"Debt" (Financial advice - birth to death)

Member Name: Trevor15

Product:	Financial advice - birth to death
Date:	12/07/01 (363 review reads)
Rating:

Advantages: Free, Resolution, Confidential

Disadvantages: None

I've been meaning to write this op about debt for months now but kept putting it off due to the enormity of the task. I've touched upon debt before on dooyoo but with this op I wanted to briefly explain the procedure for dealing with debt, a procedure that is accepted by almost all financial institutions, creditors, advice agencies and the courts. Therefore if anyone was to be experiencing financial difficulties now or in the future, then they would have some idea of what to expect. And I do believe that knowledge is indeed power.


Right, let's get down to brass tacks. . .

~~~Why should you take any notice of me?~~~
Up until a few months ago and as part of my general duties at work, I was a debt adviser (for over 6 years), helping the general public to regain control over their financial affairs. I am trained and experienced in all matters pertaining to debt resolution. I have dealt with countless individuals and families in debt ranging from a few hundred pounds, to hundreds of thousands. Over the course of the six years, millions of pounds worth of debt have passed across my desk. This is not a boast, just a fact.

Now before we get to the nitty-gritty, please remember that, as with most information you come across on the Net, you should use what I provide as a yardstick first and foremost. Consequently what follows is for guidance only. Before you take any action, you must seek professional assistance. I'll provide some info at the end. Agreed? Then read on!


**This op will concentrate on the procedure employed and generically accepted when helping individuals in financial difficulty. Business debts are peculiar in themselves and require a somewhat different approach, and therefore are not dealt with here.**



~~~Debt~~~
There isn't any one specific factor as a precipitation to people experiencing debt; there are as many reasons why as there are people in debt. Each si
tuation is unique and must therefore be treated accordingly. Some become indebted due to ill-health, redundancy, sudden unplanned expenditure; while others may have a whole host of others reasons. But one thing that is common to all is the stress that can be placed upon families in such a situation. It can be overwhelming and appear that there just isn't a way out. Not so. It is extremely unlikely not to be able to find a resolution. It may take a little creativity, a longer period of time but you will get there.
There are 5 steps that must be gone through in order to deal with a debt situation, and the amount of indebtedness is not a consideration, the procedure is the same:

Step 1
Deal with emergencies

Step 2
Details of creditors

Step 3
Strategy

Step 4
Negotiation

Step 5
Progression

We now need to look at all the procedures in a little more depth. Don't worry, I'm not going to overwhelm you, just give you some idea of how it all works in relation to each step. Don't be tempted to skip a step or two, the only way to deal with debt is to be absolutely systematic, any deviation throws it out of kilter and you'll have to start again.



~~~Step 1~~~
Get yourself a file, any old A4 one will do. Try and make it a large one if possible as a hell of a lot of paperwork is going to be generated, not just outgoing but incoming too. Divide the file down into however many creditors you have. (Use 2 or more files if necessary). For each creditor write down:
Their name & Address, phone number
Account number/s
Amounts owed
Whether you agree with monies claimed or not
Any recovery action they may have taken
Whether the debt is priority or not, or an emergency.

*An emergency debt is classified as being one that may involve you imminently losing your home, your liberty, your vehicle if you use it for work, etc, etc. (Urgent)
*A
priority is a debt which 'may' at a future date involve loss of liberty, vehicle home etc. For example, if you "wilfully or culpably" refuse to pay your council tax you may be sent to prison. If you don't pay that electricity bill you may be cut off. These kind of things are priority. There are many others, though. These need to be dealt with quickly.
*A non-priority debt is one that 'may' not have an immediate impact on you, such as a mail order catalogue debt.

You can put the above details on one sheet, doing a separate one for each creditor. Put these in each compartment of your folder, and behind this file any correspondence received or sent from or to that creditor. Now, at a glance you have a clearer idea of where you are up to in relation to each debt.



~~~Step 2~~~
This is a three pronged affair, including listing your income & expenditure (I/E) and also ways of increasing your income.
On a sheet of paper list all your incoming and outgoings. Don't be tempted to underestimate. Then choose whether you are going to work this out on a weekly or monthly basis. If it is monthly, remember to times weekly figures by 52 and then divide by 12 in order to obtain the correct monthly figure. For example, Council Tax is usually paid over 10 months. By dividing this figure by 52 weeks and then x12 (months), you will reach the correct amount.
Don't get too caught up in the figures or devising a comprehensive income / expenditure plan at this stage, it is only for your immediate reference. You will do a proper financial statement later (and I'll let you know how to get hold of pre-prepared ones).
Once you complete your amounts, take the outgoing figure from the income figure. If there is anything left, this is known as disposable income. If your outgoings exceed your income, don't panic. There are options available.

Increasing Income - you will need to check your tax co
de to ensure it is correct, claim any welfare benefits to which you may be entitled, find employment, increase hours of employment, take in a lodger, etc, etc. These are only some 'possible' options for increasing your income. There are many, many more.

