Many people consolidate their debts by using a debt consolidation loan. Often, the amount of interest you pay is on your loan is a lot less than the cumulative interest you pay each month on all your debts and more often than not the amount you pay each month to your loan is less than the amount you pay toward all your debts. In theory therefore, debt consolidation loans are a great way of clearing debts. However, as I will explain in this post, debt consolidation loans are also a massive cause of peoples debt problems becoming even greater.
In my time working in insolvency one of my jobs was working as an IVA drafter. As part of any IVA proposal you must include a history of how the debtor has come to be in the financial situation they have found themselves in. The vast majority of IVA cases entailed a person pr persons spending money on credit cards taking out a consolidation loan, spending on the cards again and then taking out another debt consolidation loan and becoming trapped in a cycle of debt. The most interesting aspect of this was that for those people who had been forced each consolidation loan to borrow at a higher rate of interest due to there credit rating being harmed by defaults and missed payments caused by the ever increasing amounts of outgoing expenditure on unsecured debts.
Many people would take up to four consolidation loans and it was the these third and fourth generation consolidation loans that are the cause of so many peoples financial woes. Take for example a company like Welcome finance. Welcome finance will lend to anybody no matter what there financial situation (they even advertise this). This policy on lending to anyone comes at a price. Interest rates. I have seen credit agreements from Welcome where the level of APR has been as high as 49%. On secured loans people can charged almost three times what the borrow in interest. Although scandalous, the likes of Welcome finance flourish on peoples desperation to pay off their debts which in turn simply prolongs the agony of those suffering with debt problems.
Debt consolidation loans are best used in the first generation when, if you have a good credit rating you will be able to a consolidation loan that is at a reasonable rate of interest. The key however, is to not spend again which for many is easier said than done. I would recommend therefore, only keeping one card for emergencies. So many people simply wait only a matter of weeks to begin spending on cards again and the cycle of debt continues.
Due to the credit crunch debt consolidation loans have become harder to get hold off. Many lenders have changed their policies in regards to how they lend. Therefore, those who have missed payments (not defaulted) may even struggle to find a lender willing to provide them with a debt consolidation loan. If you can find a lender don’t simply take the loan because it is being offered. How much are you going to pay in interest? Is it more or less what you are paying at the moment? How long is the loan going to take to pay back? Sit down and work it out. In short don’t make rash decisions. Take you time and try get as many quotes as possible.
www.ausdebtsolutions.net
www.ausdebtadvice.net
Monday, June 22, 2009
Wednesday, June 10, 2009
Debt Consolidation: What one?
If you are struggling with debt you may decide its time to consolidate. The trouble is debt consolidation takes many forms and finding the right form of consolidation can be tricky. This post is designed to act as a kind of introduction to the world of debt consolidation and how it can best help you become get free. This guide is by no means exhaustive, those guides will come later.
I will assume for the purpose of this post you have already worked out what you owe. There are three options available to you which I will discuss in more detail below. The first form of debt consolidation is what I call the ‘informal’ approach. By informal I mean without the assistance of the government (that will be discussed in more detail below) and possibly without any other third parties.
Informal Debt Consolidation part one: The loan (secured and unsecured or re-mortgage
If you are a homeowner and have equity in your property you may wish to consider re-mortgaging your property to pay of your debt. Prior to the Credit Crunch this was an immensely popular form of consolidation especially as re-mortgages could be organised either for those homeowners with a poor credit history. Since the Credit Crunch has had such a crippling effect on the economy this form of consolidation is more applicable to those with a good credit history. You could also look at the possibility of taking out a secured loan against your property to pay off your debts. I am not a huge fan of secured loans. Typically, you would be better off re-mortgaging as the interest is far lower and you may actually reduce your monthly payments as the length of your mortgage will have been extended.
If you are considering re-mortgaging bare the following points in mind:
· Do not go with the first company you speak to or even your existing lender initially. Shop about and see who gives you the best offer.
· Make sure you fully understand the fees you are going to be charged. Always read the small print and ask if you are unsure.
· Be aware that if you re-mortgage you are going to extend the amount of time you are paying back your mortgage. Factor that in to any future plans you have such as retirement and the like.
· If you decide to get a secured loan make sure you have factored in the repayments to your monthly outgoings. Failure to keep up with them may result in your property being repossessed.
