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Debt queries

Geeta Varma from the Consumer Credit Counselling Service

Geeta Varma from the Consumer Credit Counselling Service answers your questions on debt.

A friend who has just gone bankrupt has tried to open a bank account to have her salary paid into etc and cannot find a bank to open an account for her.

Finding myself in a similar situation, Nationwide were only too happy to help last year but not any more. She has had the same response from the other major banks she has applied to. By the same token I now find that after discharge some time ago Nationwide and others are stating that if you have ever been bankrupt then not to apply for an upgrade to an existing account or other for a debit or credit card.

When applying for a bank account following bankruptcy, it's best to look at what are termed 'basic' accounts. These are 'no frills' accounts which offer basic facilities for day to day banking needs, such as standing orders, direct debits and use of cashpoint machines. What they don't offer are the 'extras' such as overdrafts, cheque book and cheque/credit cards. When applying for this type of account, be specific about requesting a basic account without the extras. If you don't specify, it is usually assumed you want an account with all the frills and therefore may be refused. A list of currently available 'basic' bank accounts can be viewed at

Back in 1999 my business went bust and I was forced to take out an IVA (Insolvency Voluntary Agreement) to avoid bankruptcy. By 2001 I had satisfied all the debts listed in my IVA and was issued with a Certificate of Satisfaction by the Chartered Accountants handling the IVA. However, I have been trying ever since then, to get Equifax & Experian to correct the information they hold on me. Eventually I persuaded both Equifax & Experian to check with the creditors, that still showed my debts as unsatisfied and update their records. Equifax now show that all my IVA debts have been satisfied, but Experian still show a Barclaycard debt as unsatisfied and refuse to amend it unless Barclaycard tell them to. I can not find out why Barclaycard have not, or will not do this with Experian, when they have already done so with Equifax? Please advise.

You correctly state that details of debts satisfied following the completion of an IVA should be noted on credit reference agency (CRA) files, but unfortunately this does not always happen, and this can be due to various reasons. One way around it may be to write to Barclaycard requesting they provide the customer with written confirmation of the debt having been satisfied/settled. This confirmation can then be sent to the CRA with a covering letter requesting they make a note on their files of the debt being satisfied. Also, as a Certificate of Satisfaction was obtained when the IVA ended, this can be sent off to the CRA with a request for it to be noted on their files.

What happens to someone's debt on their death? Would the debts of a young person, for instance, become the responsibility of their parents?

Legally, lenders can attempt to claim on the estate of the deceased, but in practice this is quite rare due to the risk of adverse publicity.

I'm a postgraduate currently studying for a Masters in Business Management. My course will finish in September when i hope to find myself a job. I'm emailing you to ask if you have any advice for students with credit card debt.

Throughout the course of my degree and my masters I have managed to accumulate roughly 1,500 on my credit card with NatWest. My repayments on this card are ever increasing, as is the interest that I am paying on the balance. Ideally I would transfer the balance to another card so that I do not have to pay the interest for at least 6 months plus, but every credit card company seems to demand that you have a regular income.

Obviously, I can see why this is a requirement, but it therefore begs the questions of why did my bank give me a credit card when I first opened my student account? and thereafter, continue to increase my limit? and most importantly, is there any way that I can possibly transfer my balance to another card company without having to stretch the truth? which incidentally, if I did do would surely get me into trouble?

My financial situation is worrying and teamed with overdraft repayments and student loan repayments, I'm beginning to understand why there is an ever increasing debt-ridden population.

Banks often like to assume that students will remain with them well after graduating and go on to earn good salaries. Hence they're generally quite willing to allow students to have a credit card, along with a free overdraft, CD vouchers and other 'goodies'. However, once a credit card is active, there is little difference in the way a student's credit card and any other customer's credit card is dealt with, in that interest is chargeable and the monthly minimum payment is required. Card companies will also often increase the credit limit on cards without this being requested!

Firstly, the card in question should stop being used so that the debt is not increasing. Next, work out how much can be realistically paid back each month. Rather than transferring the balance to another card, contact the card company concerned to explain there is a difficulty; offer a smaller monthly payment and ask if charges can be reduced or frozen temporarily. If there are multiple debts, look at getting some professional debt advice from a free-of-charge service like Consumer Credit Counselling Service (CCCS), Tel 0800 138 1111.

I am I disabled man on incapacity benefit I have debts of over 25,000 after paying every thing out bills etc. I have approximately 12 left to pay my creditors. My question is how do I declare myself bankrupt if I can't afford the fees. I am told if I was on income support the fees would be waved.

Unfortunately, incapacity benefit is not recognised by the courts as qualifying the recipient for the discounted bankruptcy fee; hence the full fee would be payable, currently a total of 467.00. You might wish to consider contacting a grant making charity for help with the fees; most public libraries have the 'Directory of Grant Making Charities' available. Some utility companies also have charitable trusts which make grants to those experiencing financial difficulties. You could also try contacting a benevolent organisation connected with any previous employment you may have held.

