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

18

“I don’t Have to Pay Anything In Bankruptcy”

True Stories is a new feature on the Debt Support Trust blog. We often speak to people who have misconceptions about debt and the misunderstanding can cause fear and worry. So, we've created our true stories section for common questions we hear at Debt Support Trust, in case other people are worried about the same problems. We never reveal personal details about anyone we help.

True Stories: "I don't have to pay anything if I go bankrupt"

Bankruptcy is associated with people who cannot afford to pay their debt, but it's a misunderstood debt solution because people believe that when you're bankrupt that the debt is "wiped off", you don't have to pay anything and your credit file is damaged.

Most of this is true. The debt you cannot afford to repay will be cleared and your credit file will be damaged for 6 years from the date your default is added. However, you will have to pay something towards the cost of your bankruptcy.

Cost of Bankruptcy

There is a fee to enter bankruptcy depending on the type of solution you are entering. If you are entering a Debt Relief Order then the fee would be £90. The cost for traditional bankruptcy is £700. If you don't qualify for the Debt Relief Order but are unemployed or in receipt of benefits then your fee could be reduced to £525.

The fees are charged as standard to process your application and if necessary, will include a court fee.

Income Payment Order

If you do not qualify for the Debt Relief Order and have entered bankruptcy through a court, then your official receiver in bankruptcy will be in touch shortly after your court date. They will review your finances and determine if you have any spare money each month.

If the official receiver believes you can contribute towards you bankruptcy then you will be asked to do so for three years. State benefits will not be taken into account when assessing how much you should pay towards your bankruptcy.

If you are required to make a payment towards your bankruptcy then this will be reviewed frequently to ensure the payment is still affordable. If you earn extra money, or have a drop in income, you should inform the official receiver immediately.

Bankruptcy can only last for one year before you are discharged however the income payment order will be in place for three years.

Windfall

If you come into money during the course of your bankruptcy you will be required to pay this towards the official receiver. You will be allowed to keep any money which is leftover after the unsecured debt, along with bankruptcy fees and charges, have been repaid.

Is Bankruptcy the best debt solution for me?

If you are wondering if bankruptcy is the best debt solution for you then contact Debt Support Trust. We are a registered debt advice charity helping people with telephone and internet based debt advice. You can telephone Debt Support Trust on 0800 085 0226.

analyseyourdebt

Tuesday, July 24, 2012
Debt Support Trust
read more

OFT given more powers

The Office of Fair Trading (OFT) which governs the UK financial services market will be given additional powers from early in 2013.

The new powers supplied to the Office of Fair Trading will ensure they are able to act swiftly in detecting and stopping unregulated or rule breaking consumer credit licence holders.

These new powers have been granted to the OFT as fury grows from the general public and consumer groups that people are poorly protected from greedy and often financially damaging companies.

The present situation

Currently the OFT has the power to retract an organisations consumer credit licence however should a company decide to appeal the decision they are allowed to continue trading for up to two years while the investigation is completed.

The change in the law will help ensure unethical debt management companies and rogue payday loan organisations are closely monitored and stripped of their licence quicker. This ensures vulnerable consumers are protected.

However, the new regulations don't simply stop at payday loan and debt management firms, they will encompass all organisations requiring a consumer credit licence to trade. This will include organisations who lend credit as well as those providing debt collection or debt advice services.

Yes Loans

The credit lending organisation Yes Loans was up until March 2012 offering credit under their consumer credit licence. However, this licence has been suspended following claims the company were charging people up to £70 to apply for credit, which has been revealed they would never be able to obtain.

The company encouraged customers to borrow expensive short term loans instead of the products they originally asked for. Yes Loans also led consumers to believe they were providing the loans directly, whereas they were actually an intermediary.

A step in the right direction

This move is a step in the right direction in the fight to protect consumers.

Consumer Affairs Minister, Norman Lamb said "This move will put a stop to those companies who exploit vulnerable consumers whilst dragging matters through a slow legal process.

It will also give a boost to legitimate businesses, with the swift suspension of unscrupulous traders."

At Debt Support Trust our charity debt advice is provided on an upfront and honest basis. Our role is to ensure you are fully aware of the debt advice options you have and provide you with any support you require. Our trained and friendly team can be telephoned on 0800 085 0226 or you can complete a debt analyser to obtain online debt advice.

Monday, July 23, 2012
Debt Support Trust
read more

Bankruptcy: Can I Go to Jail?

A common misunderstanding is that somebody can go to jail for not repaying their debt. This is not true. You will never be sent to prison for failing to pay your debt.

