How Will Falling Property Market Affect Those In Serious Debts?

I own a property in Bristol and have just looked on Hometrack to see if similar properties in the area are selling and if so, what sort of prices they are selling for. The results of my search were not great. A couple of properties just up the road from mine have sold in the last few months for £10k less than I bought my house for in October 2006. So what does this mean for me? Well it means on paper I’ve lost money.

But how does this affect people with serious debts? Well, if there are others in a similar situation, whereby the small amount of equity they had in their property has been eroded by falling house prices, they should take some pleasure from knowing that their creditors won’t be able to take any money from their house as there is no money in it!

However, this is not entirely the case. I have heard from some debt collectors that they will look to get a charging order from the courts, such that when you come to sell your property, there will be a charge for the amount of debt you owed to your creditor against your property. This would mean that if you owed £10k on  loan that you defaulted on, and they got a charging order on your property, you would have to redeem this charge with the proceeds of your sale before any leftover equity was passed back to you upon completion.

This could be bad news, so it would be best to consider getting your debts settled rather than allowing this to happen. If you need help settling your debts seek professional advice from these guys.

Update on Lloyds TSB letter

I have received a response from the Law Society stating that the solicitors firm in question are now trading under a different name, SCM Solicitors and can be found here on Law Society Website.

Received A Letter From MHA Collections Regarding Lloyds TSB Platinum Card

Today I received a letter from MHA Collections on behalf of Lloyds TSB regarding my Lloyds TSB platinum mastercard which has been in arrears for quite a while.

The letter statest that they are seeking payment from me to recover the arrears, currently over £1,000, as I have failed to respond to Lloyds TSB’s requests for payment. This is not entirely true, as with all of my creditors, I never shy away from answering their calls or informing them of my situation.

I have written to Lloyds TSB and informed them that I cannot afford the debt, I have even offered them a full and final settlement on it as I cannot imagine I will ever be able to afford the debt on my current earnings.

In this letter, it states that if I do not immediately forward a payment to Lloyds TSB, Sechiari Clark and Mitchell (solicitors) may commence legal proceedings against me.

According to the Law Society website, these solicitors are not registered, they have no results for them in their database of solicitors. According to the Solicitors Regulation Authority website, they have no record of this solicitors firm either. This makes me a bit suspicious, are they a real solicitors firm or are they just debt collectors pretending to be solicitors?

I would have thought that in an area of business that is regulated such as law is, the two main bodies that keep a register of regulated law firms should have this firm listed on their website. I’m happy to be proven wrong, but at the moment I cannot find any trace of this firm being a genuine solicitors firm.

Just as a bit of a sanity check, I searched for the solicitors firm that I used for my divorce and found them listed in the Law Society website, so the search facility does seem to work and contain useful results. I have sent in a request to the Law Society for them to put my fears to rest that the law firm does actually exist, so I should get a response from them soon.

I will update with a follow up to this post when I hear back from the Law Society.

Supreme Court Judgement Ruling For OFT Test Case

This was all over the news yesterday with lots of journo’s getting worked up about the fact that the ruling went in favour of the banks. This is the case of unfair overdraft charges that the banks have been applying to consumers’ bank accounts.

My personal opinion is that when I had little or no money, I would from time to time stray into my overdraft, and occasionally exceed my overdraft, but I always accepted the charges on the chin – it was my own fault for not managing my money better.

I do however think that the banks are profiteering from their consumers’ misfortune (or lack of self discipline depending on your point of view) and they should really rethink how much they charge for exceeding overdraft limits and so on. I also think there should be more advice to young people on how to manage their money such that they don’t need an overdraft. I know it’s taken me a long time to really understand how to handle money, and it’s not come easily, I’ve read countless books on personal finance, and I still think there are things I could learn.

However, what I will say is this, had I had a formal education into how to handle money whilst I was still at school, I would never have needed an overdraft or a credit card when I was an young adult. Perhaps if there was more education on how to handle money, and a more responsible attitude by both consumers and bankers, then this whole issue would not be so prevalent.

Help With Credit Card Debt

The UK is suffering from a pandemic of credit card debt that is causing severe levels of stress to individuals and an equal amount of headaches for the lenders and debt collectors involved.

If you have credit card debt that you can no longer afford, don’t panic, there are literally thousands of others in your situation. The worst thing you can do is to stick you head in the sand and hope that the problem will go away – it won’t!

