chewits - the debtquake monster is coming

mrscmr

morning kissjenn... i know its sunday and you are officially off duty but wonder if you can help?
as my official CAB guru - when someone goes to CAB and says they have problems with their creditors and need to negotiate a lower payment with them each month - short term - does the cab ring the creditors or does the person who has the debt ring them? what im trying to find out is if i go to the cab [assuming i can get in there] can they do a better job of negotiation with my creditors than i could do on my own?

thanks and kissesx
mrs cmr

kissjenn

mrscmr wrote: »

morning kissjenn... i know its sunday and you are officially off duty but wonder if you can help?
as my official CAB guru - when someone goes to CAB and says they have problems with their creditors and need to negotiate a lower payment with them each month - short term - does the cab ring the creditors or does the person who has the debt ring them? what im trying to find out is if i go to the cab [assuming i can get in there] can they do a better job of negotiation with my creditors than i could do on my own?

thanks and kissesx
mrs cmr

They have official money advisers (full time staff) whose job is to help with this and they can speak to / correspond with creditirs. Up here they have a 3 stage process - to try and reduce the load on the Money Advisers. This may vary CAB to CAB but should be the general process.




Stage 1 - Debt 1 interview. This is a fact fine. You come in and bring all the paperwork you think they'll need.

• Latest Mortgage statements
• Latest Credit card statements
• Latest Loan statements
• Any demands you've recieved for late or non-payment
• Council Tax bill (and any demands)
• Last utility and phone bills (and any demands)
• You and OH's NI Numbers
• Wage slips, benefit awards, accounts (anything which shows income)

Tell them everything that's going on. Any demands being made. Employment status etc. They will advise you to prioritise the debts. If at all possible these up to day (or official payment holidays as you've done with the mortgage)
Mortgage and any Secured Loans
Council Tax
Utilities

Absolute priority is to keep a roof over your head with heating and lighting. Money put aside for groceries. Council Tax is priority because they have far reaching powers which they will use very very quickly if you miss payments. Remember it can be paid over 12 months so if it helps day to day at the moment ask council to rejig your payments.




CAB will also take a quick look at your benefits. You should be getting or claiming

• Child Benefit for each child under 19 in Full Time non-advanced (not uni) education.
• Contributory JSA for OH - he should claim now if he's actively seeking work. His NI would need to be up to date for 06/07 and 07/08 (from memory)
• Non-contributory JSA for household if you're not earning much to help with mortgage - based on household income and savings (I'm assuming you have nothing left in svaings)
• Council Tax benefit - based on household income and savings
• Child Tax Credit a top benefit for those on a low income with children (doesn't matter if you have savings unless income from savings exceeds £300 pa and then they deduct some money)

Creditors will insist you've maximised your income. So worth doing early.

CAB will advise what other they need you to bring in next time or hand in. Next meeting may take a month to organise due to the volumes. You must make it clear if this is a crisis case and you don't have lots of time because you are being threatened by repossession, court etc.

Step 2 - Debt 2 interview. This will look at what your income and expenditure are (like the SOA here). If you've already got a spreadsheet or have filled in a SOA that will help them. And from that what the possible options are.

Budgeting...can you cut back here and there and pay back creditors over time.

Debt management plans

How it works

You need to have £100 or more available income per month to pay your creditors.
You must have 3 or more creditors.
You make the agreed monthly payment to a free debt management company who distributes the payments amongst your creditors for you.


Advantages

• This is fair and transparent method of distributing payments.
• The debt management company will negotiate with creditors on your behalf. This means that offers are more likely to be accepted and interest frozen.
• You can increase your payments if your circumstances improve.
• The debt management company is responsible for administering all payments to your creditors. You just make one monthly payment to the debt management company.

Drawbacks

• You may not be able to make reduced offers if your circumstances get worse and you cannot afford the minimum £100 a month.
• The debt management company cannot force creditors to accept offers or freeze interest so a DMP can be undermined.
• This will affect your credit rating.

Individual voluntary arrangement (IVA)

How it works

An IVA is an alternative to bankruptcy. It is a formal arrangement through the county court to pay an agreed amount off your debts over a shorter period such as five years. The rest of the debts are written off.
You will need an insolvency practitioner to set up an IVA.
The arrangement has to be agreed by the majority of your creditors (by value).




Advantages

• Less stigma than bankruptcy.
• No publicity.
• Not bound by bankruptcy restrictions.
• Can continue to trade if in business.
• Can exclude assets such as the home if creditors agree.
• Creditors will be bound by the IVA even if they voted against it.
• Usually lasts a maximum of five years.
• Most insolvency practitioners will allow fees to be paid on a monthly basis as part of the IVA.
• Some insolvency practitioners follow the IVA Protocol which provides guidelines for how an IVA should be drawn up and how the insolvency practitioner should behave.

