However, focusing solely on keeping your credit score intact by not entering into a debt solution is a false economy.  If you’re considering a DMP, or other debt plan, you’re likely to already be struggling to make repayments and any missed repayments will be recorded on your credit record.  The important thing to do if you’re finances have hit a rough patch is to take control of the situation.  Speaking to your creditors and entering into a managed repayment plan is going to result in a better outcome, and credit score, than ignoring the facts and hoping that somehow, you will make this month’s repayment when the figures show that this isn’t going to happen.

Information is held on your credit record for up to six years and may affect your ability to obtain credit, but you do have the option of changing your spending habits and learning to live without credit. 

A Debt Management Plan, such as those offered by ourselves, is designed to give you some breathing space if your financial situation has become unmanageable.  We speak to creditors, such as credit card companies, on your behalf and are, in most cases able to freeze interest and charges and reduce monthly repayments until your financial situation improves.

While drafting an IVA proposal for our clients, it is our role to calculate the equity in any property owned.  If the equity in the property is more than the amount of unsecured debt owned, the client will be exempt from entering into an IVA, as it will be expected that they sell or remortgage and repay their debts in full.

If the equity in the property is less than is owed, then the IVA will go ahead and in the final year of the arrangement, the house will be valued again and any equity, or share of equity will be expected to be released, if it is available,  and placed into the IVA to repay creditors.

In cases where the client cannot secure a remortgage deal, it is possible that the IVA terms will be extended for a further year to compensate.

Household items such as furniture and white goods owned outright,  and not on finance plans, will remain untouched in an IVA, as would also be the case in bankruptcy or Debt Management Plan. 

For clients who are renting, their situation can remain unchanged.  If rent payments have been kept up to date and the landlord is not a creditor included in the IVA, then there is no reason that they should be involved or made aware of the IVA.  Rent payments are a priority debt and should be paid above other repayments if you are struggling with your finances.

Of course, each individual arrangement differs and the above is a quick overview of what would be expected to happen with a mortgage in an IVA.  If you are thinking of entering into an IVA, but are concerned about your mortgage, seek professional advice straight away.  The sooner you have all of the facts, the sooner you will be able to make a decision about the best way forward.

If you’re in an Individual Voluntary Arrangement or Debt Management Plan and need to stick to a strict weekly budget, try taking out your weekly allowance in cash.  Using cash makes you more aware of how much you’re spending, and how much you have left to last the rest of the week.  There’s no turning a blind eye to the lack of money in your purse when it comes to deciding whether or not you can afford to order a takeaway for dinner.

Top-up cards add an extra step of denial.  After all, the money’s already been spent when you topped your card up, so there’s no harm in using it up.  Often marketed as a way to help you budget your spends on mobile phones, MP3s and coffee, they often have the opposite effect.  I don’t know anybody who hasn’t run out of credit ahead of their budgeted time, and simply topped up another chunk.

Systems that make payments effortless are great news for shops, but bad news for skint shoppers.  Contactless payments in the form of contactless bank cards and smartphone payment apps are on the rise and I’m convinced this is going to be matched by an increase in unpleasantly surprising bank statements.   As part of the debt solution process, our IVA and DMP clients fill in a statement of affairs and are more often shocked at the amounts going out of their bank on little ‘treats’.  It’s not the big purchases that blow apart your budget; an increase in small spends can really sneak up on you.

Many of our IVA and Debt Management Plan enquires are from customers who cite their energy and utility arrears as ‘the straw that broke the camel’s back’, pushing their financial situation from ‘struggling’ to ‘unmanageable’.  Many utility companies send bills quarterly and expect immediate payment, making it difficult to budget for.  Add to that the near impossible equations involved in working out how utility companies end up with their final figure and it’s easy to see how gas and electricity bills are a bugbear for many households.

The majority of utility companies now offer pre-payment plans which make it easier for customers to spread payments, but it does nothing to ease the fact that utility bills are going up and up.  It’s easy to write off high utility bills as a simple fact of life, but the truth is that consumers could make significant savings by switching suppliers. 

The Big Switch campaign, launched by Which? aims to use people power to bargain for cheaper energy prices from suppliers.  To date, over 250,000 people have signed up for the campaign and are making savings.  Energyhelpline.com has also taken up the cause and launched The Huge Switch campaign, which similarly uses the idea of consumers signing up to buy energy in bulk from suppliers.

Switching your energy supplier is not as fiddly as you may think.  There are a growing number of energy price comparison websites, such as Uswitch.com, which make the process clear and simple.  Once you’ve dealt with your energy suppliers, go through the rest of your household bills to make sure you’re getting the best deal.  Have you checked you phone, internet and mobile packages?  How about your car and contents insurance?  You’ll soon get the hang of hunting down the best deal for you and the savings will be well worth the time it takes.

