Problems with Debts? One Affordable Monthly Payment More Information

What the Creditor Will Expect from a Debtor

When you have overcome the initial contact with a creditor you will enter into a payment arrangement period that can range from a month to an indefinite period. You may be told that they will accept a reduced payment for three months, then you will be expected to resume normal payment and reduce the outstanding arrears, or that your case will be reviewed in 6, 9, 12 months…

You will be expected to increase your payments pro-rata when you pay-off creditors or if your financial circumstances improve. If you had debts due to unemployment and you get another job it could be tempting to leave the reduced payments ‘just for a while’. You run the risk of losing the complete co-operation of all creditors.

In serious situations the creditor will know that the debtor is unlikely to ever resume normal payment, or even repay the debt. Whatever the situation or arrangement, you will be expected to complete an Income & Expenditure Statement every six months (some creditors every three months). You must return these requests promptly, and factually. After a period these requests may seem more regular than they are. Accept them as a small price to pay (literally).

Finally, never take out a loan when you are paying reduced payments to your creditors. This is not only unfair, but you run the risk of your creditors checking your up to date credit record and finding new credit details: if you do, again, expect the debt collector to call.

Should I Take Out a Loan to Repay My Debts

In almost all debt situations the question of taking out a further loan to repay a debt will confront you. The advice you will receive from most debt counsellors would be an emphatic ‘NO’. But that is not always the most realistic answer to debt. Sometimes taking out a further loan can be a good long-term answer, as well as an obvious short-term solution.

If you are in employment, and your position is secure, you need to work out your finances in a similar way to the Income & Expenditure Statement. If you find that taking out a five-year £5,000 loan at £120-130 per month will settle debts that cost, say, £300 per month at present, you should take out the loan (together with learning your lesson).

If you have debts through weekly collected credit (supplied through door to door loan sales/collectors) the loan rates are normally (nearly always) too high to consider taking further loans to reduce a debt (whatever they may tell you). However, obtaining a loan through lenders with acceptable rates to pay off a door collector should be considered. Many weekly loan customers are of an acceptable standard to major loan services but they have never tried to get a loan as they carry on a family tradition of weekly loan credit.

The two questions that you need to answer are:

• Is a further loan a long-term solution?
• Am I serious about getting out of debt?

If you answer no to either question, avoid any further debt.

Credit Repair Fact or Myth?

There is much debate about credit repair companies.

Can they remove CCJ’s?

Can they get the money owed on a CCJ reduced?

Lets start at the beginning.

1. You do not pay a bill, a loan, an invoice etc

2. You receive a formal demand for payment from the creditor *

3. You ignore the demand

4. The creditor sends you a ‘Claim Form’ (previously a Summons) demanding payment within   14 days or your defence in writing (following court rules)

5. You ignore the Claim Form

6. The creditor asks the court to enter a Default Judgment (the CCJ) **

7. The court send you the CCJ giving you 28 days to pay ***

8. You ignore the CCJ

9. When the 28 days expire, the CCJ will be on your record for 6 years ****

Notes:

* The demand must say who you are, delivered to where you live (or work), who the creditor is, their address, how to contact them, what is owed, what it is owed for, when you must pay the amount by and what will happen if you do not pay i.e. “if you do not pay £100 by 12/11/99 we will take legal action”.

** When the Defendant (debtor) does not reply to the Claim Form (previously Summons) the court enters a ‘Default Judgment’. The term Default means you defaulted on your opportunity to respond to the creditors claim.

*** If you pay within the 28 days the CCJ is not recorded if you contact the court

**** On the sixth anniversary of the date of the Judgment the CCJ will automatically erase from your credit record.

Now back to the credit repair.

The fundamental issue with all credit repair opportunities is did you receive the Claim Form (previously Summons). If you did, you cannot remove the Judgment. However, this is not the end of the matter with most (but not all) credit repair companies. If you are prepared to state thatyou did not receive the Claim Form (previously Summons), and you have a reasonable reason why you did/could not receive it, you have the grounding for a successful credit repair. You will complete a few forms with the credit repair company and make an application to set aside the ‘Default Judgment’.

You cannot set aside a CCJ that you knew about, did not pay, but can pay now. However, credit repair companies may correspond with a company that secured a CCJ against you, say, 3 years ago, for £7,000 and offer them, say, £4,000 if they do not object to a credit repair and application to set aside the Judgment Default of their CCJ. If you have paid off a CCJ that is 3 years old the credit repair company cannot use the leverage of paying the creditor some money not to object to the credit repair: the credit repair company relies on the creditor not being bothered to object. Credit repair companies are most effective if you have not paid any money towards the CCJ. If you settle a debt after the first 28 days, the CCJ will not be taken off the register. The file can be marked as ‘satisfied’, if you apply to the court for a 'satisfaction notice'.

A further problem can exist on your credit record that is as destructive as a CCJ: a ‘Default’. If you miss two to three payments of an agreement (Hire Purchase, Lease) the creditor can send you a formal default letter. A CCJ and a Default are both regarded as serious information by lenders etc. You cannot pay or satisfy a Default: it is just there! An inexperienced clerk at a finance company can send a Default to you without any supervision or serious default.

My Personal Summary:

The credit repair companies are under immense pressure from government, credit counsellors, finance companies and institutions: and of course the main credit reference companies who rely on poor credit ratings to earn profits – at times it is difficult to see who the ‘goodies’ are! Should someone who went through a very difficult time in the past have the opportunity to correct his or her standing in life before a 6-year term? I know of many such cases where debt had very little to do with recklessness, and more to do with such things as poor health, redundancies etc.

Banks and finance companies use computers to sort the good from the bad. With CCJ’s lasting 6 years (and the computer treating a 1-month debt the same as a 5 year 11 month debt) the punishment is out of proportion to the ‘crime’. The choice is a personal one: to use or not to use. Our peers (governments, Lords etc) have been making laws to abide by, and ethics to follow that they at times do not abide by themselves – do you think our peers would use credit repair?