Some basic advice from an ex CAB counseller

[Deleted User] · 12 February 2004 at 7:23PM

How about a 'sticky' at the top of this board with some basic advice?

Many of the posts here are the same to a certain degree but I feel there are important pieces of advice being fragmented across many posts and threads and some things are not even being mentioned - possibly for fear of upsetting someone.

As an ex voluntary debt counseller for the Citizens Advice Bureau perhaps I will say the following -

1. There are many reasons why people go into debt. Sometimes circumstances force it upon them - i.e. loss of a job, death of the main earner, divorce/co-habitation split - to name a few.

Other reasons are simply due to the live now pay later attitude and reckless spending.

You need to examine WHY you are in the situation you are in now and acknowledge it to yourself if you are at fault. If you cannot do this, you cannot move on and you will keep spending.
If you cannot even see there is a problem - you may have that as a problem in itself.

Are you using loans to pay off other loans?
Are you behind with your rent/mortgage?
Is all or the majority of your wages/salary/benefits already spoken for before you've got it?
Are you borrowing from friends/relatives to get you thru the week?
Are you buying groceries on a credit card that is not paid off every month?

Any of the above shows you DO have a problem.

2. I cannot emphasise enough the importance of COMMUNICATION with your creditors/utility companies/banks etc..

If they don't hear from you because you are burying your head in the sand, or because you don't ask them for help and time to pay, they then cannot be blamed for having a bad attitude towards you, nor can you expect them to be sympathetic.
(This is not to say creditors don't have their faults - I know only to well how ignorant, bullying and almost criminal some of them can be).

3. You need to look at your WHOLE financial picture, not just the credit card problem, or the loan problem.
Debt needs to be prioritised. For example, you cannot go to jail for not paying your credit card. You can go to jail if you don't pay your council tax.

4. You can get FREE, CONFIDENTIAL and EXPERT advice from your local Citizens Advice Bureau. They will want to see ALL your paperwork regarding loans, mortgage/rent and all your paperwork regarding salary/wages or benefits you are receiving - basically, everything. They can help you work out your income/expenditure and most importantly, what you have left to live on and to service your debts with.

Once this is known, they can negotaiate with your creditors for reduced payments, more time to pay, suspended interest and other things. (I have also successfully negotiated much reduced full and final settlements as well).

If you use the CAB - you WILL be helped but you need to sign commitment not to go further into debt. No more credit card spending etc...
If you cannot do this, you are not ready to be helped and the CAB will not become involved any further in your case.

Specialist debt counsellors at the CAB can, with your signed permission, deal with your creditors on your behalf, working with you and them, to an arrangement that you can manage.

In severe cases, management of the debt may simply be unrealistic and bankruptcy or an admin order may be an option. Again, specialist advice is there for you and the CAB can help with Court procedures as well. (Or could when I was there).

I make no apology for 'plugging' the CAB for the marvellous work they do. It's free for you utilise and I know of no other free agency that even comes close to what they achieve for people in debt. They are non judgemental and deal with each case on it's merits.

But it is not ALL down the them. Clients have to be prepared to make it a team effort and consider changing their ways too.

Whilst the original cause of your debt may not be your fault, the worsening of it could be.

Moderator comment:- For Martin's take on this have a look at 'Q. Help!!!! My debts are out of control, no one will give me credit, what should I do? on the Q&A page of the main site.

Fran · 12 February 2004 at 8:13PM

I have tried starting a thread under "Loans and Debts" - "Debt while on Benefits" which is aimed specifically at people who have got to a crisis point while on benefits who might come on this website thinking that by doing more juggling they can sort things out, but in fact they need to have the present situation looked at urgently. This is a different situation to people coming here to save money by managing their affairs better. Though the C.A.B. are available to anyone, the majority of debt visitors are at a crisis point and on benefits. An important factor about debt is that it is often related to other factors such as employment (loss of job, non-payment of wages eg.), housing (rent, mortgage and/or council tax arrears) and other issues such as relationship breakdown. C.A.B.x will try to maximise income by checking the client is receiving any benefits they are entitled to and the correct amount. Funding for C.A.B.x is got by individual bureaux so the level of debt advice will depend directly on the level of funding/staffing.