99.9% of people contacting Debt Support Trust will have borrowed money and experienced a change of circumstances (loss of employment, marital breakdown etc) or over committed themselves on credit, over a long period of time.

Going to Jail for Debt

There are times when you can be sent to jail and it's because of a matter surrounding your debt. For instance, if you fraudulently obtain credit you are breaking the law and could be sentenced to jail for fraud, but not for the debt. If you spend lots of money quickly and have no intention of repaying the debt then a judge can decide that this is fraud.

You can be sentenced to prison for ignoring the rules which surround bankruptcy. This can be as simple as refusing to let the Official Receiver in bankruptcy know about all of your assets or trying to set up another company.

Recently in the press a man was sentenced to nine months in prison because he set up a new company and spent thousands of pounds on personal items when it should have gone into his bankruptcy. This deliberate decision to ignore the bankruptcy rules meant he was breaking a court order. If you decide to enter bankruptcy it's essential you follow the Official Receiver's demands.

Other common misconceptions about Bankruptcy

There are a few common misconceptions about bankruptcy which confuse people. Some of these are:

  1. You will only lose your property in bankruptcy if there is equity available for the creditors. For instance if the secured debt on the property is £120,000 and the property is worth £100,000 then the property is in negative equity. You must still maintain payments to your mortgage whilst in bankruptcy or you will lose your home.
  2. Bankruptcy lasts for 1 year but if you are in employment you will likely have to make a contribution towards your bankruptcy for 3 years. This is called an Income Payment Order. The amount of the Income Payment Order is decided by your court appointed Official Receiver.
  3. You have to pay to go bankrupt. As at today's date, the cost to enter bankruptcy is £700. If your debt is below £15,000 and you meet the rest of the criteria you could enter a Debt Relief Order which is £90.
  4. You can never get credit again. People who exit bankruptcy will experience difficulty in applying for credit but your credit file can be repaired over time. The trick is to borrow money carefully and repay it in full and on time, every time.
Friday, July 20, 2012
Debt Support Trust
read more

Debt through a child's eyes

Last week at the debt advice charity we were working with a local community group to discuss debt, budgeting and share experiences of financial hardship. On Monday we received an email from a girl who attended the event with her mother. The story provides an insight into how children begin to understand the concept of money and we found it fascinatingly honest and worth sharing on our blog.

The family agreed to share the story, however we have changed the girl's name.

My Life with Money

My name is Lynn and I am 12 years old. Every week my gran gives me £5 pocket money and I always try to save it, but somehow manage to spend it. Whether I spend it on clothes or makeup or shoes etc.. I always do spend it!

When I was little I wouldn't say I didn't get much, although I did and my parents had great jobs and could always provide food and everything for me and my sister, we also got a lot of treats. Maybe not as soon as I was born, but by the time I was 5 my mum had her own business and my dad had a very stable job and still does today. When I was little I didn't really worry that much about money, I didn't really need to, that's what the older people did. To be fair I didn't really know about money, I didn't understand that to get a new toy mum and dad had to work, I didn't understand the fact that you had to buy food and toys and clothes. My parents didn't really care, obviously I didn't get everything, but I got a few treats here and there. It was always equal between my sister and me, although it didn't seem that way because of the 5 year age gap, but it was always fair.

My sister is 5 years older than me and when she started secondary school she got the chance to go to France and I always felt it unfair as she's allowed and I'm not, but now I am at the secondary I had the privilege to go on the France trip the same as she went.

As I grew older I began to understand the concept of money but still not really the fact of working and would ask mum for money and not really think, or understand, the effort that has been put in to earning it. I still wouldn't class myself as the smartest with money, maybe I don't put it to the best of its ability and I could save it up, but I can't keep money I always feel the need to spend it as soon as I get it.

When I was eight my mum and dad announced to me and my sister that we were moving out of our small semi detached house and into a large 3 floor house with a lot more rooms and space to do what you like in, at first we didn't really like the fact of moving, leaving our friends and where we grew up, it felt like a massive distance between the houses but they were only 10 minutes apart.

My whole life we had pets, hamsters, dogs, budgies, fish, rabbits etc.. When I was younger I didn't realize that food, cages, toys and everything all added up to a lot of money but I understand now. We still do have pets just I think about the cost more.