Debt Management plans are a massively popular way of consolidating debt, the key is to find the right company. Please refer to this post for more details regarding this matter. Debt management plans work by you paying your monthly disposable income to your debt management company who will then forward a payment onto your creditors minus their fee. The idea is that all creditors will receive a fair payment all you need do is pay each month. I cannot stress enough how important it is to remain in regular contact with your debt management company regarding your finances. Do not assume that because you are with a debt management company they will be constantly fighting your corner. Make sure you reads your monthly statements and query if payment arrangements are being out in place and interest and charges are been frozen or reduced.
Debt management companies are not really regulated in a robust fashion. Hopefully, this is going to be addressed soon however as I have mentioned before some debt management companies are awful (I have worked for them) and will take your money and do little else. If you are planning in entering into a debt management plan see it as a two way relationship. You should work together to get rid of your debts, a debt management company will do the bulk of the work but you must also help yourself in the process. Many people judge a debt management company by how much they pay in total each month. Think of it this way, the less you pay the longer it will take your debts to be paid back and the longer you will be on a debt management plan for.
Here are a few important tips to think about if you are going to attempt a debt management plan:
· Could you do it yourself? True some debt management companies do know what they are doing. However, if you are disciplined and strong willed you maybe able to do the hard work yourself.
· How long are you going to be on your debt management plan? Anything over four years (without factoring in additional interest and charges) maybe too long and you may wish to consider alternative arrangements.
· How much is your monthly management fee? Anything over 17.5% of your total monthly payment is too much.
· Shop around. Check out iva.co.uk and iva.com. Look at other forums to see what people say about the company you are thinking of going with.
· Don’t assume that because you are on a debt management company everything will fine. Make sure they are doing their job call them, badger them if you feel you are not getting good service.
· Don’t for heaven sake take out anymore debt. It will not end well.
The next form of debt consolidation is what I call the formal route. You could argue that a re-mortgage is formal, however these are just my definitions, so there! By formal I mean debt consolidation arrangements that are legally binding. The most common of these is Individual Voluntary Arrangements.
There are two forms of IVA’s. The first and most typical is an arrangement lasts for five years and involves you making a monthly payment (much like a debt management plan) after which any remaining debts are written off. The amount that is actually written off depends on your circumstances. Don’t be fooled by the advertising that will tell you wipe of X amount of debt. Please see this post and this post for more details. If your IVA proposal is accepted you are protected any further action by ALL of your creditors as well as all interests and charges are frozen. IVA’s will have an effect on your ability to take out further credit for a period of about five years after your IVA has finished.
The second form of IVA’s are called ‘one day IVA’s’. These IVA’s are for those who are able to pay a lump sum of cash into the arrangement from the beginning (normally done via a re-mortgage) and upon payment your creditors you are free to move on. You will still find it hard to take out further credit for five years and the amount of debt that is written off depends on your circumstances and how much you are going to pay in.
IVA’s have a success rate of about 60%. There are various reasons why IVA’s fail ranging from people simply not paying them to people losing their jobs. Here are a few tips to bare in mind when considering an IVA:
· Don’t go with the first company you come across. Look at this post and this post. Shop around and do read this post!
· You cannot include any secured debts, so no mortgages, secured loans car HP’s. You will also be unable to include your student loan, you must continue to pay this.
· Do you have a partner? If you do make sure they are aware of what you are doing, if you have any joint debts they will still be pursued for them so make sure they are aware of this.
· Always ask if you are unsure about anything. Don’t carry if you unsure about anything.
The other from of formal debt consolidation is bankruptcy. I often post on Yahoo answers with peoples queries regarding debt and I am often amazed by what people perceive bankruptcy to be. Many people think they are going to go to prison or they will lose all their possessions. The truth is all bankruptcy is an effective method of clearing debt if the circumstances are correct. Sometimes people are left with no other choice than to declare bankruptcy, others choose bankruptcy over other forms of debt consolidation because they decide that is the best option for them. One of the accusations debt management companies have levelled at them is that they should have told individuals with no assets to go bankrupt because it would have been better for them to declare bankruptcy. Garbage. I dealt with many people who wanted to payback something to their creditors because they felt like it was the right thing to do, and good on them for doing so.
