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By Claire Stevenson Staff Writer
Wednesday, 25 February 2009
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Debt Advice Agencies
Where to go for free, impartial and government approved advice
Don't suffer in silence. Free help and advice is available from the Citizens Advice Bureau and the Consumer Credit Counselling Service.
Other options to bankruptcy include debt management plans, Individual Voluntary Arrangements and soon-to-be Debt Relief Orders. Either Citizens Advice Bureau or Consumer Credit Counselling Service can give you further information and help you start making arrangements.
Citizens Advice Bureau (CAB)
www: http://www.citizensadvice.org.uk/
Consumer Credit Counselling Service (CCCS)
www: http://www.cccs.co.uk/
tel: 0800 1381 111 (8am – 8pm Mon-Fri)
@: contactus@cccs.co.uk
National Debtline
www: http://www.nationaldebtline.co.uk/
tel: 0808 8084 000 (9am – 9pm Mon-Fri and 9.30am – 1pm Saturday)
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IF you're struggling to repay debts in the current financial climate, you might be considering filing for bankruptcy. It's seen by many as the solution to all their money worries and stresses, but is often ill thought out as people don't take the trouble to understand how being bankrupt translates itself in the real world.
Bankruptcy is increasing - in January this year the Insolvency Service released figures which showed that over 67,000 people were made bankrupt in 2008.
That figure is an all-time high and experts are predicting that it will rise because of soaring redundancies and the dwindling availability of credit to individuals who want to borrow their way out of debt.
Despite the economic uncertainty that lies ahead, there ARE other options.
And apart from the fact that you'll be just another depressing statistic that will satisfy the doom merchants, what other reasons are there to think twice about bankruptcy?
1. Do you really understand what bankruptcy means?
Your credit score is blemished for six years, even though you're freed from the bankruptcy after one. This means you won't be able to get a credit card, a bank loan or a mortgage.
If you think you're safer in rented accommodation, think again - many private landlords won't accept tenants who've declared themselves bankrupt.
Bankruptcy won't necessarily free you from all your debts - you'll still have to pay things like child maintenance or student loans.
If you own a business, you can't hold a directorship any more. And you will have trouble getting future loans.
2. Get free help and advice.
There's free help and advice available from a range of agencies who are there to help.
Get in touch with your local Citizens Advice Bureau - they can offer information on legal and finance problems and even help to make informal arrangements with current creditors.
The Consumer Credit Counselling Service will also offer you free advice, and will try to negotiate with your creditors on your behalf.
3. Agree a debt management pan with your creditors.
If your debts are temporary, it's the least formal way of dealing with them. This is sometimes called an informal arrangement or "family arrangement".
Go to a debt advice agency to explain the levels of your debt. They will then work with your creditors to come up with a plan that allows you to pay your creditors over a sensible and realistic time frame.
Be aware though that as an 'informal arrangement' it is not legally binding and your creditors could change their mind later.
Citizens Advice Bureau can advise and help you make an informal arrangement for free.
4. Find out more about Debt Relief Orders.
From April this year, you can apply for a Debt Relief Order instead of full-blown bankruptcy, if your debts are no more than £15,000.
The Order is an alternative to the individual voluntary arrangement (IVA) and is designed to help people who have very few assets they can use to pay off their debts.
If your assets are less than £300 and surplus income of £50 a month, the Debt Relief Order is an option to consider. It's anticipated that the Orders will be available in England and Wales from April 2009.
5. Apply for an Individual Voluntary Arrangement.
This is a legally binding agreement between you and your creditors which lasts for five years.
Over the five years you pay a minimum contribution towards settling the debt, then once the agreement is up the debt is classified as cleared.
It's an alternative designed to avoid full-blown bankruptcy and the agreement is set up by an insolvency practitioner.
An IVA can be sought for debts of any amount, with no set minimum or maximum repayment levels (except for what your creditor will accept).
The main benefits of an IVA is that you can sometimes come to an agreement on keeping some of your assets such as your home and how you will make repayments to your creditors. You will also be able to keep your bank accounts.
Once an agreement is in place, your creditors can't charge you any additional interest on your repayments.
But remember, as a legally binding agreement if you fail to give correct details of your assets or debts or you fail to make payments you can be taken to court for bankruptcy.
What bankruptcy really means...
Bankruptcy has a number of very serious downsides that are often overlooked when people find their debts are out of control and cannot continue to cope with them.
But what can happen when you become bankrupt can sometimes be far worse than spending the time in trying alternative ways to cope with debts.
- If you have any equity in your home, your home is likely to be sold.
- Any assets of value will be sold (car, TV, computer, furniture, etc...)
- If you run a business it could be sold, with any employees being dismissed.
- Rented accommodation can become unsecure, as tenant agreements often include clauses stating that undischarged bankrupts cannot be tenants.
- Bank accounts can be difficult to obtain. You cannot get more than £500 credit without declaring that you are bankrupt.
- Bankruptcy can be expensive: court fees will be taken from your assets.
- You will not be able to hold a public office position such as MP, councillor or magistrate, or work in certain professions such as solicitor or accountant. You won't be able to become a director of a business or trade under any other name than what was used at the time of bankruptcy.
- Bankruptcy does not write off secured debts.
- Creditors can still chase any non-bankrupt debtor of any joint debts.
- Bankruptcy does not write off fines, child maintenance, family court orders, debts from personal claims injuries, debts incurred through fraud, debt arising from certain other orders of the criminal court.
- While bankruptcy normally lasts for 1 year, the court can sometimes ordered it to be imposed for 2 to 15 years.
Get good advice and make sure you get it for free
Remember, whatever situation you are in - and however high or unmanageable your debts seem - always, always start with a free and government approved service like Citizens Advice Bureau (http://www.citizensadvice.org.uk/) or Consumer Credit Counselling Service (http://www.cccs.co.uk/). You can even get free and confidential advice over the telephone by calling the National Debtline (0808 8084 000 between 9am - 9pm Mon-Fri and 9.30am to 1pm Saturday).
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