StepChange #debtmyths

System

The myth:

Overdrafts don't count as debts #debtmyths

The reality:

Many people do not consider their overdraft as part of their debts. They may well go up to (or often over) their limit every month and not even swing into credit on payday, but people still don’t see this as a debt problem.

It often takes a lot of convincing but overdrafts are very much a debt and need to be taken into account when getting advice. We’ve written a blogpost about how overdrafts can be the debt problem you don’t realise you have.

The misconception comes from the fact that people will usually pay back most or all of their overdrafts when their wages come in. This would be fine if the overdraft was going to then remain untouched, but those struggling with problem debt will need to use the overdraft again to get through the month.

Our advice to people struggling with overdrafts is to open a new basic bank account and transfer your wage payments, direct debits and standing orders to the new account (banks often have switching services to help with this). Once you’ve moved accounts you can then start to make monthly instalments to bring the overdraft down.

Former_StepChange_Rachel

THURSDAY

The myth:

Juggling 0% deals is an effective solution to problem debt #debtmyths

The reality:

We usually advise against juggling cards on balance transfers, as we speak to many people who’ve found this strategy has made their situation worse. You should only consider this as a strategy if :

· You’ve worked out a budget and know that you can afford the payments
· You won’t be tempted to spend again on the card you’ve transferred from
· You have plans in place for when the interest free offer ends
· You’ve looked at the transfer fees involved and it’s still cheaper

Many people we speak to try to use 0% deals to avoid a debt problem but find that because they don’t deal with the underlying money problems they’ll continue to overspend and run up more debts. (They also forget about the transfer fee – usually around 1-3%)

While 0% deals can be tempting they are often only a way of prolonging the issue rather than dealing with the problem.

Anyone considering a new credit card as a solution to their debt problems should think about getting debt help from us instead. You can get free and impartial advice from our online tool Debt Remedy or you can give us a call and speak to an advisor.

marzom

Can you do a myth about PPI?

So many people have said that they have successfully claimed PPI back on credit cards even though they did not take out PPI. They say credit card companies have put it PPI on their accounts secretly.

I am sure that this is not the case, which is why I have not bothered to claim. I have never knowlingly taken out PPI (couldn't have afforded it anyway), yet colleagues and friends say its still worth a punt!!!!

StepChange_James

The myth:

Everyone’s entitled to a PPI refund #debtmyths

The reality:

Marzom (above) mentions that some people have claimed back on PPI that they never had in the first place. The reality is that you’re only able to claim back if you took out PPI in the first place.

Often people see PPI payments as bonus money, but the reality is that you are just being reimbursed something you’ve actually paid for (usually because you didn’t need it or couldn’t have used it). So if you’ve never paid PPI you’ll not be able to claim it back. It sounds obvious, but it needs reiterating.

We’ve more on our blog about how to reclaim PPI for free or you can read more by clicking the Reclaim £1000s link at the top of the page.

System

The myth:


It’s free to go bankrupt.


The reality:


Few things in life are free (apart from our debt advice), and bankruptcy comes with its own costs.

First of all, there’s a court fee to pay and an even greater sum has to be paid to the Official Receiver.

In fact, filing for personal bankruptcy costs a total of £700 in fees; £175 to the court and £525 to the Official Receiver. In certain cases you could be exempt from paying the court fee. This usually only applies if you are on a low income or receiving benefits. Even with this in mind, you would still have to pay the Official Receiver's fee.

Depth_Charge

Hi Mat

Interesting but a slightly puzzling post as read by a fellow charity debt adviser

To be honest Ive not heard of the myth that bankruptcy is free and this is coming from someone who has dealt with thousands of bankrupties over many years (too many to be honest...years that is:))

I dont think it ever has been either.

In fact many people now comment on how high the fees are and that it can be a barrier to the right debt remedy (bankruptcy) that will allow people a genuine fresh start with their debts (Joanna actually comments on this in the article below)

http://www.bbc.co.uk/news/business-21281565

There are also many charities such as the Royal British Legion that provide grants for bankruptcy fees & DRO fees for that matter

Many CAB and other agency Caseworkers successfully apply for grants to chariities such as the Royal British Legion & Utility Trusts etc for their clients with regard to bankruptcy fees.