Mortgage_Master · 13 February 2004 at 1:28AM

Great post Ice,

I was just wondering if you could please tell me what the CAB's views are of restructuring short/medium unsecured debt to long term secured?

How do you determine if it's better to consolidate all your debts by remortgaging or negociate with creditor for reduced payments, suspended interest?

Thanks

[Deleted User] · 13 February 2004 at 2:34PM

I have been out of CAB for a few years now but would imagine their ethos regarding debt is mainly unchanged - however, you would really need to speak to them.

Personally, I would not advise anyone to considate their debts using specialist firms (who charge much higher interest) or transferring it to your mortgage.

An unsecured loan which is not paid back cannot threaten the roof over your head. Transfer it to your mortgage and the situation is very different should you default.

You must also bear in mind that should house prices start dipping, you could find yourself in negative equity far sooner than if you had not consolidated loans to your mortgage. Not only is this bad enough in itself, but adding to your mortgage obviously means you will be paying it off longer with less to show for it. Then there's the question of interest rates creeping up....

CAB are not there to hunt round the market for deals etc... to find a better product for you. As already stated, they will negotiate with your creditors on your behalf to take the heat off you whilst enabling you to pay off what you owe at a rate you can afford. This alone can bring much peace of mind and be all it needs to get someone back on the road to recovery as it were.

If you decide to approach your creditors yourself, be certain you understand any verbal arrangement you agree to and GET IT FOLLOWED UP IN WRITING. Make anote of WHO you spoke to, dates/times etc... also.

If you only have the ONE loan or credit card debt which is worrying you but the rest of your finances are ok and none of the pointers I mentioned in my first post apply to you, then you may be able to move it about round some of the 0% credit card deals - even if you can only transfer half of it, half on 0% is better than none.

If you are finding it hard to get credit for this purpose you need to ensure your credit record is correct. This is especially important if you have recently moved in to your current address.

If you have any doubts Simy, speak to CAB BEFORE you do anything.

Mortgage_Master · 13 February 2004 at 7:50PM

Thanks for your reply ice.

I think you make some really valid points and I really admire the work CAB, CSSS, Debt Line do, however as a mortgage broker, I'm really surprised if you're saying that short term unsecured debt should never be transferred onto a mortgage.

I visited https://www.cccs.co.uk to have a look at their debt calculator and to see what the outcome of a fictitious situation would be. (Didn't ring them as I didn't want to waste their time)

The details I used were as follows:

- Married couple
- 2 Children
- 1 income of £1700 net per month
- £100 Child benefit per month
- Current outstanding mortgage £67985 (7 yrs into a 25 yr term)
- Mortgage payment - £515.44 p/m (excluding insurance)
- 1 HP agreement - £299 p/m (car finance 1 year to go £3000 o/s)
- 2 Credit Cards - minimum payment £450 monthly (£8000 + £7000)
- 1 Personal Loan - £133.88 p/m (18 months to go, 1800 o/s)

When they purchased the property 7 years ago they had no other debts and could manage fine, he was on £18000 and she was on £14000. They gradually started furnishing the property on 6 months free interest deals and then transferring balances to 0% credit cards. They took the personal loan 18 mths ago to clear their overdraft which was used to pay for their honeymoon. They had another baby 8 months ago.

They only have his income which has fortunately increased to about £27000. She will return to part time work in about 4 yrs when the youngest child goes to school. Current property value £200000.

The total monthly cost for the mortgage and unsecured debt is £1398.32. They need £1000 a month to cover council tax, car insurance, gas, food etc...

They haven't missed any payments yet as they borrowed £2000 from her parents to cover the shortfall. They only have £500 left and will then be short of £600 each month. They recently tried to apply for another personal loan to see them through but got turned down as his income is not sufficient to cover all their liabilities.