Think about it rationally, the only way the problem will go away if you stick your head in the sand is if you suddenly come into a windfall and are able to pay off the debt in one go, or perhaps you may suddenly get a huge payrise at work? If both of these scenario’s sound a bit far fetched, that’s ok, they were supposed to! The reason being, to make YOU realise that YOU and only YOU can do something about your debt problems.

The first step is to take responsibility, they are your debts, so you need to do something about them if they are no longer affordable.

But what can you do about them?

If you can no longer afford to pay the minimum monthly payments on your debts, then you need to contact your creditors (lenders) and inform them of this situation. To do so, write each creditor a letter explaining why the debt is no longer affordable. Include with this letter a run-down of your household budget, showing that the total minimum payments on all of your debts exceeds the amount of disposable income you have left after all your other necessary monthly payments.

You should be able to come to an agreement with your creditors for at least six months, during which time they will freeze interest and charges, and accept a much reduced payment from you. This should give you time to figure out how you can reduce monthly costs or increase your income, such that you can start repaying your debts at the normal rate.

If after six months of paying a reduced amount each month you are still not able to revert to the normal minimum payment, then it would be advisable to speak to a professional debt management company about a longer term debt solution. This could be a long term debt management plan, with some form of plan to settle the debts at a later date, either through a full and final settlement or IVA.

Lloyds TSB Phone Call To Chase Payment

I had a rather cryptic phone call this morning from Lloyds TSB, regarding a credit card I have with them. They left a voicemail asking me to call them back. It would appear that the letter I sent them a few weeks ago with an offer of full and final settlement has been completely ignored, and they are assuming that I will get the account back to normal.

I will continue paying them what I can afford – £1 a month – on a £14k debt, I can only assume that sooner or later they will start to think rationally and will reconsider my offer of full and final settlement.

How To Improve Your Credit Rating

If you have a blemished credit record, fear not, as with all things in life, there are ways of improving the situation.

First things first, you must find out what you have on your credit record that is causing the problem. To do this, you need to sign up to a credit checking website and get your personal credit report.

Once you have this, you should be able to see a list of debts that you have, which should detail what status they are all in. This will either be up-to-date, or in arrears, and how many months, in default or CCJ registered.

If when you go through your credit file it simply states that you have some missed payments on credit cards, you shouldn’t worry too much. Once these are over twelve months old, it shouldn’t affect your ability to borrow.

If you have some arrears on your debts, you can pay off the arrears if you have the money to do so. This will put you back to square one, though it could be twelve months before you are fully clean again.

With defaults and CCJ’s it gets a bit more complicated. If you have any of these on your credit file, it is going to be more of a problem. Essentially if you have a CCJ on your credit file, you have had a judgement made against you in a county court. Until you pay off the debt, or satisfy this CCJ, it will remain on your credit file.

With a default, it is much the same as a CCJ. A default is where you have failed to make the payments under the agreement. You must be sent a default notice by the lender to make you aware of the fact. Before they send you the default notice, they should send you a warning, stating that you have 14 days to rectify the situation.

I have read on various consumer action forums that if you do receive a default notice, most likely it is not legally enforceable, as the warning and default notice are not usually within the requisite time frame. If you have received a default, it may be worth investigating to see if you can have it reversed on your credit file. The other option is to simply pay off the debt. If you settle the debt (like I have done with this Barclays bank overdraft), then the default will remain on your credit file, though the debt will show as satisfied.

Barclaycard Has Passed Credit Cards To Mercers Debt Collections

I had received a bunch of text messages from Barclaycard this week stating that I needed to make a payment ASAP to get my account up-to-date otherwise they would be forced to pass the debt onto a debt collection agency.

As I’ve already stated to Barclaycard in writing, I cannot afford to make the minimum payments on my cards as I’m not earning much money, so instead am paying a small amount each month so that they always receive some form of payment.

As a result of my not having responded to these various text messages, I got a phone call on Thursday evening from Mercers Debt Collections, who are dealing with my accounts on behalf of Barclaycard. I spoke to a very nice woman who was quite sympathetic to my reasons why I couldn’t afford the normal payments on my cards and she said they may be able to offer me a settlement figure.

