Bankruptcy can be a way out for those who have racked up debts and cannot afford to pay them any longer. However, in reality it doesn’t seem to be helping the most vulnerable people as if you don’t have the £700 fee, you can’t declare yourself bankrupt.

Many people have spent years fighting her debt nightmare because they cant afford to go bankrupt. Research from the Citizens Advice Bureau indicates that nearly 50% of people for whom bankruptcy is the only option, do not have the money to take advantage of it.

Experts say these people suffer immense stress and depression, are left at the mercy of unscrupulous debt collectors and often have no options to remedy their debt.

It’s true that many see bankruptcy as an easy option. You know, the type of people who have lived lavish lifestyles, however it is the people who have been pushed into a debt spiral by the current problems in the UK who are struggling with debts and are feeling like they have no way out.

Many of these people have suddenly lost their jobs and are being left with no way to pay their mortgage or bills. Some of the people who are unable to find new jobs end up paying their living costs on their credit cards. This is where the debt nightmare can begin.

So surely there are other options to Bankruptcy…Right? Well, if you cannot afford to go bankrupt, there are other options such as a debt management plan or an IVA. You may also consider a Debt Relief Order if you don’t own your property and have less than 15k worth of debt.

In reality, thousands of people every year are too poor to go bankrupt. The situation has actually got worse in recent years as bankruptcy fees have risen sharply. Debt relief orders (DRO’s) have helped some people, but they don’t help people with debts over £15,000.

In light of the current financial crisis, many debt experts have advised that its time to review the DRO limit. It was set at £15,000 eight years ago and many feel its time to put it up to £20,000 or even £25,000.

The Government in the UK needs to improve the system for waiving bankruptcy fees for those who really need it so that more people can be helped.

With new figures just around the corner, the figures for UK bankruptcies are set to fall due to the fact that people cannot afford the fees. On the flip side of the coin, IVA’s and DRO’s are expected to increase.

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Recent data also reveals that credit cards are the main culprit when it comes to unsecured debt.  Although, personal loans and overdrafts aren’t too far behind.

Debt advice Charities in the UK are preparing for the inevitable as demand for help is set to increase as many families struggle to pay their debts,

Research shows that 20% of the population in the UK, are now finding it really difficult to control their debt.

As the first bills of 2012 reach us, now is the time when those people in debt don’t know where to turn may be tempted by offers of credit from anyone who will lend it to them.  A text message offering a quick, pre-approved loan can be very tempting if you’re in debt and you feel you have nowhere else to turn

Many debt advice charities are warning that these people will fall deeper into debt due to some debt companies offering “miracle solutions” for their debts.  Many of these firms promise a debt-free future but fail to deliver.  These firms make their money by charging high fees. 

When it comes to debt help and advice in the UK, it really is a case of if ­something sounds too good to be true it usually is. You don’t

Stop The Debt Vultures

need to pay anything for advice or for a debt management plan.

These companies target the most vulnerable people and often, send mobile texts and email’s offering them their “services.”  All too often the people who reply to these texts and e-mail end up in a far worse situation than before.

Many companies are legitimate but these firms that look to make a huge profit from people’s debt worries, are cause for concern within the debt help industry. The reality of the situation is that anyone who contacts you offering to fix your debt problems, are doing it because they can make money out of it.

People in the UK should be aware that they are entitled to free expert advice that will help them with their debts in the correct manor.

The Consumer Credit Counselling Service has actually launched a campaign in the hope that it will alert people on the scale of spam texting.  They are using Twitter as the source and are asking people to tweet using #debttext if they get one of these spam texts.  The CCCS see these companies are vultures and they are concerned that families that are struggling will be tempted to reply.

There is lots of free help and advice from UK debt charities.  These debt charities will take you through your options and offer a solution that is best for your circumstances.  People who are struggling need to know there is good free help out there and affordable ways to get out of debt.

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Taking that into account, we are going to look at all the options available to you when you are in debt.  We will summarise all of the possible debt solutions, to enable you to make an informed choice

We will look into what you can do to freeze interest, or the more formal Government backed debt solutions.  Which debt solution you choose should depend on how much debt you are in, if you own your home and how money you have spare after all of your living costs.

A – An Informal Arrangement with your creditors

If you have got yourself into temporary debt and missed a payment or two, the first step you should take is to contact your creditors and explain your situation.  Try to offer a repayment arrangement that you can realistically afford and request that they freeze interest on your debt.  This is always the first step you should take however please be aware that some creditors are more obliging than others to helping someone in this situation.
B. Debt Management Plan

If your debt goes beyond missing a payment or two, the next logical step is to get a 3rd party to try and negotiate a Debt Management Plan with your creditors.  A good debt management company  will act as a go-between and will contact all of your lenders and put together a repayment strategy. Once the debt management plan is ready and has been accepted by your lenders, you will pay the debt management firm a monthly payment.  The Debt Management firm will then divide this payment to your creditors.