If you decide to declare bankruptcy it is your decision. Do not listen to anyone who says it is easy and who claims to know how will it effect you. Speak to your Official Receiver who will help you through your bankruptcy, they will know how your case will effect you and will be able to help you with any questions you may have. Here are some tips to bare in mind:
· Do not under any circumstance pay for the services of a third party to assist you prepare for bankruptcy. These companies are rip off merchants of the highest order and will charge you up to three times more than your bankruptcy will cost you.
· Bankruptcy does cost. You must pay an initial fee of £450 and may have to make monthly contributions to your official receiver for a time period they see fit.
· Do exactly what your Official Receiver tells you. If you try to deceive them or cheat the system you may end up in a lot of trouble including a prison sentence.
· Your name will be placed in the local paper. Don’t be scared by this. Who ever reads the bankruptcy section anyway.
This post is just an introduction to these debt solutions. For anymore help post a question or check out:
www.ausdebtsolutions.net
www.ausdebtadvice.net
I will assume for the purpose of this post you have already worked out what you owe. There are three options available to you which I will discuss in more detail below. The first form of debt consolidation is what I call the ‘informal’ approach. By informal I mean without the assistance of the government (that will be discussed in more detail below) and possibly without any other third parties.
Informal Debt Consolidation part one: The loan (secured and unsecured or re-mortgage
If you are a homeowner and have equity in your property you may wish to consider re-mortgaging your property to pay of your debt. Prior to the Credit Crunch this was an immensely popular form of consolidation especially as re-mortgages could be organised either for those homeowners with a poor credit history. Since the Credit Crunch has had such a crippling effect on the economy this form of consolidation is more applicable to those with a good credit history. You could also look at the possibility of taking out a secured loan against your property to pay off your debts. I am not a huge fan of secured loans. Typically, you would be better off re-mortgaging as the interest is far lower and you may actually reduce your monthly payments as the length of your mortgage will have been extended.
If you are considering re-mortgaging bare the following points in mind:
· Do not go with the first company you speak to or even your existing lender initially. Shop about and see who gives you the best offer.
· Make sure you fully understand the fees you are going to be charged. Always read the small print and ask if you are unsure.
· Be aware that if you re-mortgage you are going to extend the amount of time you are paying back your mortgage. Factor that in to any future plans you have such as retirement and the like.
· If you decide to get a secured loan make sure you have factored in the repayments to your monthly outgoings. Failure to keep up with them may result in your property being repossessed.
Debt Management plans are a massively popular way of consolidating debt, the key is to find the right company. Please refer to this post for more details regarding this matter. Debt management plans work by you paying your monthly disposable income to your debt management company who will then forward a payment onto your creditors minus their fee. The idea is that all creditors will receive a fair payment all you need do is pay each month. I cannot stress enough how important it is to remain in regular contact with your debt management company regarding your finances. Do not assume that because you are with a debt management company they will be constantly fighting your corner. Make sure you reads your monthly statements and query if payment arrangements are being out in place and interest and charges are been frozen or reduced.
Debt management companies are not really regulated in a robust fashion. Hopefully, this is going to be addressed soon however as I have mentioned before some debt management companies are awful (I have worked for them) and will take your money and do little else. If you are planning in entering into a debt management plan see it as a two way relationship. You should work together to get rid of your debts, a debt management company will do the bulk of the work but you must also help yourself in the process. Many people judge a debt management company by how much they pay in total each month. Think of it this way, the less you pay the longer it will take your debts to be paid back and the longer you will be on a debt management plan for.
Here are a few important tips to think about if you are going to attempt a debt management plan:
· Could you do it yourself? True some debt management companies do know what they are doing. However, if you are disciplined and strong willed you maybe able to do the hard work yourself.
· How long are you going to be on your debt management plan? Anything over four years (without factoring in additional interest and charges) maybe too long and you may wish to consider alternative arrangements.
· How much is your monthly management fee? Anything over 17.5% of your total monthly payment is too much.
· Shop around. Check out iva.co.uk and iva.com. Look at other forums to see what people say about the company you are thinking of going with.
· Don’t assume that because you are on a debt management company everything will fine. Make sure they are doing their job call them, badger them if you feel you are not getting good service.
· Don’t for heaven sake take out anymore debt. It will not end well.
The next form of debt consolidation is what I call the formal route. You could argue that a re-mortgage is formal, however these are just my definitions, so there! By formal I mean debt consolidation arrangements that are legally binding. The most common of these is Individual Voluntary Arrangements.
