StepChange #debtmyths

Former_StepChange_Rachel

The myth:

My debt problems will ruin the credit scores of the people I live with #debtmyths

The reality:

This is a common concern for people approaching us for debt advice. Thankfully credit files no longer work like this, and everyone has their own credit file which reports on their own record. So if you have problems with your debts then it’s only your file that’s affected.

The exceptions to this rule are when you have accounts in joint names with someone, or someone has signed as a guarantor on a debt. You can find answers to almost every conceivable credit history question on the main credit report article on moneysavingexpert.com.


MSE Insert: Thanks Rachel - link here: http://www.moneysavingexpert.com/loans/credit-rating-credit-score

System

The myth:

Once a CCJ is set in place you can’t change the monthly amount that you repay

The reality:

Receiving a county court judgment (CCJ) usually involves the courts setting an instalment that you have to pay for a debt. You have a chance to give the courts details of your finances, which means they will look to make your payment affordable. None of our situations stay the same for ever though, and it’s not unusual for a payment on a CCJ to become too much. If you wish to change the payment on a CCJ you can by using the form N245 (and paying a small fee).

You can read more about how to deal with a county court judgment (CCJs) on our blog.

Former_StepChange_Rachel

The myth:

Your debts are written off if you haven’t made a payment in six years.

The reality:

This refers to the Limitations Act; a debt can become statute barred after six years if the debtor (or anyone jointly named on the debt) hasn’t made a payment or admitted the debt and the creditor has not secured a county court judgment (CCJ) against the debtor. This means that after the six year period, the debt becomes legally unenforceable.

Section 2.14 of The Office of Fair Trading Collection Guidance also states that it is unfair to pursue such claims where the creditor has made no contact during the relevant limitation period.

The Act isn’t there to encourage debt avoidance or non-payment, it’s there to protect people from being forced to pay debts that have ‘timed out’ through no fault of their own. The money owed itself is not written off; it’s still a debt and in reality it still exists, but with the Act in force the creditor can no longer enforce the debt through the courts. The creditor can continue to chase the debt if they wish.

For more information you can read our blogpost: http://moneyaware.co.uk/2012/07/debt-avoidance-truth/

fatbelly

StepChange_Rachel wrote: »

The myth:

Your debts are written off if you haven’t made a payment in six years.

The reality:

This refers to the Limitations Act; a debt can become statute barred after six years if the debtor (or anyone jointly named on the debt) hasn’t made a payment or admitted the debt and the creditor has not secured a county court judgment (CCJ) against the debtor. This means that after the six year period, the debt becomes legally unenforceable.

Section 2.14 of The Office of Fair Trading Collection Guidance also states that it is unfair to pursue such claims where the creditor has made no contact during the relevant limitation period.

The Act isn’t there to encourage debt avoidance or non-payment, it’s there to protect people from being forced to pay debts that have ‘timed out’ through no fault of their own. The money owed itself is not written off; it’s still a debt and in reality it still exists, but with the Act in force the creditor can no longer enforce the debt through the courts. The creditor can continue to chase the debt if they wish.

For more information you can read our blogpost: http://moneyaware.co.uk/2012/07/debt-avoidance-truth/

Your linked blog post contains no useful information on statute barred debt. For a balanced overview, read the National Debtline factsheet:

Factsheet | Liability for debts and the Limitation Act

This relates to England/Wales law, as does your post. For Scottish Law, where the period is 5 years and the debt IS extinguished, read the Scotland version of the National Debtline factsheet.

Acknowledgement must either be in payment or in writing, and be done by 'the debtor or their agent' so a letter by a debt management agency, unless worded very carefully, would count as acknowledgement.

OFT guidelines also state that it is an unfair practice to 'continue pressing a debtor for payment after he has stated that he will not be paying a debt because it is statute barred (section 3.15 (b) iii)'. This is probably more useful to the debtor than the section you quote (with incorrect numbering).