C. Debt Relief Orders

Debt relief orders have come into existence within the last few years.  A debt relief order, and is a form of insolvency.  These orders are for people that have hardly any disposable income and very little assets.  A debt relief order will fast-track through the court system with no appearance at court required.  Your debts should be lower than 15k if you are going to be eligible for a DRO.
D. Individual Voluntary Arrangement’s (IVA’s)

An IVA is different to a Debt management plan in that it is a formal contract between you and your lenders.  In this contract you will detail your current financial situation and an offer of payment on you can afford, each month,  These payments are normally paid every month over 5 – 6 years. On rare occasions, a one off lump sum payment can be negotiated to clear your debts.

If the IVA is accepted, it becomes a legally binding agreement which means that lenders cannot contact you to try and increase your payments or they cannot add further interest.  Once an IVA has reached its conclusion, the total debt is legally discharged, meaning you own nothing more.

E. Bankruptcy

Bankruptcy in the UK is a lawful way of discharging your unsecured debts and it works for most people who have debt they simply cannot pay back.  Many people in the UK think that Bankruptcy is an easy option in order to clear their debts but nothing could be further form the truth.

Every bankruptcy case that is assessed in the UK is thoroughly reviewed and your financial history prior to going bankrupt is investigated.  If you feel you can stack up on the credit card spending, knowing that you have no way of paying it back and then declaring yourself bankrupt, you can think again.  

If your Bankruptcy is granted, you will be assessed to see if you can make a payment for a period of three years from the date of your bankruptcy order.

There is also the possibility that the official receiver could enforce a bankruptcy restriction order.  A bankruptcy restriction order means that you will not be released from bankruptcy for many years.  The official receiver can enforce this if you were found to be reckless with your spending before you applied for Bankruptcy.

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With the popularity of social network sites, it seems that the debt collectors have resorted to Face-Booking and Tweeting to try and get their money back.

The Financial Ombudsman Service has advised in the last six months, it has received over 350 new complaints about debt collecting. That was nearly 60% up on the previous six months.

These revelations have led to the Office of Fair Trading issuing a warning to debt collectors in the UK.  The OFT has received many complaints from debtors who were being pressurised online to pay off loans and credit.

They have advised these debt collection agencies that they are not allowed to pursue people on social networking sites to try and get the debt repaid.  The OFT has said that it is worried that details about their debts will be revealed on the internet.

It is particularly concerned because of the public nature of websites such as Facebook and Twitter, where friends can see messages being sent to an individual.

To try and deter the practice, the OFT says it is willing to strip perpetrators of their consumer credit licences. 

The CCCS said the rules were much needed:

Delroy Corinaldi of the CCCS said.  “Many debtors are understandably anxious to keep their debt problems private from friends and work colleagues – and the possibility of being contacted by a debt collector on Facebook or Twitter causes serious worry for many,”

The OFT has published some new debt collection guidance in recent months which sets out the standards that is expected of any business associated with debt collection.

A previous tactic of many debt collection agencies in the UK was to put cards through the letterbox or leave phone messages which other family members could read or listen to.

The main areas of complaint that the Financial Ombudsman Service are receiving are harassment and intimidation by debt collectors.  Another complaint was that many people were being chased for debts they knew nothing about.  Many individuals were also being chased for debt when a repayment plan was firmly in place with the creditor.

If you feel you have been subjected to unfair debt collection procedures, leave a comment and let us know.

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According to the Government, these measures will make sure businesses will still be able to collect debts fairly.

Updating the National Standards is the very first step in UK Government plans to change the way bailiffs are regulated and to ensure they operate fairly.

Local Councils will adopt the standards along with other authorities.  These standards  will be used as a set of rules for any bailiffs that may be working for them.

The new measures are aimed at tackling things such as threatening behaviour and intimidation.  The measures will also aim to prevent bailiffs from misrepresenting their powers.

Under the new regulations, Bailiffs:

* Should not discuss the debt with anyone except the debtor.

* Must not behave in a threatening manner or use unlawful force to gain access to a home or business;

* Must never behave in a way that would publicly embarrass a debtor.

* Have a duty of care towards people who may be vulnerable, such as people with disabilities, the elderly, single parents and unemployed people.  Bailiffs must use their own common sense and discretion when collecting debts from people such as this

* Must withdraw for their activities when only a child is present

The full details will be revealed within the next few months and they are due to become law soon after.

Do you feel you have been a victim of unacceptable behavior by bailiffs?  If so, leave a comment and let us know.