Now given that last month (October) I had already settled one of my Barclaycard accounts for around 30% of the balance, I was expecting this lady from Mercers to be aware of that figure, and come up with something similar for the accounts she was dealing with – I have two remaining Barclaycard accounts, one was a Sky card that was transferred to Barclaycard.

After discussing with her manager for five minutes, she came back with figures for each account. I wasn’t massively impressed – she was only offering a 20% discount on each account – this would still leave me needing to find 80% of the balance, a figure I just don’t have access to.

I explained that I would politely decline the offer, and she then stated that I should try and get onto a professionally managed debt management plan, and she gave me a number for a company.

I asked her then when the accounts would be passed to Calders Financial, as they were the debt collections agency I dealt with on the settlement last month. She stated that as the account was only three months in arrears, it would be another three months before it was passed to Calders, and so the waiting begins…

If you would like some professional advice about your debts, I can recommend using one of these guys. They will give you a FREE no obligation consultation which should give you an insight into what solutions are available to you and what it will cost.

How To Repay Your Credit Cards Quickly

A lot of this website is advice about how to write off debts as this is an area I strongly believe in having already written off 25% of my debts and looking to get the other 75% of my creditors to agree to full and final settlements.

However, I appreciate that there are a number of people out there that may not want to tarnish there credit rating by defaulting on their debts and subsequently settling a year or so down the line.

There are ways of writing off your debts that don’t involve a full and final settlement, for instance you may have a case for your agreement being unenforceable if the agreement was made a number of years ago. There are a number of companies out there that claim to specialise in UCA’s – unenforcable credit agreements – if you chose to use one, make sure they are on a “no win, no fee” deal as from my understanding of it, only about a small percentage of claims will be viable.

If you are not interested in blemishing your credit file and your debts are not unenforceable, then there are still ways of clearing your debts quicker that can be looked into.

The best thing to consider if you have multiple creditors is to work out which is the most expensive debt, by way of the interest rate. Once you have ordered your creditors by their interest rate, simply target all of your spare cash each month on the most expensive debt.

This will get that cleared off quickest, then use the money you would have normally paid on the minimum payment, plus the excess that you have been paying and focus on the next most expensive debt, repeating the process until all of your debts have been cleared.

This method will ensure that over the life of your debts you have minimised the amount of interest you paid, and maximised the amount of capital that you could repay to your creditors.

If you are seriously struggling with your debts and cannot meet your monthly repayments, then you should consider speaking to a debt advisor about a possible debt management plan.

How To Negotiate With Creditors

When neogitating with creditors, it is very important to be mature about the situation and realise that as a borrower, you do have a moral duty to repay your creditors. However, if you cannot afford to repay the whole amount borrowed, then you need to accept that fact and communicate it to your creditors.

It is very important that in any communications with your creditors you remain pragmatic and unemotional. It’s very easy to advise people to do this, but it’s not so easy to put into practice. From my own personal experience, dealing with my “bad debts” this last eighteen months has transformed my outlook from someone that did deal with it on a very emotional level, to now someone that is very unemotional.

If you can learn to detach yourself from the emotion of the situation, you are able to think much more clearly and able to make better decisions as a result. Once you do this, you are much better able to face the reality of the situation, which in many cases is facing up to the fact that you cannot afford your debts, but you do need to sort the situation out so that you may move on in life.

Once you realise that you cannot afford to repay your debts in whole, and you want to be pro-active in clearing (settling) the debts, you need to understand this very important fact – it costs your creditors money to pursue your bad debts. So the longer the account(s) are in arrears and therefore not generating any interest (income) for your creditors, they will be keen to recover as much money as they can from you and lend that out to better credit risks where they can make an income again.

When you speak with your creditors about a full and final settlement, you should always have a maximum figure in mind that you wish to pay as settlement, but you should always aim to settle for less than this if possible.

Your starting offer should always be lower than your maximum settlement figure, so for example if you owed £10,000 on a loan, and your maxium settlement figure is £4,000, start out by offering £2,000. It’s low, but it’s significant enough that the debt collection team will realise it’s a genuine offer. Expect this offer to be rejected, so ask for a counter offer, then you are into a negotiation.

The last bit of advice I can give is that you should always be prepared to walk away should the debt collection teams’ best offer be above your maxiumum settlement figure. Remember, the longer the debt is bad, the more likely the creditor will be to want to settle, and for a lower figure as time goes by.