Drawbacks

• This will affect your credit rating.
• You need to have high available income or a lump sum or asset available to make an IVA possible.
• Costs are high (typically £4,000 plus) and the insolvency practitioner may require payment of fees up front.
• You can still be made bankrupt if the IVA fails.
• Some IVAs fail because the payments agreed are too high in the first place.
• If your circumstances change the IVA may end if the insolvency practitioner cannot get creditors to accept new terms.
• Many IVAs have a built in requirement to revalue your home and release equity to pay the creditors after a set number of years of payments (usually five).
• There is a growth in companies who may offer to set up an IVA for you even if it isn't suitable in your circumstances and charge high fees.

Bankruptcy

How it works

You can petition for your own bankruptcy or a creditor can make you bankrupt. Your financial affairs will be dealt with by the official receiver.
Valuable assets are usually sold to pay your creditors. Your bankruptcy usually lasts one year but you may have to make payments for three years.
If you have no assets the debts are written off. Bankruptcy may be a good option particularly where your rent your home and have no assets.


Advantages

• It relieves stress and anxiety.
• It allows you to make a fresh start after a year.
• Debts are written off if you have no assets.
• Creditors cannot take further action unless the debts are secured on your home.
• Monthly payments for a maximum of three years.

Drawbacks

• This will affect your credit rating.
• If you have equity you could lose your home.
• Secured creditors can still take action against you.
• You have to find a fee and deposit totalling £485.
• Your assets may be sold by the official receiver.
• Not all your debts are written off (see table one for details of main debts not written off).
• Your employment may be affected.
• Your business may be closed down.
• Details of your bankruptcy will be in the London Gazette (and a local paper).
• You may have a 'bankruptcy restriction order' made against you for dishonesty or 'unfit conduct'.
• There are some powers for the official receiver to take criminal action against you e.g. if you have committed fraud.
• You may feel humiliated by the 'stigma' of bankruptcy.

Debt Relief Order

How it works

You can apply for a Debt Relief Order (DRO) from April 2009. You must apply to the official receiver on a special on-line application form with the help of a money adviser who has been appointed as an approved intermediary.
You will be eligible if: you are unable to pay your debts; you have less than £50 a month spare income after you have paid your normal household bills; your debts are under £15,000; your assets are worth less than £300; and if you own a car this is worth below £1,000.
If your application is successful, your debts will be written off after 12 months. A DRO could be a good option if you rent your home, have few assets and little spare income.


Advantages

• It relieves stress and anxiety.
• There is no court hearing.
• It allows you to make a fresh start after a year.
• Your debts are written off if they were included in the DRO.
• Most debts can be included in the DRO, including priority debts such as rent arrears, fuel debt and Council Tax.
• Creditors cannot take further action once you have a DRO.
• You have to find a fee of £90 but you can pay this in instalments and this is much cheaper than bankruptcy.
• You do not have to make monthly payments on your debts while you have a DRO.

Drawbacks

• You cannot apply if you own your home as this would be counted as an asset.
• Secured creditors can still take action against you.
• Not all debts are written off. For example, you cannot include magistrates' court fines, student loans, maintenance and CSA payments.
• If you forget about a debt, you cannot add it in later.
• Details of your DRO will be in the Individual Insolvency Register.
• This will affect your credit rating.
• You may have a 'debt relief restriction order' made against you for dishonesty or 'unfit conduct'.
• There are some powers for the official receiver to take criminal action against you e.g. if you have committed fraud.

Administration order (AO)

How it works

You must have a county court or high court judgment. Your debts must be no more than £5,000. You must have at least two debts. An application is made to your local county court on a form N92. An AO is a county court order which allows you to make a single payment every month to the court. This is divided amongst your creditors on a pro-rata basis by the court.


Advantages

• None of the creditors listed on the AO application can take further action against you without the court's permission.
• The court deals with the creditors and makes the payments for you.
• Interest and other charges are stopped.
• There is no up-front fee (court takes 10p in every £100 paid in).
• You can apply to make payments for a time-limited period such as three years using a 'composition order'.
• You can increase payments where your circumstances improve.
• You can apply to the court to make reduced payments if your circumstances get worse.

Drawbacks

• You must have total debts below the £5,000 limit.
• Creditors can make objections to the court and ask to be left out of the order (although the court may not agree with this).
• This will affect your credit rating.
• If you do not maintain your payments the AO can be revoked and the creditors can pursue you again.

