Q&A with advisers from the Debt Support Trust
We asked you for your questions about debt and budgeting, and Lorna McCallum and Andrew Greechan, both advisers at the Debt Support Trust, answered your questions on dealing with debt collectors, catalogue debt, payday loans and more.
Debt Support Trust is a telephone and internet-based debt advice charity, staffed by a mixture of volunteers and qualified employed advisers. The average person who contacts Debt Support Trust owes just over £35,000 to repay credit cards, personal loans and other forms of credit.
Q. Sham1971: I'm just about to start working after being on benefits for the last three years, so I'm excited but also anxious and need some advice. I'm a single mum with three kids, and will be working a 30-hour week. My income per year, before tax deductions will be around £12,000. What I need to know is what help I will get regarding childcare for one child at £60 per week, and how much child tax and working tax credit I will receive. Also, how much tax will I be made to pay at the end of the tax year? It is a self-employed job, so I need to pay my own taxes.
Mums with teenagers: inform the child benefit office if your child is staying on at school after their 16th birthday, as it's automatically stopped otherwise. Many mums may not be aware this is the case and could be missing out on extra income.
A. Debt support trust: Congratulations on returning to work. You would be eligible for working tax and child tax credits, along with up to 70% help with your childcare costs. To get the ball rolling, it's best to call the tax credits helpline on 0845 300 3900. It's hard to tell how much tax you'll pay at the end of the year as it's a self-employed position, this would typically be dependent on your tax allowance and many other factors. You would be best to seek advice from an accountant or bookkeeper.
Q. TheJolly Pirate: I work with families in a variety of financial circumstances. Many families I see who have fallen into debt have done so via catalogues. I usually advise a visit to the Citizens Advice Bureau (CAB) for support where needed, but many experience threatening letters from Debt Collection Agency (DCA).
Are catalogue debts legally enforceable? For instance, can a DCA get a County Court Judgement (CCJ) against families? This seems to be a big worry.
A. Debt support trust: Yes, catalogue debt is treated the same as any other unsecured debt and it is enforceable. Catalogue debt is a typical problem we hear about, too. The catalogue company is able to get a CCJ against a person in debt.
Q. Haven36: Can a company chase you for money they cannot prove you owe?
A. Debt support trust: If a company is unable to prove you owe them money, then they would struggle in a court of law to enforce the debt and they would need to prove there was a signed credit agreement in place
Q. TheAtterySquash: What do you think of payday loan companies? My sister uses them frequently to cover her until the end of the month, but I'm always really worried about the high interest rates and what would happen if she couldn't pay it back.
A. Debt support trust: The high interest rate associated with payday loans means it is seen as a last resort for many people. Companies often make most profit from overdue accounts where the client is unable to meet the repayment schedule as agreed. Your sister may benefit from budgetary advice or support - the Money Manager on the Debt Support Trust website can help people to organise their finances.
Many people choose to use payday loans to fill a short-term finance gap and it's definitely not a long-term solution for finance.
Q. TheDailyWail: My colleague has applied for a payday loan. I forwarded on the details for a crisis loan but don't know if she would have been eligible for it as she earns about £18k a year. What would she be eligible for? Is there any way that these payday loan companies can be banned?
A. Debt support trust: Anybody can apply for a crisis loan, but it's typically given to people in the most extreme circumstances. A person may be suitable for a crisis loan if they don't have enough money to meet their (or their family's) immediate short-term needs in an emergency, or as the result of a disaster, or if you think there will be serious damage or risk to your (or their family's) health or safety without the loan.
Payday loans are suitable for some people however they are a risky form of credit because of the high interest rates. We never advise people to obtain payday loans but some people feel they offer short term flexibility.
Q. Nettosuperstar: What do you do when you really can't afford any payments to debt?
A. Debt support trust: If you have completed your income and expenditure, and have no available income to pay towards your debt, then you would need to get professional advice.
We would recommend you contact a charity to assess your financial situation. It would depend on your financial circumstances (for instance, if you own a house) as to the correct route. If it's a short-term problem, then liaising with your creditors would be the best option.
Q. Lovebeingknockedup: I noticed from the Christians Against Debt website, when producing your financial plan, you allow £35 per adult and £20 per child for food each week. If I can't afford this much, does it mean I am in financial trouble?
A. Debt support trust: If you are not in any arrears with your credit agreements, then you are not necessarily in financial trouble. The guidelines are set as an average and each person will be different. You may wish to look at ways to save money in order to increase your food budget. Our Money Manager tool could help.
Q. Blooferlady: I would be grateful for advice on debt consolidation. We have around £6k 'toxic' credit card debt, with a high rate of interest and no defined repayment schedule. I recently applied for a bank loan in order to pay off the credit cards and clear ourselves of debt in five years at a lower rate of interest, but because my credit rating is poor, I was offered a 19% rate of interest (and my husband was turned down).
We are very keen on identifying an appropriate loan provider if at all possible: if we could get one at around 8-9% interest we would save around £150 a month on repayments. Can you recommend anywhere that would give reasonable rates of interest to people with poor credit ratings? Or do we have to accept that we are paying for our disorganisation and folly?
A. Debt support trust: The banks typically decide on your rate of interest based on your credit rating. You may wish to check your credit score with the three main credit referencing agencies: Call Credit, Experian and Equifax. This will cost around £6. If you were to find anything on your file which was inaccurate then, after this is removed, it may improve your/your husband's credit rating moving forward.
Unfortunately, if you have adverse problems on your credit file you will struggle to get the lower rate of interest from any lender.