There are two forms of IVA’s. The first and most typical is an arrangement lasts for five years and involves you making a monthly payment (much like a debt management plan) after which any remaining debts are written off. The amount that is actually written off depends on your circumstances. Don’t be fooled by the advertising that will tell you wipe of X amount of debt. Please see this post and this post for more details. If your IVA proposal is accepted you are protected any further action by ALL of your creditors as well as all interests and charges are frozen. IVA’s will have an effect on your ability to take out further credit for a period of about five years after your IVA has finished.
The second form of IVA’s are called ‘one day IVA’s’. These IVA’s are for those who are able to pay a lump sum of cash into the arrangement from the beginning (normally done via a re-mortgage) and upon payment your creditors you are free to move on. You will still find it hard to take out further credit for five years and the amount of debt that is written off depends on your circumstances and how much you are going to pay in.
IVA’s have a success rate of about 60%. There are various reasons why IVA’s fail ranging from people simply not paying them to people losing their jobs. Here are a few tips to bare in mind when considering an IVA:
· Don’t go with the first company you come across. Look at this post and this post. Shop around and do read this post!
· You cannot include any secured debts, so no mortgages, secured loans car HP’s. You will also be unable to include your student loan, you must continue to pay this.
· Do you have a partner? If you do make sure they are aware of what you are doing, if you have any joint debts they will still be pursued for them so make sure they are aware of this.
· Always ask if you are unsure about anything. Don’t carry if you unsure about anything.
The other from of formal debt consolidation is bankruptcy. I often post on Yahoo answers with peoples queries regarding debt and I am often amazed by what people perceive bankruptcy to be. Many people think they are going to go to prison or they will lose all their possessions. The truth is all bankruptcy is an effective method of clearing debt if the circumstances are correct. Sometimes people are left with no other choice than to declare bankruptcy, others choose bankruptcy over other forms of debt consolidation because they decide that is the best option for them. One of the accusations debt management companies have levelled at them is that they should have told individuals with no assets to go bankrupt because it would have been better for them to declare bankruptcy. Garbage. I dealt with many people who wanted to payback something to their creditors because they felt like it was the right thing to do, and good on them for doing so.
If you decide to declare bankruptcy it is your decision. Do not listen to anyone who says it is easy and who claims to know how will it effect you. Speak to your Official Receiver who will help you through your bankruptcy, they will know how your case will effect you and will be able to help you with any questions you may have. Here are some tips to bare in mind:
· Do not under any circumstance pay for the services of a third party to assist you prepare for bankruptcy. These companies are rip off merchants of the highest order and will charge you up to three times more than your bankruptcy will cost you.
· Bankruptcy does cost. You must pay an initial fee of £450 and may have to make monthly contributions to your official receiver for a time period they see fit.
· Do exactly what your Official Receiver tells you. If you try to deceive them or cheat the system you may end up in a lot of trouble including a prison sentence.
· Your name will be placed in the local paper. Don’t be scared by this. Who ever reads the bankruptcy section anyway.
This post is just an introduction to these debt solutions. For anymore help post a question or check out:
www.ausdebtsolutions.net
www.ausdebtadvice.net
Thursday, June 4, 2009
IVA Mis-selling Part One: The culture of blame.
One aspect of the whole IVA Factories debacle was the amount of IVA Miss Selling that apparently went on. The whole concept of IVA mis-selling is an intriguing one given how relative the term itself is. If you by a ticket to a football match and the game is a nil nil draw with little action or entertainment you may feel the £30 you paid to get in was not worth it. If you go the next week and are treated to a five goal thriller with you team wining in the last minute you are likely to think your £30 was better spent. The fact is you have essentially knew what you were going to before you went. You made a conscious decision to part with money on both occasions.
Now imagine an ad appears saying you could claim your money back for the game that was nil nil. The advertisement claims that your club failed to tell you the game was going to be boring. You were misled into spending money you could seldom afford in the first place. The greedy club is taking your money to pay its greedy players. The next thing a tabloid newspaper takes up the cause campaigning for downtrodden football fans, not before long everyone involved with the club is being blamed. The programme seller is exploiting people, the person on the turnstile is a thief, the hot dog seller, the players, the board, the whole thing has become a never ending circle of blame. Someone else went to the nil nil match, paid the same money and was happy. They knew what they were getting into, they paid the money and got on with it. But do we hear from these people. No. Because no one wants to hear about his or her experience because it is so average, it doesn’t create controversy.