Growing up my parents always had fancy cars but when i was nine the credit crunch started and everything started to change. We had lived in our new house for about a year and my mum was driving an Audi and everything was great, school, friends, work. My mum's work had moved to a better place. But when the credit crunch advanced and became more outstanding everything started to change, we had to sell the car, and we stopped getting as much, even the amount of groceries we bought decreased. The quality of things, all the little things was changing, the toilet paper, the soap, the lemonade, the oranges, but i didn't really care, to be fair I didn't really notice. We used to always go on holiday and the best holiday we could get was a small caravan holiday. After a while my mum's business started going down and she was acting strange. My sister's boyfriend would always fly up from London and even going to the airport she would panic and hide. After about 6 months the business went bust and my mum was out of work. My dad was fine and he has always had the same job, but he worked a lot more after my mum's business went bust so we could pay the bills and everything. Around Christmas time I would hardly see my dad for the amount of time he was working, I got to see my mum because she didn't have a job which was great because she used to work full time. My mum is now back working again.

My parents try their hardest to treat my sister and I but we do understand the fact that now everything has changed and we can't get everything. Me and my sister are both very unique for the fact we don't follow the crowds, not only are we unique our parents are too, if our parents didn't work so hard we wouldn't have a good story to tell. Also, most importantly we wouldn't be here today.

Advice

Debt and money advice is available over the telephone and internet from Debt Support Trust while face to face advice is free from the Citizens Advice Bureau.

Tuesday, July 10, 2012
Debt Support Trust
read more

I don't want telephone debt advice

From time to time we speak to people who say they would prefer face to face debt advice and could we provide this service. At Debt Support Trust our charity is only able to offer telephone and internet based debt advice.

However, at Debt Support Trust we do recommend that if people prefer face to face advice that they speak to their local Citizens Advice Bureau. The Citizens Advice Bureau is a fantastic local resource supporting people who need face to face debt help.

For-Profit Debt Advice

At Debt Support Trust we spoke with a gentleman this morning who paid almost £2,000 on debt advice with a for-profit company. Many for profit companies will not charge you for debt advice but they will for the debt solution.

There are free debt advice charities which can support you with face to face debt advice, such as the Citizens Advice Bureau or potentially your local council.

If you decide to pay for debt advice be sure to find out

- What level of support are you receiving?

- What will the company provide for the money charged?

- If you need a face to face company which charges or could you attend the Citizens Advice Bureau?

- What is the total cost and how will you be asked to make payment (are there up front fees?)

- Could free telephone debt advice be more appropriate?

Seeking Debt Advice

It's important to seek debt advice if you are struggling to manage your finances and there are plenty of free advice organisations to choose from, whether you want face to face or telephone based debt advice.

For telephone debt advice Debt Support Trust would gladly help you. For face to face debt advice you can seek local free debt advice organisations. If you are having trouble finding a free debt advice agency in your local area for face to face advice Debt Support Trust will be glad to help you. You can telephone Debt Support Trust on 0800 085 0226.

Monday, July 09, 2012
Debt Support Trust
read more

10 Things to Know about Trust Deeds

You will find lots of advertising about a Scottish debt solution on TV called a Protected Trust Deed, however most people will have no idea what the solution is and whether they are applicable for it. There are positives and negatives to a Protected Trust Deed and it's important to know all of the facts before deciding on your debt solution.

Entering a Trust Deed Scotland

1. Credit File: Your credit file will be affected by entering a Protected Trust Deed. A default will be added and this will last for 6 years.

2. 3 years debt free: Typically people entering a Trust Deed to become debt free are in the solution for 3 years, however the Trust Deed can be shorter or longer depending on your financial situation. If the Trust Deed is shorter it may be because you don't have any available income and instead are offering equity from an asset. The Trust Deed may be longer in order to meet the minimum 10% return to creditors.

3. Monthly Disposable Income: Your disposable income is required for the Trust Deed. Your disposable income is the difference between your income and your expenditure. The monthly disposable income is paid to your Trust Deed practitioner. Your insolvency Trust Deed practitioner will take their fees from the money you pay in every month.

4. Inheritance / Windfall: If you come into money during the period of the Trust Deed you must inform your trustee. The trustee will likely want to include this money within your Trust Deed.

5. Your house & other assets: Your house and car will be considered in a Trust Deed. The insolvency practitioner is only interested in the equity within these solutions. For instance, if there is equity in your car above £3,000 then you may be asked to sell this and purchase a cheaper car. If you have a mortgage on your house then a redemption value will be obtained to understand how much equity is in the house. If there is no equity then you may be offered to pay a nominal fee at the start (roughly £500) to discharge your trustees interest in the property. This means that if your property increases In value at the end of the Trust Deed then this equity cannot be included in your Trust Deed.  If your property has equity, usually above £5,000, then this will have to be included in your Trust Deed, typically via a remortgage or from a third party.