Q. Cashlite: We owe money to a large high street bank. We have tendered a budget plan and repayment offer and made those payments. The bank phones us everyday, sometimes up to three times a day, including weekends, and before 9am. Every time they phone we ask them to only contact us in writing and stop phoning, we have asked them to remove our phone number from their database, but it just continues.
They won't give us a number for their complaints department, we feel we are being harassed, how can we get them to stop?
A. Debt support trust: Well done on contacting your creditor and arranging a budget plan. The Office of Fair Trading has created guidance on acceptable practices in debt collection. Within this guidance (section 2.2. point G)it states that an example of an unfair practice includes, "ignoring or disregarding debtor's legitimate wishes in respect of when and where to contact them".
You can send your bank the harassment letter on our blog, and if they continue to contact you via telephone then you are able to report them to OFCOM and Trading Standards.
Q. StarlightMcKenzie: My dad's company (which is just him) didn't complete its tax return, and now is being fined £5,000, even though he made no money all last financial year. He didn't complete the forms as he was ill, then went into hospital and couldn't return their contacts. He then sadly passed away, but HRMC are still asking for the £5,000 from his estate, saying then we can appeal. His estate doesn't have £5k, and neither do we. Any ideas?
A. Debt support trust: I'm sorry to hear about your financial troubles, especially at such a difficult time. Unfortunately, most tax issues are dealt with on a case-by-case basis. However, the first stage would be to request a statement from HMRC regarding this debt. Typically, HMRC charge two payments of up to £250 for late submission of accounts so they may have made an estimation of what your father is due to pay.
Your father's accountant should be able to help here to prove to HMRC there was no income in last year's trading.
Q. expatinscotland: How long can a company chase you for repayments in Scotland?
A. Debt support trust: In Scotland, a company can chase you for as long as they wish, there is no limit. If you are being chased for a debt which is five years or older, and this is the first time you are being made aware of it, then it could be considered to be statute barred. It would be six or more years in England and Wales. More info can be obtained here or here.
Q. curlylox: How easy is it to arrange a suitable repayment plan with credit card companies if you are finding it difficult to make the minimum monthly payments? Will this affect your credit scoring?
A. Debt support trust: Each company differs in the amount they expect. You can speak to your creditors and ask for some flexibility, but if it's a longstanding problem then you may wish to seek professional debt help. Also, failing to meet your monthly minimum payment would result in your credit scoring being negatively affected. If you need specific advice on your situation a debt charity will be able to help.
Q. Bucketofsoldiers: How long can a company chase you for payments for, if you pay none?
A. Debt support trust: There is no minimum or maximum time a company will chase you, but if they fail to get any correspondence they will be more likely to proceed with bankruptcy proceedings, depending on the amount owed to them.
Q. Swallowedafly: I have a mortgage shortfall debt after becoming disabled, having a child and needing to move out of the unsuitable property but being unable to sell in the recession. My property was repossessed in January 2010, and although the mortgage company knows where I live, they don't bother contacting me. I called in April 2010, and they reckoned they still didn't know the final sum I owed, or what was likely to happen. I've heard nothing since.
I suspect they know I have no income and are therefore waiting to see if I come into an inheritance or start working again before pursuing me for the debt, as if they did so currently I would have nothing to give. How long can they leave it before pursuing the debt? How would I go about trying to get the debt written off? I have no income other than benefits and my health problem is long term.
A. Debt support trust: First, are you aware if the property has been sold yet and, if it has, do you know what the outstanding balance is? There is no standard time a creditor would wait before taking action and some will hold off to see if your situation changes.
From the information you have supplied bankruptcy may be an option, but we would always recommend speaking to a qualified debt adviser at a debt charity first. This would allow you to explore all available avenues. There are a number of solutions where you would only repay a percentage of the money you borrowed. However, you should take advice before proceeding with any of these options.
We realise the inconvenience of changing your bank account, but if you decided to pursue bankruptcy it might be necessary to change account. The Co-op Cashminder bank account is suitable for people with challenging financial circumstances.
Q. expatinscotland: We are on a pre-payment meter. In January, we started using a key provided by Scottish Power. After we started using it, we immediately started getting statements from them saying we were in debt to them. I've tried phoning them (on a chargeable number). When last I spoke to them, they said they had the wrong serial number and would ring me back.
How is it possible to accrue a debt on a keyed meter (we have been in this flat for 18 months now and were using Scottish Hydroelectic key with no problems)? What recourse do we have?
A. Debt support trust: I would recommend asking Scottish Power to confirm in writing they had the wrong serial number. It's likely the people living in your property owed money to the energy company and changed supplier without settling their bill. This has then resulted in you being charged for their energy usage when you returned to Scottish Power from Scottish Hydro.
Q. Sausagerolemodel: After I had a baby two years ago, I couldn't return to my original job so I set up a business myself. Money is beginning to come in, but last year I made a loss. However, my accountant says that I still need to pay £3,500 for my final accounts for the year 2008/2009.
I don't have this money, and I didn't realise I was still owing HMRC for income before my DD was born. Can I ask HMRC to defer the payment or make it in instalments? Will this affect my business negatively? Or am I better to bite the bullet and get a loan?
A. Debt support trust: Congratulations on your new business. HMRC are usually flexible for businesses willing to make arrangements with them and as such they should be happy to make an agreement based on instalments. This should not negatively affect your business.
On a separate point, I would ask your accountant for a breakdown as to why there was such a large discrepancy in your accounts, just to make sure you're being fairly charged.