Should creditors help those who can’t afford bankruptcy fees?
Posted
by Debtwizard
Thursday, 03 May 2012
Come on guys, it’s not rocket science to see why consumer bankruptcies are down yet again. In my view it’s simple: many who need to go bankrupt are prevented from doing so because of the extortionately high costs of the Official Receiver’s (ORs) fee of £525 and the court fee of £175, totalling £700 per person.
And I’m not alone in this thought. Research from Citizens Advice shows that almost half of those for whom bankruptcy is the only option simply do not have the cash to take it. Peter Tutton, credit and debt policy officer at the charity, recently told the Mirror: “We see thousands of people every year who are too poor to go bankrupt, even though this is the only realistic option for them to deal with their debt problems.” CAB sees just under 9,000 NEW debt cases every working day.
The actual cost to the OR of administering a bankruptcy case
According to the Insolvency Service, back in May 2009 a bankruptcy cost on average £1,715 to administer, part of which is met by the OR’s fee of £525. The Insolvency Service told me that ‘If the Official Receiver’s deposit were to be waived in its entirety, all the costs of case administration would have to be met from other sources, in particular, the tax payer and creditor.’
Should there be a creditors’ levy?
I have no problem with creditors being faced with a levy going to towards a fund to help consumers who cannot afford the fee. Instead of making incessant phone calls and racking up interest and late payment charges, it may make them sit up and think about how they can better support those who experience genuine difficulty through loss of employment or a breakdown in a relationship. If you think this is a bit extreme wait until it’s you on the other end of a hunt by a creditor or debt collector to pay up and then you may think differently.
How bankrupts fund their case administration costs
I also don’t believe tax payers will need to foot the bill of a reduce fee because bankrupts actually do pay something back towards the cost of administering their case as they are assessed to see if they can make any payments under an Income Payment Agreement (IPA). This is a legally binding written agreement between the bankrupt and the Official Receiver runs for a period of 36 months. Where possible the initial payments will cover the cost of the administration of the bankruptcy order, after which creditors receive a dividend of the surplus funds.
According to The Insolvency Service website, 54,889 IPAs were implemented between 2007-2010. These do not account for the sale of any assets such as vehicles or homes that belonged to the bankrupt, so in fact the Government does actually make quite a bit from bankrupts! They need to see this as a service rather than a money making facility.
Nil Tax Code
Even more money is made, subject to the timing of the petition, in a well hidden scheme whereby an individual going bankrupt and in receipt of an income, will receive a NT tax code where their income tax is diverted to the Official Receiver, towards the administration costs, for up to 12 months.
Another important point is that many consumers recover from bankruptcy and rejoin the ranks of tax and National Insurance payers and contribute to the income stream, so it is not all doom and gloom and when back in work they no longer draw full benefits.
So why is it so expensive to go bankrupt and why is there not more support for the honest person who has no other option than bankruptcy? The last debtor’s prison shut in 1869, that’s 143 years ago. Society, culture and attitudes have moved on since then and it’s about time we supported those that end up becoming financially challenged, after it could be you or me one day.
7 point guide to spotting a dodgy debt advice website!
Posted
by Debtwizard
Monday, 30 April 2012
No one really knows how many debt advice websites there are on the net and whilst most adhere to the strict OFT guidelines on debt management, too many don’t.
There is nothing wrong with debt provided it is well managed and it has become a perfectly normal part of everyday life. For those that become ‘over indebted’ however, it can become a serious problem.
If you are one of those looking for honest, open and transparent debt advice but end up getting hooked by a dodgy, unlicensed and deceptive debt advice website then you could experience catastrophic consequences. I make no bones about it; there are companies and individuals out there giving the wrong advice - playing on a person’s desperation and a lack of awareness of their options, just to earn a buck or two. This bad advice can cost people their livelihoods, relationships and thousands and thousands of pounds in unnecessary fees.
So, just how easily can you spot that dodgy debt advice website?