6. Your bank account: If you owe money to your bank where your wages are paid into then you should change to a basic bank account with a creditor you don't owe money too. Your bank has the right to offset your wages / income against your debt if they know you are entering into a Trust Deed. This can mean your bank may take money directly from your account without your permission.  Your bank account, and other debts, will also be frozen when your enter a Trust Deed so a fresh account is best.

7.  Six Monthly review: Every 6 months a Trust Deed company must complete a review of your finances to determine if anything has changed. So, if your disposable income has increased you may be asked to contribute more towards your Trust Deed in the future. Similarly, if your disposable income has gone down then your monthly payments will be lowered. If your payments are lowered too far it can mean the Trust Deed is no longer viable, or that the solution would be extended at the end to meet the dividend return to creditors.

8. Bonus/ Overtime: If you receive a bonus or overtime from your employment then this will be taken into account, with 50% of the money being asked for the Trust Deed.

9. There are other Scottish debt solutions: It's important to remember that there are other Scottish debt solutions available which you may wish to consider, like a DAS or Sequestration.

10. Discharged from Trust Deed can take time: After you complete your Trust Deed payments, usually after 3 years, the Trust Deed company will then have to close your case. This can take a little bit of time because they have to make payments to each of your creditors and produce final reports. Don't be surprised if it takes a few months to close your Trust Deed.

Finding a Trust Deed company

There are around 50 licenced insolvency practitioners providing Trust Deed for people struggling to manage their debt. You should speak to a couple to decide which organisation is correct for you. Remember, a licenced insolvency practitioner will charge fees for their service.

If you need help deciding if a Protected Trust Deed is right for you then contact Debt Support Trust on 0800 085 0226 or complete our debt analyser form.

analyseyourdebt

Debt Support Trust is an independent and impartial debt advice charity.

Tuesday, July 03, 2012
Debt Support Trust
read more

Saving to go Bankrupt

Help and advice for people with debt problems and requiring bankruptcy help.

Saving to go Bankrupt

When we provide bankruptcy debt advice to people it's because their financial situation means they are unable to contribute towards their debt each month. Also, the amount of equity in an asset is not substantial enough to repay the debt. One of the most vulnerable people to enter bankruptcy is the unemployed.

It could happen to anyone. One minute you've got manageable levels of credit and the next your unemployed and receiving housing benefit, council tax benefit and job seekers allowance. The drop in income is usually large enough to mean a financial problem exists - how do you pay your rent, food, electricity, gas etc as well as continue to meet your credit arrangements.

Token Payments instead of Bankruptcy

It's our responsibility to inform people of all the options available to them. One of the most popular debt solutions for people who have been made redundant and have unsecured debt is to make token payments towards the debt. This means an affordable sum of money is paid towards the debt each month, however it will not be enough to meet the contractual payment. This way your creditors know you're serious about repaying your debt but are not financially capable of doing so. Most creditors will accept a token payment each month and may even freeze interest and charges until you are back in employment.

Saving to go Bankrupt

Bankruptcy is often considered an easy route to clear off unsecured debt. However this is not strictly true and it's important people entering bankruptcy are aware of the costs and implications of this debt solution.

Firstly the costs. Bankruptcy can cost up to £700 if your unsecured debt is above £15,000. This fee can be reduced to £525 if you are on a low income or in receipt of benefits.  If your unsecured debt is below £15,000 then a Debt Relief Order (DRO) could be the most appropriate solution. Either way, we often hear people tell us they can't afford to go bankrupt because it costs too much.

You can potentially get a grant from your energy provider to help with the costs of Bankruptcy.  British Gas Energy Trust and the EDF Energy Trust are just two of the energy providers helping with the costs of Bankruptcy.

If you are in employment you may have to save to go bankrupt. However, this may not be the only cost you face. While Bankruptcy lasts for 1 year, an income payment order will last for 3 years and will require you to pay your disposable income towards the Official Receiver in Bankruptcy. The Official Receiver will determine how much you can afford to pay towards your Bankruptcy each month.

Finally, your credit file will be damaged as a result of entering a Bankruptcy solution. A default is added to your credit file which lasts for 6 years and will make obtaining credit more difficult in the future.

Bankruptcy debt help

If you would like Bankruptcy debt help please telephone 0800 085 0226 or complete a debt analyser and we can provide you with tailored advice.

analyseyourdebt

Tuesday, June 26, 2012
Debt Support Trust
read more

Cost of Rent Rises

According to a new report released by LSL Property Services the average cost to rent a property in England and Wales has risen for the second time in a row. The average cost to rent a property is now £712 a month, a 2.3% rise on the same time last year.

The statistics suggest that the cost of renting is rising fastest in London and the South East.

Why is Rent So Expensive?