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I have been unable to pay my Nationwide Credit Card, due to a change in personal circumstances . I am now nearly 2 months in arrears.

I wrote to Nationwide and offered them a token payment of £10 per month because I cannot pay the required amount at present.  I told the that I hoped my financial situation would change after 2 months, although this isn’t guaranteed.

I wok up this morning to find that I got two letters from them.  The first letter contained an income and expenditure form.  After reading it, it seems that they are requesting me to fill it in and send back along with a payslip, and bank statements. The other letter is a final demand for payment within 72 hours or they say they will make a visit to my house!

I really don’t know what to do!  Do I really have to send copies of all my bills and my bank statement?

I really could do without people knocking on my door adding to the stress that I’m under. Should I acknowledge the final demand letter in writing?

Thank you in advance for any advice you can provide.

———————-

Our Answer…

Well, to start off with you are under no obligation to provide them with copies of bills and bank statements.  At this stage in your arrears it is unlikely a home visit will be made.

If you are unable to come to an arrangement with your debt, they will more than likely send you a few more letters and then pass the debt on to a debt collection agency.  At this stage the debt collection agency will go through the process again.  Its standard procedure.

While you should do your very best to pay the debt, at the end of the day you can only pay what you can afford.  No one from Nationwide has a right to visit your home without your permission.

Nationwide, and most lenders have set arrears and debt procedures and will go through a cycle of different letters and telephone calls.

You should stay in contact with your lender at all times but don’t let them harass you.  If you are uncomfortable with telephone contact you are more then entitled to request that your dealings take place via mail only.

If your situation doesn’t get any better and you are unable to pay, It will usually be two or three months before it’s passed to an outside debt collector.  If it does reach this stage you are best dealing with them via post and make sure everything thing is sent recorded delivery.

If your debt situation doesn’t get any better you should consider entering into a formal debt arrangement such as an IVA.

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In total there was a 57% rise in payment protection insurance complaints during the last three months from nearly 20 thousand to over 30 thousand complaints.  This has had a knock on effect as The Financial Ombudsman Service received over 55 thousand complaints in the same time period.  This figure was up by 10% from the previous three months.

The amount of time spent on PPI claims amounts to over half of the current Financial Ombudsman Service’s workload.

The Financial Ombudsman Service is there to rule on complaints that cannot be resolved between the customer and the financial provider.  The Financial Ombudsman also rules on other areas such as current accounts, Credit cards and mortgages.

The recently increased number of PPI complaints shows clearly that the banking industry has still got a lot of work to do before the payment protection insurance ordeal is cleared up.

Payment protection insurance was originally offered to customers to cover loan repayments in case the borrower lost their job or became ill. It soon come to be apparent that that many of the polices had been mis-sold. 

Consumer groups campaigned for years to get the PPI matter investigated, and after regulators stepped in, it became very obvious that many people were sold these polices who did not need or want them.

The FOS appears to be favouring the consumers in the cases that are referred to them.  Between October – December 2011, the FOS ruled in favour of the customers in nearly 70% the PPI cases it reviewed.  This figure was actually much less than the 92% success rate between the months of July – August 2011.  Although when you compare it to the 66% the FOS ruled in favour recorded in the whole of the 2010, the figure is still very high.

The banking industry was reluctantly forced to concede in early 2011 after years and years of denying that there was any problems with the way these policies were sold.

In early 2011, the British Bankers’ Association lost in their case against the Financial Services Authority’s demand that all of the past PPI sales should be reviewed.  The FSA also required that a new, far stricter, rule be implemented when it came to selling new policies moving forward. 

During the High Court challenge 200,000 complaints had been put on hold.  With many compensation claims being rejected by the financial institutions, on to of the new ones coming in, the FSA can expected to be bombarded with these disputes for quite some time to come.

The big banks in the United Kingdom have put over £6bn aside to cover PPI compensation payments.  Many companies are adopting a “no-quibble” payout policy for these types of claims however other financial institutions are not being so generous.

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Hi, Freedebtadvice-UK

I could go on explaining my situation forever but to get to the point the last, past four years have been difficult with finances, due to spending on loans and credit cards and a change of job.  On op of this i also went through a difficult divorce and bought things on credit to try and take my mind off the problems i was going through.  I’m through the emotional heartache but now I’m left with all the debt.

I owe £20,000 on personal loans and £9,000 on credit cards.  I have defaulted on these over the last 6 months and there is no way i will be able to afford the arrears or the repayments.  I contacted CCCS and they seemed helpful and advised me to take out an IVA.  They didn’t go into much detail but I’m afraid that these “debt charities” want the best for the creditor and not me?

So what I’m asking is, should i go IVA or will Debt Management plan be a better choice? I have been ignoring the problem, and its keeping me awake at nights.  I live in tented accommodation and do not have any assets or property to speak off.

