Expert debt views & facts
Summer fun may land Brits in debt
According to research released this month by Credit Expert, a summer holiday may land 2.5 million British consumers in debt.
Coming home to a backlog of work and a fading tan may be depressing, but credit card debts, overdrafts and mortgage arrears may be more serious consequences of over-spending this summer.
Quick guide to IVAs (Individual Voluntary Arrangements)
An IVA (Individual Voluntary Arrangement) is a legally-binding agreement that helps you write off unsecured debts that you cannot afford to repay. It involves paying back a fixed amount each month, usually for 5 years, based on the maximum affordable amount, after your costs of living have been taken into account.
If you enter into an IVA, your creditors will not receive everything that you owe them, which in some cases can put them off. But many creditors will accept that an IVA is their best chance of receiving at least some of what they are owed. But they will have to be convinced that they will get more from an IVA than if they petitioned for your bankruptcy.
One in 25 to die penniless - but it needn`t be so
Recent research has found one in four people expect to have nothing to leave to their families after they die and two-thirds of people will ensure they have enough funds for themselves before thinking about leaving an inheritance.
The survey, carried out by personal finance site Fool.co.uk, also found nearly half of British people expect to receive some kind of inheritance and 11 per cent say it is "vital" to their personal finance plans.
Debt collection: what are my rights?
If you have one or more unpaid debts and you have received more than one letter from your creditor demanding repayment, it’s likely that you will be contacted by a debt collection agency, who will aim to get the money back on behalf of your creditors.
Being caught up in the debt collection process is often distressing. If you can’t afford to repay your debts, the best course of action is to contact an expert debt adviser, who will be able to talk you through a range of options to see which one is most suitable for you.
But if it does get to the stage where debt collectors are calling, it’s important to know your rights to ensure you are fairly treated.
What is a priority debt?
Priority debts are your most important debts – ones which cover your essential costs of living. Your priority debts include:
Talking to non-priority creditors
What do you do when you can’t make your debt payments? When there just isn’t enough money to pay all your debts, your #1 priority has to be your priority debts (click here for more on this). As the name suggests, your priority debts are the ones you really can’t afford to miss: paying your credit card bills is important, but paying your mortgage / rent is essential.
Once you’ve set aside enough money for these debts, you can turn your attention to your non-priority debts.
Priority and non-priority debts – what`s the difference?
In general, the sooner you tackle your debts, the easier they’ll be to clear. But before you can tackle them, you need to understand them.
Different kinds of creditors can – if necessary – take different kinds of action to recover their money*. Do you know your priority debts from your non-priority debts?
County Court Judgments (CCJs)
Have you taken out any unsecured credit (credit cards, personal loans, overdrafts, etc.)?
If you don’t keep up your payments, the creditor may feel that the best way of getting their money back is to turn to the County Court. Normally, you wouldn’t end up in court before the creditor has spoken to you about your arrears and issued a default notice, followed by a final demand.