There are many reasons why the cost of rent is increasing but mainly it is a supply and demand problem. The demand for rented accommodation remains high and as such the price is constantly increasing. The reason demand is high is because the availability of first time buyer mortgages is not necessarily competitive.

First time buyer mortgages are available from a 5% deposit and many lenders are offering 4 times a person's salary to acquire the mortgage. However, raising the money to purchase a property can be difficult, particularly in an uncertain market. It is forecast that property prices will decline by up to 10% in the next year.

Stamp duty, which was frozen, has now been re-instated and this is a further expense for people purchasing property.

Consequently, the demand for rented properties is increasing which in turn is increasing the monthly costs.

"Can't afford to Live"

The main problem with increasing rent is that large numbers of people are struggling to make ends meet as it is. If the rental costs continue to climb then it can become difficult financially for people to survive.

Rent is not the only monthly expenditure to increase in the last few years, as gas, electricity, food and petrol have all increased too. The combined monthly increase means the cost of living is a lot more expensive. The most recent increase in price will be to petrol as the cost for a litre of unleaded will reach £1.40 shortly.

Continued increasing of costs can push people into debt, or those already in debt it can mean they are unable to make the monthly payments towards their debts without continuing to borrow.

If you have debt and find the cost of living too expensive then there are some debt solutions which could help you manage you debt more affordable.  You can telephone Debt Support Trust free of charge on 0800 085 0226 for more information.

Monday, June 25, 2012
Debt Support Trust
read more

Bank account for Bankrupts

If you have a poor credit rating, have been, or are about to go bankrupt or you have been rejected by your local bank for a standard account, then you may feel that you can't open a basic bank account anywhere.

However, there are some banks which will accept people who have a poor credit rating. Barclays and the Co-op bank have a policy of accepting people who have been made bankrupt for basic bank accounts.

Bank account stipulations

Most people who feel they can't open a basic bank account will pay a fee every month to open an account. This can be a costly exercise as withdrawing money can cost up to £10 a time.

The only problem that the Co-op and Barclays make is that if there is a record of fraud on your account they will not be able to provide you with a basic bank account.

Basic bank accounts

When you open a basic bank account you will need to provide proof of your address and one piece of ID. A credit check is not performed however an Identity check is carried out with a credit referencing agency.

You can use your basic bank account to set up direct debits and standing orders, use the visa card provided to withdraw money at an ATM for free and receive telephone, online and in-branch support. You will not be able to access an overdraft on a basic bank account and if you have an unpaid direct debit the bank will charge you a fee.

If you are about to be made bankrupt you should open a new bank account with a company which you don't owe money too. That means if you owe Barclays money you should switch to another basic bank account provider where you don't owe them any money.

Difference Between Other Banks

Many other high street banks will not provide a basic bank account product to people with bad credit or who could pose a credit risk. This can mean that people turn to expensive companies so they have access to a bank account. Some bank accounts which charge a monthly fee do so as a setup cost and then as you subsequently borrow money. This can be expensive and usually people who are using these fee-charging bank cards have money problems already.

If you're using a fee charging bank account why not apply for a free basic bank account?

Wednesday, June 20, 2012
Debt Support Trust
read more

Households Struggling to Survive

A report by Lloyds calling "Spending Power" has said that people between the ages of 35 and 54 are in the bracket of "most unlikely to pay bills" and found that the majority of people in the UK are spending 75% of their income solely on essentials.

Families in the UK are struggling to make ends meet as it's confirmed that due to inflation and falling wages, people are more than £400 worse off than in 2011. Despite 80% of people stating they are unhappy with the inflation rate, people are forced to grim and bear the situation. The study found that one in four public sector workers are spending less on food because they are struggling to survive.


What does this mean?

An increasing number of people contacting Debt Support Trust for debt help are doing so because they have over stretched on credit. This means that people have a monthly repayment towards their debt every month which must be paid to avoid a default on their credit agreement.

People struggling to make ends meet and turning to credit to fill the financial void will usually require debt advice at some stage. Our advice can vary from making token payments to creditors through to Bankruptcy.

Debt Advice Process

Debt advice from Debt Support Trust is based on a person's personal and financial situation. Our aim is to help a person make an informed decision about the available debt solutions on offer. We provide the positives and negatives of all suitable debt solutions to help a person make the necessary decision in becoming debt free.

We encourage people struggling to manage their finances to seek debt help from a registered debt advice charity, such as Debt Suppor t Trust or the Citizens Advice Bureau. Advice from debt charities is free, independent and impartial.

Tuesday, June 19, 2012
Debt Support Trust
read more