You can do this in about one minute of your time, that’s all, and if you find that even just one of the following points applies to the website you are looking at then the alarm bells must surely ring out.
Does the website clearly show the following?
1. A telephone number to call, that is UK based and with an address to write to
2. A link to their complaints policy
3. A link stating that any debt option will affect your credit rating
4. A link offering contact details of the debt charities as an alternative
5. A link clearly explaining their fees
6. Details of their membership with a trade association such as DEMSA or DRF *
7. A link to ‘The Insolvency Service Debtor’s Guide’ **
* DEMSA and DRF are the two trade associations, to at least one of which a bona fide debt advice organisation, other than a charity or Payplan, needs to be a member of.
** The Insolvency Service Debtor’s Guide is required by the Office of Fair Trading to be in a prominent position on the home page of any debt management advice website.
Do the two minute test
Try Googling ‘debt advice’, 29/4/12 and compare a few debt advice websites against my 7 point test and see how they compare against www.debtwizard.com.
Having just spent around two minutes examining the website, ask yourself this question, ‘Do you feel you can you trust them’? If the answer is no then you know what to do, don’t you?
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My Worst Deal
Posted
by Debtwizard
Saturday, 07 April 2012
A guest blog by Katie Ford
All five epidodes of the new BBC 1 morning show My Worst Deal are now online at iplayer here.
The series looks at the surprising financial dealings of financial bodies from the Big Banks to loan sharks. On Twitter, a lot of people were commenting on just how absurd it was that people were fooled by these deals, but when people are in the deepest, darkest of places, these deals can seem like the silver lining they’ve been hoping for.
But more than that, the series also deals with the shocking behaviour of some of the UKs biggest banks – the companies that for the most part, we expect to be able to trust.
The series features Mike Thomas, who I work with regularly, so it will probably seem like I’m being biased. But I’m not. The government keep telling us that we’re in financial difficulties – but they’re talking about the National Deficit, something that has existed for 60 years, and is missing the major point. The people of the UK are in shocking amounts of debt, from a few hundred on a credit card, to over £100, 000. Any of these can cause major emotional difficulties. In my opinion, shows like My Worst Deal can only serve to arm people against the horrible things people can do them to convince them to hand over their money.
My Worst Deal - BBC One
Am I responsible for my partner’s debts?
Posted
by Debtwizard
Friday, 30 March 2012
It is surprising how many times I get asked this question!
If someone has debts in their name only then they are the only one that is responsible for it. For debts that are in joint names, then in the event that one person cannot pay then the other named person is responsible for the full amount outstanding. It is not split 50-50 just because it is joint names.
This is not the case with credit or store card debts because they are in one name only, so any additional cardholder is not responsible for the payments.
When someone cannot pay back their unsecured debts, lenders can take action to secure their debts on a borrower’s assets, such as a house. They can also apply for a County Court judgement and then ask the court to enforce repayment. Bailiffs can then be sent into the home or an order made for an attachment of earnings, meaning that payment can be taken from your salary before it goes into your bank.
Also the credit file of both persons could be affected because of the link on the address of one person having debts.
You and your partner will be linked together if you have any financial connection, such as the rental agreement or mortgage in joint names or even a joint loan. If you have a partner who has debt problems then you may wish to disassociate yourself from their credit file. You can do this by writing to any of the main credit reference agencies. See below.
Disassociation - what is this?
If there is financial information on your file about people in your family with whom you have no financial connection, or people who have never been part of your family, you can write to the agency in question asking them to disassociate yourself from them. The agency may wish to make some enquiries or checks to make sure that you are not just trying to avoid a bad credit record.
Unless the agency has a good reason to doubt what you tell them, it must not continue to give lenders information about the other people that you have mentioned. You need only write to the agency that supplied you with your file, since disassociation information will be shared between the other main agencies.
More importantly though, how about getting some support for your loved one and start to help manage the debts. Once under control this may well improve matters and remove the risk of bailiffs calling. We have a list of helpful organisations that can assist for free, they include the debt charities.
Fee- free debt advice organisations
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