It’s worth noting that you cannot switch your water supplier.  However, remember that by law, water companies cannot disconnect your water supply.  Despite this, our IVA and DMP clients do report misleading threats to the contrary from water suppliers.

If you’re having difficulty making repayments on your energy or utility bills, get in touch with your supplier as soon as possible and explain the situation.  Energy and utility companies have dedicated departments which deal with customers who are having problems with repayments, which is an indication of just how many people are in a similar situation!  

If dealing with you creditors has become an issue for you and you are finding yourself avoiding the issue, an IVA or DMP could be an effective solution for you.  We deal with creditors, including electricity companies and gas suppliers on behalf of our clients and receive regular feedback on how much this service relieves the stress and worry from our clients’ lives.

The sad truth is, there’s nothing to stop debt collection agencies using Facebook , Twitter and other popular sites to gather information on you.  Until the new guidelines were released, there was also nothing to prevent creditors and debt collectors from contacting you via these networks too; even publicly.  The idea of a debt collector posting on your Facebook wall, or tweeting a demand to contact them is unsettling and it is just that kind of practice that the new guidelines are designed to stamp out.

Privacy is at the heart of these changes, with the new guidelines insisting that debtors should not suffer  ‘undue pressure’ from creditors ‘posting messages on social networking sites in a way that might potentially reveal that an identifiable person is being pursued for the repayment of a debt’.

Of course, you could make all of your information private, you could delete all of your social media profiles, but if you’re silencing your Twitter account and opting out of Facebook, it’s very likely that you’re also hiding in other ways.  Perhaps you’re pretending to be out when the doorbell rings, sweating when an unknown number calls, stacking up unopened mail . . .  That all sounds very complicated, when the answer is really quite simple – deal with the problem.

If you’re struggling to make repayments on your debt and have been avoiding dealing with your creditors, a debt solution such as an Individual Voluntary Arrangement, or an IVA, might be right for you.  At Moneypressure, much of the feedback we receive from our IVA clients describes the relief of the creditors’ letters and phone calls stopping.  An IVA is a legally binding arrangement with your creditors whereby you repay only what you can afford to, for a set period (typically five years).  Once the IVA has been agreed, you are protected against legal action from your creditors and we take over the correspondence with them on your behalf.  Debt Management Plans are another available option, allowing you to negotiate reduced payments with your creditors so that you can get back on track. 

Social networks are supposed to be interactive, and so is life!  If debt is affecting your life get some good debt  advice, get it sorted and get back out there!

However, whilst the volume of IVAs was down, the percentage of all insolvencies represented by IVAs increased because they fell less dramatically than bankruptcies. Martin Prigent, Head of External Relationships, Financial Difficulties at TDX, said: “It is important to remember that this decline in volumes is in comparison to record highs in 2010 and volumes still remain significantly higher than in 2009. There is no sign of a recovery in consumer finances so the IVA will remain an important tool to manage distressed debt.

“TDX data shows that the proportion of people paying less than £175 per month almost doubled in 2011 and more than quadrupled since 2008. Kevin Still of APDSI commented, “There are some encouraging signs from the TDX release notably that indebted consumers with high levels of unsecured debt are seeking debt advice earlier before debts spiral any further.  “Lender forbearance is also critical and the recent release of the updated Finance & Leasing Association (FLA) code is welcomed with increased provisions in the section of dealing with clients in financial difficulty and limitations on the number of repeat short-term loans.”

Also highlighted by the company was the fact that last year consumers entered IVAs sooner, owing an average of £40,000 compared to £50,000 back in 2007.

Martin added, “The IVA market is challenging for the industry – but IVAs are more accessible than ever, with a diverse group of individuals being offered a structured and controlled route to navigate their way out of financial difficulty. “We have also seen a marked increase in the volumes of consumers re-negotiating their plans. This clearly shows insolvency practitioners working hard to provide over-indebted consumers with a viable and robust way out of debt problems.

“With debtor contributions falling, insolvency practitioners are having to focus on efficiencies. While some have exited the market, there have also been a number of new entrants and the top 20 have grown their market share. Overall, the IVA remains a robust, accessible and fair solution for all parties involved.”

Kevin continued: “The reduction in the average disposable income requirements and the sustainability of household income for a viable IVA are interesting, as these have always been seen to be the traditional strengths of a Debt Management Plan (DMP), where an informal debt solution can quickly adapt to changes in circumstances. “The continued erosion of disposable income may mean that there are more creditors’ meetings to vary the terms of an IVA or allow the IP to use their discretion to maintain an IVA, with the potential for increasing the term.”

The current personal debt snapshot reveals the highest levels of worry over debt ever recorded. Furthermore, the survey identifies a group who could be termed ‘Zombie’ debtors – who currently pay only the interest and charges on their debt, but not the debt itself. They stand at around one in six people.

Debt concerns: Three in five (60%) of the population say they are worried about the current level of their debt. This is up 21% on this time last year and is the highest level of concern ever recorded.

