Consumer Debt Help 6 – Bankruptcy – How do I Get My Credit Card Back?
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If a shop, restaurant or trader asks you for a credit card and you say you don’t use one that’s when the funny looks start. This answer almost implies that you used to have one, but you had ‘the snip’ (no, the other one, where the credit card company tell you to cut the card in half and post it to them). Cutting your dearest friend in half is now the biggest serial killer of all time.
Loosing your cards is a double blow: you cannot use credit to buy, and you are now limited to where and what you can buy. Going on holiday in today’s world is unthinkable without your precious card (this does not stop the millions of British holiday-makers each year who only know cash and would not have it any other way).
Accessing the Internet, until lately, was the realm of the cardholder: and certainly the realm of the bank account holder. Buying goods or services on the net is very much geared to the card user.
The point that I am trying to make is that a credit card is a part of our daily life that gives you the widest choice of goods and services, and therefore, the most competitive price. And that it is too easy to criticise the down side of a card when you have a lot of debt, and also complain that the marketplace favours the use of credit cards: cash is dying and will become more expensive to obtain and use.
If you have ‘lost’ your cards, and you are desperate to get one, there are a number of ways to increase your chances of getting one. One of these measures is not to use the companies that advertise, ‘lose all your debts, start afresh with a new bank account and credit card’: unless the Bank of Antarctica is an accepted card in your local supermarket!Disclaimer : Any similarity to the real Bank of Antarctica would be a surprise!
The first option is to resurrect a card that you may be paying off at present. If you had a good relationship, up to a point, with your credit card company and your reasons for your debt problems are explainable (other than ‘I could buy lots of things I couldn’t afford’) then you have every reason to be upbeat. The first thing to do is to pay as much as you can for a sustained period, until you have a balance of at least half of your last card limit.
Write to the company and explain:
- what caused your problems (you may as well be honest),
- what you have been trying to do to get the debt reduced (no new debt, no holidays, working hard),
- what your situation is today (no other major debts, situation in control etc)
- Why the situation is unlikely to reoccur (got rid of other half, have a good full-time job, older and wiser),
They may reply,
- that you need to reduce the balance further: ask how low,
- they may say re-apply in six months: better than ‘no’, and a good sign,
- they may want to only allow you a £500 limit, from an original £2500: that’s OK.
- Whatever conditions they set, you know that it’s a second chance and that you’re back in the real world.
Another way to further your chances of getting a credit card is to start afresh with a new bank account and with a ‘reasonable’ deposit – this should ensure your acceptance. Do not apply for a card before six months: this is a banks usual minimum period for all customers, and you do not want to be seen to be desperate. If you are rejected at the six-month stage, go through the above scenario: I’m a changed person etc.
A final option is to get married to a cardholder and have a joint card – it’s not the same as having your own card, but it’s a start.
Remember that a credit card is a responsibility and a very useful tool if handled correctly. If you believe that cash keeps you sane, then forget the card and find ways to get the same goods/services that cards offer.
The aim of most creditors (the one’s you owe money to) is not to make an individual bankrupt. Most bankruptcies have little in the way of compensation for unsecured creditors. The government services are more likely to petition your bankruptcy than, say, a trader you owe money to. It is also common for an individual to start a bankruptcy petition themselves: out of desperation to avoid the hounding of some overzealous creditors.
The purpose of bankruptcy is to convert your possessions, and any wages you receive, into lump sum and installment payments for creditors. A debtors purpose to apply for their own bankruptcy is to form a moratorium (a group of creditors) to agree part repayment of all outstanding debts, and when the agreed repayment has been met, to have a ‘clean slate’.
Individual creditors cannot take action against you. They must make a claim through the ‘trustee’ (the name of the person who controls a bankruptcy) or write off their debt. When appointed the trustee will advertise your demise in a number of newspapers to give all of your creditors a chance to make a claim against the bankruptcy. It is also the responsibility of the bankrupt to make an honest list of all creditors: as a bankruptcy is also a chance to start again the bankrupt should ensure every creditor is notified. Not that a creditor could make a claim against you after a bankruptcy, but it will get all your creditors of your back.
If you own your home you would be fortunate to keep it. You can keep household ‘essentials’: bed, fridge, heating appliances etc. But not, TV’s, video recorders, computers (unless used for work, or used to get work). All ‘tools of trade’ are protected, but will be scrutinised (a new transit van is not a necessity – buying a well used second hand van would be a likely suggestion from the bankruptcy trustee).
