Tips and advice for solving your debt problems

In these uncertain times during the worst recession in over 70 years, people have understandably been stressing over their finances and any financial obligations.

Before the crash, banks were handing out loans and mortgages to people who they knew could not keep up with repayments. This is known as bad debt. These financial contracts were then sold to third party finance companies for billions, only to be discovered that they we’re worth anything, which in turn caused a global melt down.

If any other company were to defraud people like that, you’d be looking at a 20 year jail sentence. So it’s as no surprise, that with the banks with their fingers in all the pots, and using their financial power to bribe members of government, that they’ve been let off with their illegal activities and have simply passed the problems onto the average hard-working consumer.

Thankfully, the government hasn’t been completely oblivious to this, and in order to bring us out of the recession has created new debt legislation to help protect consumers and get the ball rolling to recovery.

Types of debt solutions

Debt consolidation loan: This is a form of debt consolidation that will allow you to write off your debt over a fixed amount of time. These loans are usually secured against a property, and some debt solutions providers will add on fees for signing you up.

IVA (Individual Voluntary Arrangement): An IVA is available in England, Scotland and Wales and can be used to write-off up to 70% of your debt up-front. With new legislation you can enter into an IVA as long as you have over £7000 of unsecured debt and can manage the monthly payments. This means you should either be working full or part-time or be receiving enough benefits.

Protected Trust Deed (PTD): This is a form of debt legislation only available in Scotland. A Trust Deed is similar to an IVA, except you can enter owing just £6000 in unsecured debt. You can also keep your home and car.

With the solutions provided above, you could easily reduce your monthly outgoings on payments by 70%. For a good example, if you’re currently paying £500 per month on your payments, that could be reduced to around £150 per month.

What can creditors do and not do?

Q) Can a creditor/debt collector come into my home without my permission?
A) No. It’s illegal for a debt collector to force or break his/her way
into a home. They must be invited.

Q) Is it legal for a debt collector to harass me?
A) No. A debt collector is not allowed to harass you, use abusive language or use false tactics to force you to pay.

Q) Can a creditor take legal action?
A) Yes and No. A creditor or debt collector cannot take legal action by themselves. This has to be summoned through a court. Once a bailiff is involved, they have the power to take legal action.

Q) Can a creditor/debt collector contact me at work?
A) No. It’s illegal for a debt collector to contact you at work. If they do, you can countersue.

Q) How can I stop debt collectors from phoning me?
A) Legally, all you have to do is tell them to stop. They must oblige, however they’re entitled to send you a letter warning you that they make take legal action.

Hopefully you’ll find this article a bit of a life saver when dealing with your debt. You aren’t alone, and there are many options to take. The best advice above all is to stay calm, and keep in touch with your creditors regarding your situation. If you’ve lost a job and are actively seeking a new one, a straight forward and honest chat with them should by you some time. Some might even freeze interest while you seek new employment.

If you’d like to know more about the solutions above, speak to a financial or debt adviser near you.