Consolidation Loan

How it works

Apply to a lender for a loan to clear debts. The lender may want to secure the new loan on your house if you own property.
It is crucial that you shop around for the best deal from high street and internet lenders. (If you have a poor credit rating, it is possible that a good deal may not be available to you)


Advantages

• This won't affect your credit rating unless you fall behind on payments.
• You will be making one monthly payment on one loan rather than many payments to different creditors.
• Your new monthly payment should be lower.

Drawbacks

• If you have a poor credit rating you may not be able to take out a consolidation loan, or you may be offered one on worse terms and conditions, for example at a higher interest rate.
• If the loan is secured on your house then it could be repossessed if you do not keep up with the payments.
• Interest rates often change over the loan period, making it impossible to work out what the total cost of the loan will be. Check if the interest is 'fixed' or 'variable'.
• Loans are often offered over a longer time than your original loans, which means that even if the interest appears reasonable, the length of time you have to repay can increase the overall cost of the loan significantly. This means that in the end you pay more.
• If you don't clear all your existing borrowing, then you may struggle to make the payments.
• If you keep your credit cards it may be tempting to use them again.
• If you did not do a full budget sheet listing your income and outgoings you may not have worked out if you can realistically afford the new payments.

Offers in full and final settlement

How it works

If you have a lump sum available that will pay off part of your debts, you can ask the creditors to accept part payment and write the rest off.
Alternatively, you may get creditors to agree to you making monthly payments for a set period and then writing the balance off.


Advantages

• You clear your debts in full but only pay part of the debt back.
• It relieves stress and anxiety.
• It allows you to make fresh start.
• This gives you a goal and means you are more likely to make the payments.

Drawbacks

• You lose your lump sum or asset which you could have used elsewhere.
• It is vital to get agreement in writing from your creditors before paying the lump sum.
• You may need to ask for help from relatives or friends.
• The debts will still show up on your credit file and affect your ability to get credit in the future.
• A creditor could try to recover the whole debt by taking court action.

Write off the debt

How it works

It may be possible to ask your creditors to write off the debts if you have no available income to make any payments and have no savings or assets.
You need to convince the creditors that your circumstances are unlikely to improve in future. Your circumstances may need to be exceptional, for example you have a terminal illness. You need to convince the creditor that it is not economic to collect the debt.


Advantages

• It relieves stress and anxiety where you are in an exceptionally difficult situation.
• It allows you to make a fresh start.
• Your creditors have accepted that it is not appropriate to take any further action because of your situation.

Drawbacks

• Creditors do not normally agree to write off the debt.
• It will still show up on your credit file and affect your ability to get credit in the future.
• Some creditors choose not to pursue the debt but do not put this in writing.
• There is no guarantee they won't chase you for the debt in the future.
• Some creditors may refuse whilst others agree.

One or a combination of these may work for you. This will give you options.

Stage 3 - Meeting with Money Adviser to discuss how you want to proceed and how they can help.

A lot of the options are complicated but you can ask for the credit card companies to let you pay token payments for a period before seeing a CAB person, if that buys you some time.

Have a look and see what you think.

mooomin

You win Longest Post EVER

Very useful though :T

mrscmr

blimey thats one big mail. im gonna print out and hand to OH. Do you think that before i get to see the CAB shall i carry on ringing my credit card co's and say we have short term probs? just like i did with the mortgage?

x thank u - you are officially a star!

kissjenn

FF - I know - a lot was borrowed from Debtline so thanks to them.

Mrscmr - I'd start phoning round and coming to agreements where you can. If you can get them to agree to suspend interest and charges for a few months until you're back on your feet and then follow up the phone calls confirming what was said, by whom and when that will stop the situation escalating in the short term.

If you can speak to a local CAB (you may have a few near you) you can then book an appointment, they may work in a slightly different way but they should cover the same ground. You can then tell any difficult creditors that you are working with the CAB.

Are you ok for an emergency bank account which you can get your child benefit etc paid into and which doesn't have payments coming out so you have a degree of personal cashflow? Your paypal account for ebaying could also be pointed there.

I'd personally get as much paperwork together as possible so you know exactly who you need to speak to and where you can shave money. On the other threads there are horror stories about some CC companies and some seem fine. MBNA doesn't get good press for example. If you maybe scout round (I'll look as well) we can identify the friendlier ones who may be more receptive to freezing payments for 6 months to let you get back on your feet. Can you let me know which companies you're dealing with and we can both do some research? Do you want me to post the info on your own diary so you know where to find it all?

mrscmr

super job, kissjenn

we have ltsb cc, ltsb loans x 3, egg loan, egg cc, halifax cc, mbna cc and virgin cc.

i will get on to them in morning - im waiting call back from egg and ltsb anyhow

kissjenn

Well Bucket Round-Up done.