P.S. It's the Limitation Act.

StepChange_James

The myth:
Bailiffs can force entry into your property and take any item they want #debtmyths

The reality:
Bailiffs can only be instructed by the courts. The bailiff is there to recover the money, whether this is by a payment arrangement or by taking goods from the property and selling them at auction to pay off your debt.

Bailiffs cannot break into the property unless you have already allowed them in on a previous visit, or they entered through an unlocked door or window. This is called ‘walking possession’. Once the bailiff has ‘walking possession’ they can use force to enter again in the future. The exception is if the bailiff is collecting unpaid magistrates fines, HMRC or business related debts.

If a bailiff enters your property, they won’t usually take goods on the first visit. They will try to make a list of items in the house which they can take in future. Once they have done this, it is an offence for you to remove any of these items from your house.

Bailiffs are not allowed to take items that are necessary for everyday living or working, or items that belong to someone else including children’s toys.

If a bailiff comes to collect a debt, it’s best to negotiate an arrangement outside of the property and seek debt help immediately. You can read more in our blogpost: how to deal with a bailiff.

StepChange_James

The myth:

If I go bankrupt I won’t have to pay anything.

The reality:

Well, you’ll have to pay £700 for starters. After the initial fee to petition for your bankruptcy is taken, the Official Receiver will look at your income and expenditure and decide if you need to pay into an Income Payment Order or Arrangement (IPA or IPO). This usually happens if you have surplus income after paying for essential living costs. Bankrupts are normally expected to pay any surplus income into the order/arrangement for 3 years depending on their circumstances.

Read this beginner’s guide to bankruptcy for more information. The Insolvency Service also has a booklet for more detailed advice.

StepChange_James

The myth:

You have to speak to someone to get good debt advice #debtmyths

The reality:

You can get a debt solution without speaking to anyone by using online debt counselling services like Debt Remedy.

Debt Remedy will assist you in completing a financial statement with information on your household, employment, income, expenditure and debts. From this we can automatically determine your options. If a debt management plan is the best advice we can set this up without you needing to speak to us.
We may need to speak to you at a later date but the initial solution can be put in place using our online service.

fairyclicks

GD2 wrote: »

You are so wrong I'm afraid. If a DMP is a good solution, but your affordability is limited, say less than £100 per month, then CCCS will not help and will pass the burden (don't like using that word but it is the best I can think of) either back to the debtor and advise self help or point to somewhere like CAB.

I'd just like to say that this is a myth - i have a DMP with stepchange (previously CCCS) and currently pay £45 per month - they have been extremely helpful to me and i have very limited resources for repayment.

System

The myth:

You have to have a certain level of debt to be offered a debt management plan. #debtmyths

The reality:

A debt management plan (DMP) can work for many clients with differing amounts of debt.

You don’t have to have a particular level of debt to be offered a DMP from us and we don’t offer DMPs based on how much you owe (we’ve overseen DMPs for £100 and £100,000).

The only thing we want to ensure is that a DMP is the best advice in your particular set of circumstances. If it’s not we’ll talk you through the other options that suit you better.

If you’d like to see if a DMP is right for you then give us a call or use our online advice tool, Debt Remedy.

Petlamb

StepChange_Mat wrote: »

The myth:

You have to have a certain level of debt to be offered a debt management plan. #debtmyths

The reality:

A debt management plan (DMP) can work for many clients with differing amounts of debt.

You don’t have to have a particular level of debt to be offered a DMP from us and we don’t offer DMPs based on how much you owe (we’ve overseen DMPs for £100 and £100,000).

The only thing we want to ensure is that a DMP is the best advice in your particular set of circumstances. If it’s not we’ll talk you through the other options that suit you better.

If you’d like to see if a DMP is right for you then give us a call or use our online advice tool, Debt Remedy.

By comparison, PayPlan refused to handle a DMP discussion with me when it looked like my total debt was sub-£5k.

So then I went to Step Change!