I have a disposable income of around £250 per month (not including my current credit that’s due)  I would appreciate any advice. 

Thank you

Our response to Gail………..

The first thing you should do is congratulate for acknowledging that you have a debt problem.  Many people continue to ignore their debts until its too late. 

In regards to your query about the best approach to deal with your debt you need to weigh up your options. 

A Debt Management Plan can be a long and arduous process with someone with your amount of debt and disposable income.  Even if you got your interest permanently frozen from your creditor you could be paying this for a decade or more. 

If you’re considering an IVA then you may also want to consider Bankruptcy due to the fact you have no property to lose?  IVA’s can go on for 6 years however, Bankruptcy, whilst very daunting and more intrusive, is completed within a year on most occasions.

It comes down to what you feel you should do.  Bankruptcy is not an easy option but it is the easiest way to get rid of your debts.  Moral conscience comes into this as well.  These companies lent you the money in good faith so some people feel obliged to take the more arduous route.

Check out our advice on Bankruptcy and IVA’s and take action.

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This statistic could get even worse due to the fact that there were 26.3 million plastic card purchases during the period studied.

These statistics show the huge financial problems in the UK and shows how the economic downturn is affecting people every single day.

Many people are choosing to go Bankrupt in the UK as they are finding it too difficult to try to maintain payments on an IVA or a debt management plan.

In the UK, a Bankruptcy normally lasts only 12 months.  In contrast to locations such as Ireland where a Bankruptcy can last for 12 years!

If you have decided that Bankruptcy is the way forward, then you need to start by filing a document called a petition at the court nearest to you.  (You should have resided nearby for at least 6 months)

You should double check that the court nearest to you has jurisdiction for Bankruptcy.  You must take £700 in cash along with your petition in triplicate to court on the day. Some courts such as Nottingham or Liverpool are known to have waiting times of at least a fortnight so chances are you may have to book in advance.

You also need your Statement ofAaffairs. This Statement of Affairs acts as a record of all your personal information and is 28 pages long.  It contains details of your assets and income.  This statement holds information on all your creditors, full addresses and complete borrowings.

The Official receiver will review this document to try and work out if you have any assets can be released for your creditors.  He will review your current and expected income to try and ascertain if you will be able to pay a sum per month to your creditors.

Once your paperwork has been checked by the staff in the court, and your fee has been taken, then you will be taken to see a Judge.

The Judge will review your application to make sure that filing for Bankruptcy is the correct course of action. Once the judge has reviewed everything he will then make his decision whether or not to grant the Bankruptcy order. If the Judge grants Bankruptcy then you be bankrupt for one year. 

In some cases it may be shorter if the Official Receiver applies for your early release.  In certain cases where there is warrant for it, the judge has the right to prolong your bankruptcy.  Such cases may include if you were purposely careless with money and credit immediately before filing for Bankruptcy.

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Many people who are experiencing financial difficulties that have contacted Very.co.uk seem to be having a hard time making any type of arrangement to pay their debt. 

We have had reports from customers who have had a well paid account for years only to fall into financial difficulties, receiving very little support or empathy

On top of this, it seems like Very.co.uk are trying to charge their customer who are already in debt, £12.00 every time a phone call is made to them!

If any representatives of the company are reading this; £12 per phone-call…Are you serious Very.co.uk?! 

Not only is it against the lending code, which states that they shouldn’t increase the alleged debt through interest or charges once notified of financial difficulties, but it is just down right atrocious that a company would levy a £12 charge to a good customer who is going through financial difficulties for the privilege of a phonecall.

It seems that Very are “very” unwilling to communicate via post with many of our readers saying that their payment offers went unacknowledged.  We also had one customer who tried to organise a reduced payment plans only to be informed that it had to be arranged through the Citizens Advice Bureau or a similar organisation.  They also advised that they would keep adding interest and all other charges until the account is brought up to date.

If you are confronted by a company that refuses to negotiate a reduced payment plan with you directly, you should point out the Lending Code and the OFT guidelines to them.  Under the Code, a common financial statement in writing should suffice if a person wants to negotiate a reduced payment plan. Many creditors actually accept such things over the phone which is really what VERY should have done.

The only way to deal with this company at the minute seems to be making everything official.  If you are sending a letter to them, ensure that it is recorded.  One of our readers’ finally got some success when they sent SAR request to get their unfair charges back.  They then got a letter back confirming they would be freezing interest for 12 months and accepting a reduced payment plan.

So there you have it, Very.co.uk seems great when it comes to offering deals and promoting their services.  They are not so great, however, when genuine, long term customers get into financial problems and try to negotiate a payment plan with them.

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