Debt Advice

Dean11

Dear All,


I have a debt of around £4000 for credit cardds/overdraft with a high street bank. I did not hear from them for 3 years but recently I recieved a letter from them stating that my debt had been sold to a debt recovery agency.

I am currently employed but I am paying personal debts (from friends) which I incurred during my studies. I have absolutely no assets and currently earn about £350 net weekly. I live in a shared house and do not have my name on a contract for the property.

My questions are as follows:

1. If I simply ignore the letters from the debt recovery agency whats it their likely action? Would they go for a CCJ with the risk that they would not be able to recover the costs of doing this? If so, how long do you think that they would wait before taking this action seeing they only have around 3 years until the debt is statute barred? Do I have the option of simply returning the letters to the agency unopened?

2. Would it be a good idea for me to go bankrupt? As mentioned I have no assets and I don't intend to access credit in the future.

3. If I phoned the company and told them my financial situation and that I was considering going bankrupt what would they be likely to accept as full consideration for the debt, given that they would only of paid a fraction of the debt ammount to buy my debt?

4. What other options do I have?

cyclura

They are such small amounts in the scheme of things why dont you just pay them off?

Take a look at your credit report and see exactly what you owe. Then look at your spending to work out how you can budget and if you decide to pay them off then you can work out how much you have left.

Fill out a SOA and post it up here so we can all give you some help with it.

Suseka

The 'good' thing about having passed your debts to a recovery agency, is that they are more likely to stop hiking the debt up with interest and charges.

If it were me I would contact them, having compiled a statement of affairs (which as cyclura says, if you post on here, folks can help you with), and make an offer of whatever you can afford.

I don't feel your situation is dire enough to go bankrupt -but if you want some impartial advice you could contact a local CAB, or National Debtline, Stepchange or payplan - all are agencies that do not charge you anything for said advice.

Stepchange and NDL have online tools that you can use to find out exactly what your disposable income is once priority bills and household costs have been taken into account. However, I would that personal debts to friends would be considered as unsecured debt and treated the same as the money you owe to the debt collector. What that means is you wouldn't be able to give them preferential treatment, but they would get paid as part of your debt management plan if you went down that route.

So, you do have a number of options and its best to solve the debt problem rather than hope it'll go away, or that you'll be able to hold them off until the debt is statute barred. If my understanding is correct - such debts can still be chased, they just can't take you to court or anything like that. So you really don't want that hanging over your head.

fatbelly

Comments in red

Dean11 wrote: »

Dear All,

I have a debt of around £4000 for credit cardds/overdraft with a high street bank. I did not hear from them for 3 years but recently I recieved a letter from them stating that my debt had been sold to a debt recovery agency.

I am currently employed but I am paying personal debts (from friends) which I incurred during my studies. I have absolutely no assets and currently earn about £350 net weekly. I live in a shared house and do not have my name on a contract for the property.

My questions are as follows:

1. If I simply ignore the letters from the debt recovery agency whats it their likely action? Would they go for a CCJ with the risk that they would not be able to recover the costs of doing this? If so, how long do you think that they would wait before taking this action seeing they only have around 3 years until the debt is statute barred? Do I have the option of simply returning the letters to the agency unopened? That is certainly an option. If they choose to take court action within the remaining time you would be able to respond with an offer to pay by instalments and, as long as this was justified by your income/expenditure and repaid the debt in a reasonable timescale, the court would probably agree to that.


2. Would it be a good idea for me to go bankrupt? As mentioned I have no assets and I don't intend to access credit in the future. At 4k debt you are barely in Debt Relief Order territory, as long as you fulfil the other criteria such as less than £50 per month surplus income, and assets under £300 (car under £1000). The payments you are making to family and friends would not be allowable, and could constitute a 'preference' so there are a couple of reasons why I would not be rushing to this option at the moment. Also what would you be getting relief from? These are non-priority debts with no action being taken at present.


3. If I phoned the company and told them my financial situation and that I was considering going bankrupt what would they be likely to accept as full consideration for the debt, given that they would only of paid a fraction of the debt amount to buy my debt? A full & final settlement solution is one of your options if (at some point) you can access lump sums. £1500 might clear this, but you would need to engage in writing and that would reset the clock regarding the statute barred question.

4. What other options do I have? Traditional Debt Management Plan?

Dean11

Dear All,


Thank you very much for your replies.

cyclura wrote: »

They are such small amounts in the scheme of things why dont you just pay them off?

Take a look at your credit report and see exactly what you owe. Then look at your spending to work out how you can budget and if you decide to pay them off then you can work out how much you have left.

Fill out a SOA and post it up here so we can all give you some help with it.

The problem with paying them off is that I feel more compulsion to pay my personal loans (which I am gradually reducing) than this ammount. I will fill out a SOA and post it up.

Suseka wrote:

If it were me I would contact them, having compiled a statement of affairs (which as cyclura says, if you post on here, folks can help you with), and make an offer of whatever you can afford.

This may be the way I proceed once I have cleared the personal debts. I understand that I could phone them and make them an offer and this would not constitute admitting the debt for the purposes of stopping the SOL?

The only problem with contacting them to attempt to negotiate a price is that they would probably ratchet up the pressure because I am responding to them.

Dean11

fatbelly wrote:

My questions are as follows:

1. If I simply ignore the letters from the debt recovery agency whats it their likely action? Would they go for a CCJ with the risk that they would not be able to recover the costs of doing this? If so, how long do you think that they would wait before taking this action seeing they only have around 3 years until the debt is statute barred? Do I have the option of simply returning the letters to the agency unopened? That is certainly an option. If they choose to take court action within the remaining time you would be able to respond with an offer to pay by instalments and, as long as this was justified by your income/expenditure and repaid the debt in a reasonable timescale, the court would probably agree to that.