Definately shows more activity in some areas than others. Out of target of 66 activities, managed 45 and not very evenly split. So will try better next week.

4/10 for effort.


Week Beginning Monday 6th July


Blue Bucket - Health and Exercise – 7 per week.

1. Found pedometer but it needs new battery or a new pedometer.
2. Took OH to stroke check-up. He’s to be referred to a neurologist.
3. Dog out for walk.
4. Small boy to Dental Hygenist.


Green Bucket -The House – 14 per week.

1. 4 loads of washing done.
2. Pasta, sponge and flapjacks made.
3. De-snowed living room (Husky shredded kitchen roll)
4. Picked up letter from Post Office – Lawyers hadn’t paid correct postage.
5. Stovies made for lunch – so MSE.
6. Dinner cooked.
7. Baking done and washed up.


Purple Bucket -Business Number 1 – 7 per week

1. Bank account checked. One rent missing. If not in tomorrow will text.
2. One person interested in ex-trashed flat and requested application form.
3. One viewing of ex-trashed flat arranged for Thursday.
4. Viewing of Ex- trashed flat done.
5. Bedrooms cleared in Beanie Boy flat. Fridge cleaned.
6. Electricity bought for Beanie and Ex-trashed flats.
7. Joiner paid.
8. Boundary issue letter done.
9. 60% of Beanie flat cleaned and 1st dump run done.
10. Beanie flat viewing done.
11. Lighting all fixed in ex-trashed flat and hovered.
12. Another Beanie flat viewing done.
13. Texted application details to possible tenant.


Gold Bucket – Education – 7 per week

1. Dug out OU Assignment and re-read chapter 1.
2. Tutor organised experiments for Small Boy.
3. CAB Law and Government
4. CAB Benefits 1


Red Bucket- Business Number 2 – 5 per week

1. Accountant SO in place.
2. Amazon posting done.

Pink Bucket- Extension and Refurbishment – 7 per week

1. 9 bookshelves boxed up for storage.
2. Attic access cleared.
3. Bookcases all boxed.

Brown Bucket - Family and Friends – 5 per week

1. Lunch out with Small Boy and OH.
2. Out with Small Boy today.
3. Lunch again with Small Boy and OH.


Lilac Bucket – MSE – 14 per week.

1. Ordered Braille Scrabble on Ebay for £23 incl P&P. Same is £35 at RNIB shop.
2. Photocopied DLA form to post tomorrow.
3. Rents checked and chased.
4. Arrears spreadsheet up to date.
5. Rents all up to date.
6. Arrears spreadsheet up to date.
7. 3 NSDs.
8. Rents checked.
9. Spreadsheets up to date.
10. Joined MFiT – T2 challenge.

kissjenn

Well ex-trashed flat shown again and she definately wants it, even gave me £600 in cash to secure. I drove up to the agents we use and dropped in her form to posting time but their router has crashed so it won't be processed til later this week :eek:

Got some OU work done today, paper due in Friday so need to get !!!!! into gear. Also cooked as planned and made ... if I say so myself a manifique plum crumble ... very very full now.

Taking Grandad to a hosp appt tomoz so that's the morning gone and a fun trip to Matalan in the afternoon. Small Boy has a 10p sized hole in his socks...all his socks (well one of every pair)...including ones he's "borrowed" from me.

"I didn't know they were yours!" says SB

"They're pink with dancing cows (F_F take note)", says me.

"But I like dancing cows", counters SB and wins the flaming arguement.

No idea where the mysterious hole came from, he didn't either until I spotted his trainers cast off in the hall with a 10p sized hole right through the sole.

"Haven't your feet been getting wet?"
"Yes," says he, "I wondered why that was happening?"
SB shuffles off stage left in search of yet more food.

Seaxwyn

OMG what a monster post! I was relieved to read you didn't write it all from scratch.

And OMG!!! about the 8.5 grand. The same thing happened to a company I was a director of, as the account had been left dormant for some time. If it's the same reason, it's easy to claim the money back. You can write to The Treasury Solicitor (I have the address if you want it) or see the website www.bonavacantia.gov.uk - which has a form to claim the assets of a dissolved company and a FAQs section and other information which might be helpful.

Pardon me if it's a different story here (I just wanted to show off that I could write long, knowledgeable posts too!)

Very glad the flats are let - and tenants paying cash up front is the business.

mrscmr

kissjenn - what is this bucket thing?!