I do some work with the Royal British Legion by the way

I was just wondering if Stepchange advisers apply to charities for bankruptcy & DRO fees on behalf of their clients and if so at what frequency?

Excellent link below from MSE for info on B/R fee grants and where to apply

https://forums.moneysavingexpert.com/discussion/4279781

Just my views and experiences

DC

Former_StepChange_Rachel

The myth:

Every debt management provider can offer Debt Relief Orders (DROs)

The reality:

A Debt Relief Order is a form of insolvency – some refer to it as a ‘mini bankruptcy’ - and it lasts for 12 months and costs £90 to process.

This form of insolvency can only be managed by an approved intermediary such as us. Other intermediaries include CAB and National Debtline.

Many organisations also offer debt advice. Some of them - like the ones mentioned above - are entirely reputable and offer a professional service.

But beware of any company that cold-calls you and offers a DRO without fully understanding your situation. There’s a strict criteria involved in a DRO and it’s impossible for a company to know if you qualify without looking into your situation properly.

To find out if a DRO is right for you, try out online advice tool Debt Remedy.

fatbelly

'an Approved Intermediary working for a Competent Authority, such as CAB, Step Change or National Debtline'

Actually there are 12 Competent Authorities:

http://www.bis.gov.uk/insolvency/personal-insolvency/dro-comp

I'm surprised your moneyaware link instructs people to pay at Payzone outlets. Most of my clients pay at a Post Office, which is equally valid and there are more of them!

System

The myth:

If you don’t get a loan from one bank, apply at another

The reality:

Despite the recession and some lenders reluctance in the current economy, applying for credit is easier than ever. Most of the time all it takes is an online form to find out if you can get your hands on a line of credit.

As tempting as it is to ‘cast your credit net’ and apply for different products in quick succession we suggest that you don’t.

Every time you apply for a lending product, a note is made on your credit file. Lenders don’t like to see several applications for credit in a short period of time. They see it as a sign that you’re struggling financially and might not be able to manage further debt payments.

Each note made on your credit file will also stay there for six years, whether you’re approved or denied. If you’re going to apply for something like a mortgage in a couple of years’ time, that period spent quick-firing credit applications could come back to haunt you.

If you’re struggling right now, try our anonymous advice tool Debt Remedy.

System

Depth_Charge wrote: »

Hi Mat

Interesting but a slightly puzzling post as read by a fellow charity debt adviser

To be honest Ive not heard of the myth that bankruptcy is free and this is coming from someone who has dealt with thousands of bankrupties over many years (too many to be honest...years that is:))

I dont think it ever has been either.

In fact many people now comment on how high the fees are and that it can be a barrier to the right debt remedy (bankruptcy) that will allow people a genuine fresh start with their debts (Joanna actually comments on this in the article below)

http://www.bbc.co.uk/news/business-21281565

There are also many charities such as the Royal British Legion that provide grants for bankruptcy fees & DRO fees for that matter

Many CAB and other agency Caseworkers successfully apply for grants to chariities such as the Royal British Legion & Utility Trusts etc for their clients with regard to bankruptcy fees.

I do some work with the Royal British Legion by the way

I was just wondering if Stepchange advisers apply to charities for bankruptcy & DRO fees on behalf of their clients and if so at what frequency?

Excellent link below from MSE for info on B/R fee grants and where to apply

https://forums.moneysavingexpert.com/discussion/4279781

Just my views and experiences

DC

Hi DC and thanks for your comment.

The fees are high and that was the point that we were trying to make!

We do work with trust funds and grant providers to help our clients afford the fees incurred with bankruptcy and DROs.

We’ve raised over £130,000 from these sources since May 2010 and we’re constantly looking for ways to help those clients most in need.

Thanks again for your comment.

Kind regards,

Mat