Page last updated at 16:00 GMT, Sunday, 10 January 2010

Personal debts: your questions answered

Kevin Boon
Kevin Boon, Consumer Credit Counselling Service

Personal debts in the UK, including mortgages, still stand at nearly £1.5 trillion.

The usual extra spending at Christmas will have made this worse for some people.

And repossession and personal insolvencies are still widely predicted to rise this coming year.

In the latest of our "ask the expert" series, Kevin Boon of the Consumer Credit Counselling Service (CCCS), answers your questions about dealing with debt.


Q1. How do you deal with companies who claim you owe a debt but despite requests to provide details refuse to co-operate? Can debt companies hold you to ransom by ruining your credit rating? If not, what remedies are there to force the issue? S. Saint from Northampton.

If you are being chased for a debt that you do not owe, and you have written to the creditor to inform them of this, you could make a complaint to the Office of Fair Trading (OFT) which sets out guidelines which creditors should follow.

It is up to the creditor to prove you owe the debt not the other way round. Before commencing any legal proceedings, the creditor would have to produce a copy of the agreement. As the agreement is not yours, this would be impossible.

Creditors have an obligation under the Data Protection Act to make sure that the information on an individual's credit file is up to date.

So, if information has been added to yours in error and the creditor refuses to correct this, then you should ask the Information Commissioner's Office to investigate.

Q2. I have a number of arrangements in place with various creditors for credit cards and unsecured loans. The only issue I have is that one card firm will not accept any proposal I put forward and seem intent on taking the matter to court. If we do go to court, can the court force me to pay the full amount of approximately £4000 or will they take my current income and situation into consideration, and allow me to pay approximately £80 per month, which is what I have offered?Gary Haran from St. Neots.

Should the card firm want to pursue the debt through court you will be given an opportunity to make an offer based on what you believe you can afford on a monthly basis.

You would be sent a court document through the post known as an 'N1' form and if you admit to the claim you would fill out 'N9A' section within 14 days.

The form would ask you to complete a financial statement based on your income and expenditure as well as what you pay to your other creditors.

Once you have sent this back to the court, if the judge felt that your offer of payment was fair, taking into consideration your other costs, then your offer would be accepted.

Providing you kept to this agreement, the card firm would not be able to force you to pay back anything more than the court had agreed each month.

Q3. My girlfriend has amassed approximately £15,000 of credit card debt. I believe she has struck a deal with the card issuers concerned, to fix interest rates and attempt to reduce the debt. My concern is whether there are ramifications for my credit rating or ability to get a mortgage, bearing in mind that she is also on the mortgage. Could I in time be pursued for some or all of the debt, if her debts get even more out of control? Concerned of Poole.

Only debts that you are jointly liable for will affect your credit rating, and only then if they are in arrears or default.

Similarly, you can only be pursued for the outstanding balance on debts that are solely yours, or held jointly with your partner and for which you are are explicitly named as being responsible.

Therefore, regarding your girlfriend's credit card debts, unless you are a joint card holder on any of your girlfriend's accounts, you can not be pursued for the balance at any point, now or in the future.

Check the credit agreement for the debt in question to see who is named on it; your girlfriend can request copies from her creditor if necessary.

As for your joint mortgage, provided you are up to date with payments, your credit rating and hence your ability to obtain credit will not be affected.

If however your mortgage is up for renewal or you change your mortgage lender, this could mean that you will both be subject to a credit reference search. If your girlfriend's credit rating has been affected, this could make it difficult for you to obtain the mortgage.

If you have spare capital once you have satisfied your own credit commitments, then you could help her to reduce her credit card balances which will increase her cash surplus faster, and reduce the risk of defaulting on your mortgage.

Q4. I have a £97,000 tracker mortgage at 0.49% above base rate. I also have enough money to cover the debt just at the moment. It would be foolish to pay off the mortgage now but what would your advice be about when to pay it off eventually? I expect in the next couple of years there is going to be a bout of inflation and higher interest rates.Phil Goodwin of Stoke-on-Trent.

As a general rule of thumb, if the interest you are paying on debts is higher than the interest you are making on savings, it is more sensible to use the savings to clear the debts, thus saving money on interest.

I would recommend that you seek advice from a reputable financial advisor who will be able to look at your options in detail and who should be better placed to use financial forecasts.

Q5. I am being pursued by a debt collector for unpaid council tax on a property that was repossessed. I am loath to pay this. I have been advised that non-payment constitutes a criminal offence. But I wonder how this is effectively prosecuted if so, and should I pay it before this escalates further?GNY from Herts.

If the council tax relates to a time when you still owned the property, then the responsibility lies with you to pay.