Given the recent reports about the level of consumer debt and how easy it is supposed to be to get more credit, I thought you might be interested to know that I have been turned down for a John Lewis Partnership card. My husband and I have no debt at all: we own our house and our car out right and pay our credit card bill off every month. Although I have no income and applied for the card in my name, my husband earns a substantial amount of money and I was told by the person who signed me up to the card that they have a category for home-maker and would take into account my husband's income (I had to disclose his income on the application form). What I am interested to find out is whether I have been turned down for the card because we don't have any debt - I can't imagine what other reason there could be. If so I think this would be pretty ironic given how easy it seems to be for people who already have a lot of debt to get more.

What you have described is very common indeed. Credit applications are a 2 part process; the application form itself which asks about current status, income, employment etc, and a CRA check which mainly details past use of credit. As their credit card is paid off in full each month, this positive information should be reflected on the current CRA report but if there is no other use of credit (in other words no other debts), this may well be the reason why the application was declined. It may be worth requesting the lender to reconsider their decision and offer to provide any further details they might find useful.

I have 28,000 in debt - one loan and several credit cards. Although I manage to keep up payments, with my current salary I cannot foresee ever repaying this amount. I have heard about voluntary agreements as an alternative to bankruptcy. Will this help me clear my debts?

An IVA (Individual Voluntary Arrangement) may well be an option here. Simply put, an IVA is a legally binding arrangement between a debtor and his creditors whereby only part of the debt is repaid over an agreed duration, usually 5 years or less. With all options, there are plus points and drawbacks which need to be fully understood before committing to anything. The main drawback with an IVA is the set up fee which is currently around 3,000. You may find it useful to firstly get professional advice concerning your situation from one of the free-of-charge debt advice providers such as Consumer Credit Counselling Service (CCCS), Tel: 0800 138 1111.

I have been helping to sort out my mother-in-law financial affairs where she had run up huge debts on a Barclaycard credit card (3,500) and a Debenhams store card (2,100). What I find very irresponsible (if this is a word) is the fact that my mother-in-law is 74, she is on housing benefit and disability living allowance and lives in a council house, and that these companies allowed her to even have a card in the 1st place. They must have known when these cards were given to her that she did not have hardly any disposable income and to allow these debts to build up to this level is beyond belief. She had been severely struggling to keep paying the monthly payments and was constantly getting deeper into debt with other bills. She was withdrawing cash out on a Barclaycard to enable her to pay the Debenhams card. All this was making her very ill and this is why I am involved. Is this sort of situation commonplace?

It is not uncommon to see people who are more vulnerable, eg, elderly individuals, struggling with high debts. This is usually due to gradual credit limit increases (very likely when the payment history is regular), and the escalation of balances due to interest charges when balances are not cleared in full. It's very easy to blame creditors but if they were to flatly refuse anyone credit facilities who is over a certain age, or whose income is below a certain level, they would be subjected to even more criticism. Creditors like to make their products available to as many consumers as possible, in order to maximise their business opportunities. Unfortunately, consumers sometimes find their credit commitments become unmanageable and that is the time to seek expert debt advice.

I don't know if you can help with this query, but I have a loan with Northern Rock which I am intending to pay off early (half way through a seven year term). I have been advised that this loan is subject to front loaded interest. Am I right in thinking that front loaded interest is no longer allowed if you settle a loan early? When I phoned Northern Rock to get a settlement figure, there was no mention of this being abolished and my settlement figure seems to be subject to it - ie I have paid seven years worth of interest even if I pay the loan off early. What can I do?

It is still quite common for companies to 'front load' the interest charges on loans and so when a customer asks for a settlement figure, this amount can turn out to be much higher than the amount borrowed. This seems unfair but it is perfectly legal. There's very little that can be done in this situation as the creditor will quite rightly point out that when customers enter into such agreements, they are made aware of the repayments, interest and total cost of the loan.

What is the situation with student loans and bankruptcy? Are they wiped out?

Before July 2004, all student loans used to be written off in bankruptcy. But since1st September last year, the legislation has changed and all student loans are now excluded in bankruptcy and would still be outstanding.

Some months ago, you discussed a new law banning discrimination of individuals dwelling at an address that has been "black-listed" for financial difficulties. My grandson is currently affected by this situation. What can they do about this?

It is correct that information about use of credit now only relates to an individual and not to an address. Therefore, if a credit application has been refused, it is unlikely to be due to the address alone. It is more likely to be because the electoral roll information may not have been updated by the CRA, especially if the move to a new address was fairly recent. Some local authorities may only be submitting their updated electoral roll information to CRAs periodically or in batches. This problem usually resolves itself in time.

The opinions expressed are Geeta's, not the programme's. The answers are not intended to be definitive and should be used for guidance only. Always seek professional advice for your own particular situation.

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