Points to note:
I never included disability benefits in the income sheet as I firmly believe that these are for specific purposes and not for repaying debt.
Some creditors take a dim view of vast amounts of money used for cigarettes. You can either include the cost in your housekeeping or list the amount separately. Nicotine is a highly addictive substance and a creditor simply saying stop! is not realistic.
From your outgoings allow a 10-20% surplus on the total, this will allow for unexpected emergencies.




~~~Step 3~~~
Now that you have a clearer idea of what money is coming in and how much is going out, you'll also know how much you have left (if any), and therefore are now in a position to negotiate with your creditors. Ignoring the non-priorty creditors for now, it's time to contact the priority ones. In this negotiation you are going to be at a disadvantage because they are in a much stronger position to demand from you due to the potential enforcement available to them. To go back to our Council Tax, this must be paid and if you wilfully refuse, sentencing is available to the court. However, here is where knowledge comes into its own. For people on benefits, the local authority (council) will accept £2.60 per week off any arrears. They will initially demand a ridiculous figure of say £15, but that is just their way of making sure their books balance before the end of the financial year.
Likewise, utility companies are always willing to negotiate - after all, they just want their money. The key thing to remember is if you don't ask, you won't get. Negotiation is a two-way process and you need to be active. Don't be tempted to
negotiate with non-priority creditors at this point. Of course they will be putting pressure on you, threatening you with all kinds of nastiness - but until you have negotiated with your priority creditors you cannot realistically offer them any kind of repayment. They know this. They're just trying it on, believing that if they don't do it others will.

Non-priority creditors - once you have negotiated with the priority ones, it's time to sort out the remainder. Transferring your income and out goings onto your financial statement (obtained from any of the organisations listed below) and now also including the payments agreed with your priority creditors, negotiation can take place.



~~~Step 4~~~
There is a set formula for repaying debts to non-priority creditors and which is accepted throughout the industry: based on available monies and amounts owed. Don't be tempted to deviate from this as once it is in place most of your immediate problems are resolved. If there isn't any money left to pay these, then they just have to wait. They will threaten court action and the like but remember that the courts also use the same broad formula for repayment.
Other options available to the non-priority creditor include, a total write-off of the debt, nil payment for 3/6/9/12 months, part payment in full and final settlement, etc.



~~~Step 5~~~
Once you get to this stage the hard work is over. You can expect regular letters from creditors in (usually) 3 month interval asking for an update of your financial situation - just in case you've won the Lottery. This is standard practice and nothing to worry about. If nothing has changed say so. Just remember to keep all correspondence in its relevant compartment in your file for future reference.



~~~Conclusion~~~
Because debt is such a huge area with many variables, the details listed above have had to be notably simplified. Th
e 5 steps remain the same, but I've only broached the tip of possibilities. 'Running' a debt case takes a huge amount of stamina and perseverance. Creditors have a whole host of tactics up their sleeve to get their money back. One of their most annoying tactics is passing on the debt or selling it. This means that you can have letters coming through from numerous organisations all requesting the same monies. Talk about frustrating and bewildering. Another favourite is threatening telephone calls and visits, intimating all sort of court action if money is not paid. This is where knowledge becomes your ally. Answering the third call at work that day from creditors (another tactic and borderline illegal) and responding with "This is harassment under 'The Administration of Justice Act, section 40(a), carrying a £1,000 fine" is much more effective than passivity. Just watch how quickly the caller takes notice!

If you are in financial difficulties, please don't let embarrassment or fear keep you that way. Decide to take an active stance with your situation, prepare yourself and you will resolve it. Contact any of the organisations below for assistance. All of them work within a code of confidentiality and they are not there to judge you. And it won't cost you a penny (unlike some current TV adverts doing the rounds). Some of them will even take over your case, dealing with all the steps themselves - in conjunction with you of course. Whichever way the debt resolution is approached there is a vast amount of help available for you. It's now up to you whether or not you seek out that help.

Good Luck!




~~~Organisations/Help~~~

As well as obtaining help from any of those below, ask for a copy of the booklet "Dealing with your Debts", this explains all the procedures above in much greater detail and covers every facet of debt resolution in an easy to understand, not patronisi
ng manner. Inside you will also find a pro-forma 'Financial Statement'. The booklet is excellent!


~~~The National Association of CABx~~~
Free, independent, impartial and confidential advice. All their advisers are experienced in debt resolution. You may visit, telephone, write or e.mail. To find your nearest bureau and for general advice, log onto: www.adviceguide.co.uk


~~~National Debtline~~~
Provide free debt advice and materials via their advice line:
National Debtline
(Birmingham Settlement)
318 Summer Lane
Newtown
Birmingham, B19 3RL

Tel: 0808.808.4000 (free)

Opening times
M & Thurs - 10am -4pm
Tues & Wed 10am-7pm
Fri 10am - 12 noon

web site: www.nationaldebtline.co.uk
(Still under development)


~~Federation of Independent Advice Centres~~ (FIAC)
www.fiac.org.uk
You can run a search for your nearest centre. Again it's all free.


~~~Local Authority / Council~~~
Your council will have paid debt advisers to assist clients. Ask to speak with the 'Anti-poverty Unit' or the 'Social Inclusion Department'. dooyoo have a comprehensive list of council's web sites listed in the Internet section, with direct links to each. You will be able to find out further details there.




**Please remember, this op only includes the very basics of debt resolution. Your circumstances are unique and therefore require a unique approach.**

Summary: