioner must be registered with a regulatory body, such as ICAEW (Institute of Chartered Accountants England and Wales), so check which body your Insolvency practitioner is registered with.
  • An IVA is completed usually within 5 years, however in some instances it can be extended to 6 years. If your paperwork doesn't state the expected date of completion, and doesn't mention the words Individual Voluntary Arrangement, then get impartial advice before proceeding.
Tuesday, August 20, 2013
Debt Support Trust
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1 Week at Debt Support Trust

At Debt Support Trust we're faced with challenging questions, but we've spent the last week reviewing some of the "Big Issues" which we face on a daily basis. We thought this would be useful for other people to realise they aren't alone with their money problems.

The four main areas where we most often got asked for our support were, "what is the best debt solution", "council tax issues", "Issues with existing debt providers" and "payday loan questions".

What Debt Solution Is Best For Me?

That all depends on your own personnel circumstances. The right debt solution for one person may be the wrong advice for another. The only way anyone can give you debt advice is once they know your own personal and financial situation. A debt advice must be aware of how much you owe, how much you earn and how much you spend. They must also be aware of any assets you have. Once a debt advisor has gained this information then they will be able to advise you on the best debt solution for you.

This was the main reason people contacted Debt Support Trust - to find a way to become debt free.

Council Tax Debt

Council tax is what is known as a priority debt and should you fail to make this payment the debt can quickly be escalated debt onto a debt collection agency. This affects so many people that we speak to on a day to day basis. Once with a debt collection agency you have two options; ask the council to take the debt back (in extreme circumstances they may do this) or negotiate with the debt agency to offer them what you can afford to pay each month. If they do accept an offer of negotiation then it is imperative that you keep to your end of the deal and make your regular contribution. Failure to pay council tax, which is a priority expenditure each month, was a major problem for many people.

Issues With Debt Solutions

There are many horror stories regarding debt solutions in the debt advice industry and the majority of which are because people didn't know the full extent of the solution they were entering. We always recommend using a registered debt advice charity and ensure you're aware of all the pros and cons of each debt solution as well as any fees which may be involved. No matter what debt solution you enter, your credit rating will be affected with a default being added to your credit file for 6 years.

Pay Day loans

The advice given about pay day loans is on the increase. This is due to the fact more people are turning to short term lending. As long as they are able to reasonably pay the full amount back, once they are paid, then it can be a resolution to a short term problem. However for many more people they fall into the trap of having to continually borrow to get through the following month and the situation can quickly spiral out of control. No debt advisor should recommend getting into further debt but most understand why people find themselves in these situations.

When the problem with payday loan debt occurs, it doesn't matter how the debt was incurred, just that the contractual payment isn't affordable. People ask for our help to resolve this.

Debt Advice

Our debt advice team deal with a number of different issues relating to debt from the under-occupancy tax (bedroom tax) through to credit card debts. The top 4 issues were just the most common issues people had last week.

Tuesday, August 13, 2013
Debt Support Trust
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Church Payday Loans

The Church has vowed to help people obtain affordable credit by offering payday loans which don't come with an interest rate of over £4,000% APR. Credit unions have, for a long time, been an affordable way to borrow money over a short period of time. The Church plans to utilise the credit unions around the country, of which there are around 500, to deliver cost effective lending services.

Would You Use The Church?

The church has already established a credit union for its staff and believes their services could mean an end to high charges for people in need of short term loans. The Archbishop of Canterbury is using the power of the church to try and solve a modern day problem. In turn, it will help show the church as being an approachable organisation for problems, such as money worries.

The Church is not intending to lend money or debt collect should somebody fail to pay, but instead use the existing credit union network to deliver the service.

The Archbishop said to the head of Wonga "we're not in the business of trying to legislate you out of existence, we're trying to compete you out of existence."

What's The Difference in Payday Loan vs Credit Union

There are various routes to get affordable credit. If a debt problem has arisen and the financial problem is too severe it's important to get debt advice, however, before borrowing money from a payday lender, could there be a cheaper option?

On a loan of £400 which is borrowed for 30 days, the repayment will vary from company to company. We're compared credit unions too and the difference was remarkable.

Borrowing from a payday lender for 30 days would mean a total repayment of £525. If you borrowed the same amount of money from a credit union the amount would be £416. That's a difference in fees of £109.

There are credit unions on most high streets or accessible in local communities.

Thursday, July 25, 2013
Debt Support Trust
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