A staggering 78% of 24-34 year olds are concerned about their current levels of debt, which drops down to 31% of 65’s and over.    

‘Zombie’ debt: One in six individuals (16%) are only able to service their debt but not reduce it.  This includes 11% of people who say that they are only paying the interest on their credit cards, while 9% say that they are only paying the interest charges on their overdraft.

Payday loans: From the sample 67 people say that they have taken a payday or other short term loan. Of this group, two thirds (68%) did so because they were unable to get credit anywhere. The proportion of those who regret taking out a payday loan stands at 60%, while 48% believed their payday loan made their financial situation worse. In fact only 13% of this group believed their payday loan had a positive impact on their finances.

Looking ahead to the next six months, 7% of the population think that it is likely they will seek a payday loan or other short term, high interest loan. This equates to approximately 3.5million GB adults who will need access to high interest loans.   

Financial outlook: A fifth of individuals (20%) believe their financial situation will improve over the next six months, when in July this stood at a quarter (25%). Today’s figure is closer to where it stood this time last year. One in three of the population believe their financial situation will worsen in the next six months.

Early intervention, best advice: if you are worried or concerned about your finances seeking advice early will maximise the options available and give you much needed piece of mind. A wide range of options are available including formal procedures such as an Individual voluntary arrangement (IVA) or less formal debt management arrangements that can offer the same protection for everybody by providing the necessary breathing space to get you out of debt and back on track.       

END.

There’s no need to go running for cover

There may be a few worried TV fans after watching recent episodes of BBC Wales series The Baker Boys.

The fictional employees who bought an ailing Valleys pie company have recently been seen scurrying around their homes, trying to find hiding places as the bailiffs bang their doors.

The storyline had seen a certain amount of personal debt come about due to the workers buying the company with their redundancy money and then taking a cut in pay.

I understand why TV dramatists accentuate some of life’s more extreme moments – but it’s a shame that, in this case, financial concerns were made to look more horrific that they need to be.

Yes, it’s tough to find yourself in dire straits – but you’re not alone, there’s a lot of help out there and you have your rights at such times; the individual does have protection and all is not lost!

For instance, did you know that you’re not obliged to let bailiffs into your home? A right of entry would need to be sanctioned by court to allow this and is rarely the case. Most often a bailiff (or debt collector) will appear at the door on the instruction of a creditor eager to put you under pressure to pay sums due.

Moreover, there are mechanisms to help people through tough times. For instance, in many cases, there’s no need to be declared bankrupt – an Individual Voluntary Arrangement (IVA) can keep creditors at bay through the negotiation of payment terms and most often will help protect the family home.

ends

http://www.guardian.co.uk/money/blog/2011/dec/08/diary-of-a-debtor-redemption?INTCMP=SRCH

The final point made is a good one – advice and lots of it is the best cure.  Speak to us for a no pressure chat about your situation and how we can help you.

…DON’T.

Debts need prioritising. Carefully selecting who you pay & when will immediately bring about an order to your situation that will keep your creditors happier, help prevent legal action and ease the stress of being in debt.

So, what are the top priorities and what order should you pay them?

1.  Mortgage and rent payments. We all need a roof over our head so always ensure you budget for this as your first priority. If you have a capital and repayment mortgage try temporarily switching to interest only. This can substantially reduce monthly payments.
2.  Weekly shop. We all need food on the table. Check your receipts and switch to cheaper options.
Avoid fast foods and convenience stores that are much more expensive.
3.  Council tax. There are harsh penalties for non payment – including imprisonment. You may also qualify for a discount so speak to the council. You will often find them sympathetic to financial hardship if you keep them informed.
4. Fines, maintenance payments, court judgments. Again harsh penalties if you default. These must be given priority.
5.  HP agreements and loans. If this is essential (such as a loan to buy your car to get to work) then it’s essential. But always try to avoid further borrowing simply to repay other debts. It usually only makes matter worse.
6.  Gas, electricity, water. Despite what the water authority may tell you it is illegal for your water supplier to disconnect you. Utility companies often understand but make sure you keep in touch with them. You may need to install a budget metre.
7. T.V licence, phone bills. Minimise your spending wherever possible. When needs must read a book!
8. Credit cards. Maintaining the minimum payments will protect your credit rating. Try transferring
balances to cards with lower interest rates.
9.  Friends and family. Be open and honest. Explain that debts will not be forgotten and will be settled as soon as possible – but it may take some time.
10.  Subscriptions. Memberships and subscriptions can be cancelled or put on hold. These can always be resumed when your finances are back in order.

Above all keep creditors informed. You will be surprised how willing they are to help if you keep in touch with
them. But never promise payments that you can’t keep up.

Remember If you would like to discuss arranging an IVA, bankruptcy or a debt management plan or have any questions we are happy to help – by phone, email or live chat.