The csss.co.uk highlighted straight away that their was a debt problem that urgently needed to be addressed and advised that appointment should be made immediately.

__________

Ice, in this type of situation are you saying that all these organisations would advise that the creditors be contacted to negotiate suspended payments etc...?

Thank you for your insight.

Fran · 13 February 2004 at 10:15PM

Simy - You asked the question:
"I was just wondering if you could please tell me what the CAB's views are ....", and Ice's reply was:
"I have been out of CAB for a few years now but would imagine their ethos regarding debt is mainly unchanged - however, you would really need to speak to them.

Personally, .......".

Ice makes it plain that s/he is not working for the C.A.B. at the present time. However you did not make it plain you were a mortgage broker which was more than a little unfair to anyone reading this. You have then gone on to make up a hypothetical situation, thus wasting the time of even more people. You did not ask Ice a specific question but a general one and s/he replied from a personal viewpoint. You end your post by saying:
"Ice, in this type of situation are you saying that all these organisations would advise that the creditors be contacted to negotiate suspended payments etc...?"
This is a ridiculous question as Ice does not purport to be working for any of these organisations but is trying to offer help on this website with a background of C.A.B. work. Please don't waste the time of people that are trying to help others and if you ask a question regarding mortgages, please make it clear what perspective you come from, as Ice did.

[Deleted User] · 14 February 2004 at 12:02AM

Thank you Fran.

Simy, I'm happy to debate the points you have just raised elsewhere in this forum if you wish - but not on this thread.

This thread was really started as a form of basic advice to people which I would not want to see watered down by arguments and ending up going off topic.

If my origianl advice was not felt to be sound, then perhaps the moderates will remove my entire posting and I shall be happy either way. It's only cost me my time to type it up.

If it is to remain - perhaps further debate on the subject could be as new topics?

Mortgage_Master · 14 February 2004 at 2:30PM

Fran, Ice,

Fran, I feel you are being a little harsh with your reply.

Let me first of all reassure you I'm not trying to do anything underhand, I'm trying to understand the approach of these organisations. Apologies for not having highlight my status in the first post, this is why I corrected my mistake in the second post.

My first question was in relation to CAB but then when I checked one of Martin's guides I came across the other organisations. I included csss in my second reply due to their debt calculator.

Fran, your post makes me feel as if I've done something wrong, if so I can only apologies as this was not my intention. I'm not in anyway trying to infer that ice, csss, cab... are wrong as I believe these organisations do a great job! And in many cases people would be wise to use these organisation before they contact some of the brokers that operate in the adverse market. There are some real horror stories.

Ice, when you said "personally" that's the way I took it. Fran, I didn't contact csss directly, as highlighted in my post as I didn't want to waste their valuable resources.

When I said "Ice, in this type of situation are you saying that all these organisations would advise that the creditors be contacted to negotiate suspended payments etc...?" I did say "you saying" and "thank you for your insight". I was asking for Ice's views, sorry if this wasn't clear.

I would like to discuss this further as I'm genuinely interested in this topic and would like to further my understanding. As I said my intention was not to offend anyone.

Fran · 14 February 2004 at 2:46PM

Simy - I've just re-read the posts and still interpret your questions as asking for C.A.B. (and other) views which Ice is not able to give. For information about the C.A.B. you could look at the following links:

http://www.citizensadvice.org.uk and
[url]Http://www.adviceguide.org.uk[/url]

For information about other organisations:-

http://www.nationaldebtline.co.uk/
http://www.cccs.co.uk/
http://www.fiac.org.uk

Spikey_2 · 10 April 2004 at 11:11PM

Hi,

Anybody out there help me with a question?

How long does arrears stay on your credit files even after the arrears have been paid off.

Thanx in advance.

Spikey

Wealth_Wizard · 21 April 2004 at 10:07PM

it used to be about 6 years I think, your credit file shows how many months your account fell in arrears

Some basic advice from an ex CAB counseller

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