A bankruptcy will normally last until the third anniversary of the bankruptcy order. During this time you are not allowed to hold a public office, become a company director (or in all but name run a business) and you must not apply for credit over £250 without notifying the lender of your bankruptcy. Your credit file will show your bankruptcy for six years from the bankruptcy order.
There is some talk of allowing some bankrupts to become company directors in as little time as three months from the bankruptcy order. The basis of the issue is: should an entrepreneur who started a business, a sound and well run business, but lost control of the company’s survivability through bad luck, ‘just a few more sales’, ‘a bit more backing from the bank’ etc. be allowed to try again once all matters have been explained to, and sanctioned by the trustee? This option gets my vote.
In order for you to understand and deal with this situation, I will describe the background of the problem, and the ‘thinking’ of the lenders.
Banks and building societies are resurrecting outstanding shortfall debts due on repossessed homes in the property slump of 1990-94. As many as 300,000 homes were repossessed with an average shortfall of £30,000 per home: some deficits are as high as £100,000. The reason for the resurrection is thought to be favourable economic conditions that leave the average worker with more disposable cash. Some of those workers are the targets of the banks and building societies; however, in order to find out who can start to repay their debts, every ex-borrower will be targeted.
The issue that consumer bodies are raising is the unlimited time period allowed for lenders to take action against the debtor. Some house debts go back 12 years (being the maximum period in which a lender can claim against you), and the average is 8 years. The period for pursuing other debts through the courts is 6 years.
After 6 years people start to build a new life and the demands for ‘written off’ debts are causing stress, hardship and as an absolute minimum is ‘unfair practice’.
What can you do?
The debt is payable under English law if under 6 years old and ‘possibly’ payable if between 6 and 12 years old: this does not mean that a court would enforce the whole debt, or even part of the debt. Many homes were sold far below market value (some sales were criminal, and many were negligent), further, lenders added contentious fees and interest. With the new court initiatives (favouring pre-court resolution) lenders would take a fearsome assault on their ‘good’ name from the courts – Halifax BS has 50,000 debtors! Resolution can happen in three ways:
1. Pay the debt in full on demand
2. Offer a sum in full and final settlement
3. Make no offer due to current financial commitments and/or circumstances
1. Pay the debt in full on demand
If your circumstances allow you to settle your debt in full and you prefer to do so, you should ask for a ‘full and detailed’ breakdown of the debt (a fee could be payable). When you receive the breakdown, take the figures to your accountant for a second opinion (there is little point in paying add-on’s and the lender is unlikely to argue).
2. Offer a sum in full and final settlement
On receipt of the (usual) solicitor’s letter demanding payment, request a ‘full and detailed’ breakdown of ‘every penny’ of the claim and get an accountant to confirm the amount. Your concern at this stage is not to argue any add-on’s, but to get the overall figure as low as possible. When you have the lowest figure, offer 5% and be prepared to pay 10%. Stay in control and strong (not aggressive). Your offer is likely to be accepted on a long overdue debt as an alternative to court (especially since in almost every respect that the debt was a write off some time back).
3. Make no offer due to current financial commitments and/or circumstances
If your circumstances do not allow you to use a solicitor, contact your local Citizens Advice Bureau or the Consumer Credit Counselling Service on 0800 138 1111.
Do not talk to a debt agency, solicitor or a representative of the lender on the telephone: tell them to send letters in future. You are unlikely to be an expert telephone negotiator, or remember the salient points of your conversation. If you send a letter, use a heading of ‘Without Prejudice’ this means the content of your letter can not be used against you in court, nor could any offer you make be considered as an acceptance of liability.
Do not provide personal information to anyone connected to the lender. That includes an Income and Expenditure Statement: I have previously advised you to provide information and full co-operation to your creditors, however, this situation is not a standard debt scenario and providing information is much like providing the rope to hang yourself with.
Finally, with this type of debt the lender (or solicitor’s) ‘bark is worse than their bite’. The property boom of the 80’s was always going to have casualties, the banks and building societies were always going to make money and losses were catered for. The resurrecting of shortfall debts is an immoral action in many cases and you should remember that if you receive one of their letters.
Personally, and I do mean personally, I would throw the first letter in the bin, reply in horror at the second letter, and use option 2 or 3 on the third contact.
Office for the Supervision of Solicitors: 8 Dormer Place, Leamington Spa CV32 5AE
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