This may be the option I go for. The only downside that I can see with this approach is that once they have a court order the are less likely to accept a lesser lump sum ammount to clear the debt. What do you think are the likelihoods of them going for a CCJ? As I understand this would be quite risky for them as they would have to shoulder the costs of this innitally.



2. Would it be a good idea for me to go bankrupt? As mentioned I have no assets and I don't intend to access credit in the future. At 4k debt you are barely in Debt Relief Order territory, as long as you fulfil the other criteria such as less than £50 per month surplus income, and assets under £300 (car under £1000). The payments you are making to family and friends would not be allowable, and could constitute a 'preference' so there are a couple of reasons why I would not be rushing to this option at the moment. Also what would you be getting relief from? These are non-priority debts with no action being taken at present.

Can you please explain this further. Is bankruptcy only available for secured debts? and when action is being taken?

3. If I phoned the company and told them my financial situation and that I was considering going bankrupt what would they be likely to accept as full consideration for the debt, given that they would only of paid a fraction of the debt amount to buy my debt? A full & final settlement solution is one of your options if (at some point) you can access lump sums. £1500 might clear this, but you would need to engage in writing and that would reset the clock regarding the statute barred question.

I am not sure that I would have to engage in writing. Would it not be an option to phone them and make an offer (leaving the SOL running)? Or even if I was to make an offer in writing I could make an offer clearly stating 'I make this offer whilst not aknowledging the debts claimed?'

The downside to this is as I stated above, I think that they would pursue me more vigorously if I respond to them. Although the only thing I can foresee them doing, apart from going down the CCJ route, is sending someone around. As they have no power to seize my property (not that I have anything of worth) then this would not really bother me.


4. What other options do I have? Traditional Debt Management Plan?

I dont know much about this. What would be the pros and cons of this? Where should I go for further infromation on this option?

Once again thank you for your help.

Dean11

Suseka wrote: »

So, you do have a number of options and its best to solve the debt problem rather than hope it'll go away, or that you'll be able to hold them off until the debt is statute barred. If my understanding is correct - such debts can still be chased, they just can't take you to court or anything like that. So you really don't want that hanging over your head.

I wanted to pick up on this. As I understand it although the debt is still in existence after the SOL has passed it is unenforeceable. Therefore, if a debt collection agency started pestering you to pay a statute barred debt then you could ask them to desist and if they did not this would constitute harassment.

My understanding is that a statute barred debt is all practically extinguished apart from perhaps for credit reference purposes. Is this right?

fatbelly

Dean11 wrote: »

I wanted to pick up on this. As I understand it although the debt is still in existence after the SOL has passed it is unenforeceable. Therefore, if a debt collection agency started pestering you to pay a statute barred debt then you could ask them to desist and if they did not this would constitute harassment.

My understanding is that a statute barred debt is all practically extinguished apart from perhaps for credit reference purposes. Is this right?

Yes it is. You can quote OFT guidance at that point and make it clear that you will not be paying as it is statute barred. Under the guidance they must cease 'collection activity'.

In most cases the entry would also be dropping off the credit file at around the same point, being six years since defaulted.

fatbelly

Commenting on your earlier remarks:

1. Most debts are not subject to court action, so you'd be unlucky to face it. Their costs (court and solicitor) would be added to the debt and they would have the option of an attachment to earnings order, if they know that you are working. If it did happen, then chances of a settlement for less than the full amount are slim.

2. You can declare bankruptcy for a debt of £750, but you'd be mad to do so, as the fees are £700. For under 15k debt, a Debt Relief Order is the preferred insolvency option (cost £90), providing you meet the criteria. However, 4k of debt is really on the low side and with the payments to friends and family, I wouldn't go there. You don't have to have action being taken against you in order to go insolvent, it's just that sometimes it's the final factor in making that decision. For instance if bailiffs are involved.

3. Technically you are correct - a phone call does not count as acknowledgement. You could try getting a settlement deal by phoning but, as you say, any contact is just going to encourage them. And a doorstep collector has no legal rights to do anything.

4. A DMP is where you repay the debts in full by monthly instalments usually negotiated by a third party like StepChange or Payplan. You could have a chat to either of those organisations or others from Martin's list.

Dean11

1. Most debts are not subject to court action, so you'd be unlucky to face it. Their costs (court and solicitor) would be added to the debt and they would have the option of an attachment to earnings order, if they know that you are working. If it did happen, then chances of a settlement for less than the full amount are slim.


Thank you for that fatboy. I think the option I will go for is silence unless I receive a claim form in which case I will attempt to negotiate a lesser payment.

I understand that the issue of when the limitation period runs from is quite technical. However, If for example a debt is from a credit card am I right in thinking that the SOL would run from the last time the card was used, unless a payment of written acceptance of the debt was given?

fatbelly

Dean11 wrote: »

I understand that the issue of when the limitation period runs from is quite technical. However, If for example a debt is from a credit card am I right in thinking that the SOL would run from the last time the card was used, unless a payment of written acceptance of the debt was given?

A credit card is quite straightforward. It runs from the time that a contractual payment is missed but restarted each time a payment or written acknowledgement is made.

An overdraft is a bit more tricky. It runs from when the overdraft is called in, which can be a long time after the last payment into it if there's a large overdraft limit.