The only exception would be if you agreed with the council at the time that you could pay a reduced amount, or, in some cases, nothing at all.

If you had not agreed either of these with the council, you will need to make an arrangement to clear what is owed.

If you refuse to pay, then the worst possible enforcement would be imprisonment for 28 days.

However it is more likely that the council would look to take what is owed directly from either wages or benefits.

My advice would be to come to an arrangement straightaway as the longer you leave it, the more likely that the amount you owe will escalate with additional costs.

Q6. Can bailiffs break in to your property to seize your possessions? Does this apply to bailiffs from a debt collection agency (DCA) or court bailiffs sent in under a warrant of execution? I am paying my creditors a reasonable sum of money each month, but they have invoked debt collection companies and I am being harassed by one DCA telephoning me between one and three times per day. I have made a formal written offer to the DCAs to pay a certain amount each month, yet they will not respond to my written letter and they seem absolutely determined to contact me by phone, even though I will not answer. I will only engage in communication in written form. What advice can you give me?David from Bracknell.

Debt collection agencies act on behalf of creditors to collect outstanding money. They can do this by letter, telephone call or by sending a debt collector to your property.

A collector does not have the powers of a bailiff so they can not enter your home or take any of your belongings.

For a standard credit debt such as a personal loan, credit card or store card, the creditor can only apply to court for a bailiff if you have defaulted on a county court judgement.

Even when a debt has got to this stage and bailiffs visit your home, they still can not break into your home. You should keep all doors and windows locked and not let them gain 'peaceful entry' as this will allow them to levy your goods and seize them on a further visit.

With regards to your arrangement, if this is all you can afford and it is a fair amount then stick to this and do not be pressured into paying more than you can afford.

If you feel that the calls are causing undue stress, then you need to put this in writing and ask for your telephone number to be removed from their systems.

If the creditor continues to contact you via the phone, then you could seek advice from the OFT which is responsible for ensuring compliance with its debt collection guidelines.

Q7. Is there any way that you can approach a credit card company to ask them to lower the interest rates? I am thinking of loans I have had for a year or two, where I have always met the repayments but the total never goes down. I cannot claim hardship in not being able to meet the minimum payments, but I cannot exceed them and so I am trapped with high interest rates. Christine from Hull.

It is very unlikely that the creditors will agree to reduce the rate of interest for you as this would have been agreed when you signed your agreement.

You could try using balance transfers to reduce the interest rate. Many credit card companies have an introduction rate such as. 0% APR for the first twelve months.

If you did go down this route you would have to be really strict with yourself and not to use the card in any other way.

Another thing to take into account is the interest rate after the promotional period has ended, as this normally increases to a much higher rate.

0% rates are generally only available for people with a good credit score, so if you are not eligible for the rate then you could tackle it from another angle.

If you have a number of debts then you can use your surplus in your budget to clear the higher interest accounts first. This would mean in the long run you would not pay as much interest.

If you want to clear the debts as soon as possible you need to look at maximising your surplus income. This can be done either by reducing your costs or increasing your gross income.

Q8. I have a Virgin credit card I can barely manage because the interest rate is so high. I have to miss payments some months because I do not have the cash to pay the interest each month. But because I have missed payments I cannot transfer to another credit card with a lower interest rate. It is a never ending cycle - how do I break it? Nicola Hannah from Pontefract.

From the information you have given, it sounds like you have a debt problem in general.

I would recommend that you call the Consumer Credit Counselling Service for advice.

We will be able to help you put together a detailed budget. The benefit of putting together a budget is that you will be able to see after paying all your priority costs (rent, council tax, food etc) how much you have left to service your debts.

If there is a shortfall here we can then talk through your different options.

If you would like an appointment please call our helpline free on 0800 138 1111.

Alternatively we do have a free online debt advice facility called Debt Remedy

Q9. I owe approximately £6,000 that I took out in university loans. I am in the process of saving to buy a house, but I was wondering what would be the best way to clear that debt before applying for a mortgage? I currently live with my parents and I do not plan on getting a house for at least two to three years. Should I just use my savings and clear this debt? I have enough to clear it - however I was using the savings as a pillow in case of an emergency. Martin from Belfast.

Assuming that you are not referring to student loans, the interest accruing on your debts will most likely be more than what you are earning on your savings.

If this is the case then it would make sense to clear debts first. This would also mean once the debts are cleared you would be able to save more and it would be a fresh start for you in your new home.

If they are student loans, repayments will automatically be deducted from your salary by your employer according to how much you earn. The interest rates are so low that there is no point in paying these off any earlier.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.



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