DFW Sticky-Provit/Statute Barred Letters, Defaults, Mental Health Help and Guidance, all here.

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Debt-Free Wannabe Sticky - Please read for links to important topics and help



Hi folks

This is the Debt-Free Wannabe Sticky where links to all current important tools and information will be posted.

Links:

(1) Those who are new to debt, and want to know where to start, check out these first steps :
https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take-are-here-please-read-then-ask-questions#latest

(2) Prove-it letter/letter asking for contact in writing only can both be found here. The prove-it letter should be sent as an Initial response to a creditor/debt collector writing to you, asking you to pay a debt, whether you recognize it or not, they must first prove liability : Letter when you know nothing about about the debt - AKA "Prove it" letter

(3) Is your debt statute barred ? Six years since default, no payment or written acknowledgement, you might not be legally liable, template letters here : https://forums.moneysavingexpert.com/discussion/6027755/statute-barred-debts-and-the-limitation-act#latest

(4) Statement of affairs, another essential first step : http://www.stoozing.com/soa.php

(5) Work out your debt verses income/expenditure here : Debt Advice Foundation Personal debt analyser

(6) Links to free debt help : IMPORTANT - Where to seek professional impartial advice about your debts.

(7) Ask a stepchange debt advisor a question : https://forums.moneysavingexpert.com/discussion/6027813/struggling-with-debt-ask-a-stepchange-debt-adviser-a-question#latest

(8) Debt free ? tell us : Debt-Free Roll of Honour

(9) Was your debt caused my Mental Health issues? If so you may be able to get some or all of it written off by the lender, now this is not a guaranteed route to being debt free, but lenders will look at such matters on a case by case basis, and don`t be put off if at first they reject you outright, these things can take time, and you need to be aware of that.

You should send a written complaint to your lender, and add as much detail as possible as to how the debt was incurred, how your condition affects you, and what you would like the lender to do about it, you should also complete a "Debt and Mental Health Evidence Form" you can download one from the Stepchange website here:

https://www.stepchange.org/debt-info/debt-and-mental-health-evidence-form.aspx

(10) Affordability - were you lent too again, even though you were already stretched financially?

In recent years affordability has been a key issue when deciding whether to lend to someone or not, but that has not always been the case, lots of cards/loans were granted to people who should never have been lent too in the first place, yes the debtor must take some responsibility for this, but the onus is always on the lender to make the correct decision, and they didn`t always do that.

If you feel your credit card or loan was not affordable to you, then you should make a complaint to your lender/lender`s.

The Debt Camel site has a full guide on how to do this, you can find it here:

https://debtcamel.co.uk/refunds-large-high-cost-loans/

A word about defaults

Defaulting an account is a necessary part of the consumer credit act, after you fail to make your contracted repayments.

It basically freezes the debt, as it is, with no further charges or interest added, as the relationship between you has broken down, it has effectively ended the agreement, but still leaves the balance of the debt to be repaid.

A lender cannot take legal action to recover the debt, until it has issued a default notice to you under section 87(1) of the consumer credit act 1974.

Issuing a default notice is a separate thing altogether from a default being registered on your credit file, they are two very separate events completely.

A default notice will be sent in the post, it will be an official looking document demanding full repayment of the arrears within a 14 day timescale, it will go on to list the possible consequences of non payment, which will include, registering a default on your credit file, legal action to recover the balance, or your account may be sold or assigned to a debt collector.

Usually one of the lesser options will be chosen, legal action at this stage is quite rare, but can happen, although lenders prefer to use the debt collection industry, or they sell the debt to a 3rd party instead.

When should a default be added to a credit record ?

The Information Commissioner’s Office (ICO) says :

"As a general guide, (a default may be recorded) when you are 3 months in arrears, and normally by the time you are 6 months in arrears".

There are exceptions to this which may result in a default being recorded at a later stage, such as secured or long term loans e.g. mortgages, or if the product operates in a more flexible way e.g. current accounts, student loans, home credit.

Those are the main guidelines, but let’s look at specific situations.

Debt management plans and arrangements to pay

For situations where you miss a few payments, make reduced payments, or enter a Debt Management Plan, the “3-6 months” guidance above applies.

If your arrears have already reached three months, then the lender can register a default, even if an arrangement to pay is then agreed or you pay the debt in full.

Arrears will usually continue to mount up when you have an arrangement to pay or a DMP, so later a default can be added even if you are making all the payments.

At the start of a DMP or an arrangement to pay you may not want a default – they do harm your credit file after all !!

But if you aren’t going to repay the debt in a few years, having a default is usually better because your credit file will clear up sooner.

With no default date added, the record will stay until 6 years from the date the debt is finally settled which could be a long while.

So it can often be better to have a default early in a debt management plan rather than not have one.

Next stop...

When you've paid off your debts your next stop depends on where you are in your life's journey.

If you have a mortgage you may want to join our Mortgage-Free Wannabe board where the aim is to post on the Mortgage-free Roll of Honour. See our Mortgage Guides and all the MFW Important Discussions.

If you want to start saving check out our Savings Guides then ask your questions on the Savings board