Britain is a blame culture, more so than ever. The insolvency industry seemed to have gotten away with it until the whole ‘IVA Factories’ situation came about. Somebody, somewhere (I have no idea how or when) reached the conclusion that thousands of people on IVA’s had been miss sold there IVA which in turn created a panic amongst those on IVA’s that they had been ripped off by the ‘IVA Factories’. The internet began to buzz with individuals claiming they had been miss sold there IVA. At the time I was working as a post appointment administrator at an insolvency firm. There was a notable increase in the amount of clients calling in complaining about their IVA’s some using the immortal lines ‘I’m going to Watchdog’ or ‘we are going to sue your company’. When quizzed why they had suddenly felt like this most replied with a line like ‘we didn’t know what we were getting into and you didn’t tell us about bankruptcy’.
One client in particular called in and along with her husband eagerly encouraging her in the background began shouting down the phone about how we had ripped them off. She claimed the following:
We had not told her about having to re-mortgage her house in the fourth year.
Her creditors were not being paid.
She did not have to pay at Christmas.
Her friend was on an IVA and was paying less (this was evidence we were ripping her off).
We lied and said she would not have to pay overtime into her arrangement.
The client was about four months into her arrangement and when asked why she was complaining she advised us she had heard about people on IVA’s being mislead on the radio by a reporter (the press and IVA’s is a whole other topic I will be discussing soon). The company I worked for recorded every phone call made to clients and was excellent in terms of training staff. Every single one of the clients complaints was proved false.
The client was sent copies of all calls yet was still massively unhappy. They then claimed they had not read the proposal and would have signed anything to stop the creditor harassment. Of course I could sympathise with the creditor harassment, but not reading the proposal and not listening to what the advisor and drafter had told them? The client was still unhappy demanding payments be lowered and the length of the IVA shortened to three years. Quite rightly, the IP refused and the client was told the arrangement would continue. The client then posted on a forum about how badly they were being treated omitting every single piece of relevant information such they had been made aware of everything they were complaining about and they had not read their proposal. Within days there was host of disgusted replies tearing my company to shreds and calling for the client to take legal action.
Most incredible though was the ringleader of this online lynching was another insolvency practitioner self righteously preaching that action need to be taken against rouge IP’s ripping people off. Surely, in a time when IP’s were being savaged a more measured approach from the IP on the forum would have been sensible? But no. Here was an IP commenting on a case of which they knew nothing about and surely must have realised was perhaps very one sided. Human beings lie. If your IP refuses to give you payment break because they feel there is no reason not to make the payment what sounds better on a forum? Your IVA firm told you to pay because there was no reason not to pay; or your IVA firm still made you pay even when your sick mother needs around the clock care after her operation and the firm you work for aren’t going to pay you for the time off?
Many clients I dealt with did not blame themselves for the amount of debt they were in. It was their creditors fault for sending them credit card applications, which they filled in, sent back and then maxed out on numerous occasions. It was the systems fault for allowing the banks to lend money to people like them. They were victims of greed, and now they found out they could claim they were unfairly on an IVA and could now blame someone else (IP’s) for their ongoing misery.
Look on any consumer forum and there are people complaining. Many with good reason.. But many are simply people who WANT to complain, it is in their genetic make up to do so. The sad truth is it is these people have the loudest voice causing other people to follow suit. My advice, make your own mind up and for heavens sake READ YOUR IVA PROPOSAL.
www.ausdebtsolutions.net
www.ausdebtadvice.net
Now imagine an ad appears saying you could claim your money back for the game that was nil nil. The advertisement claims that your club failed to tell you the game was going to be boring. You were misled into spending money you could seldom afford in the first place. The greedy club is taking your money to pay its greedy players. The next thing a tabloid newspaper takes up the cause campaigning for downtrodden football fans, not before long everyone involved with the club is being blamed. The programme seller is exploiting people, the person on the turnstile is a thief, the hot dog seller, the players, the board, the whole thing has become a never ending circle of blame. Someone else went to the nil nil match, paid the same money and was happy. They knew what they were getting into, they paid the money and got on with it. But do we hear from these people. No. Because no one wants to hear about his or her experience because it is so average, it doesn’t create controversy.
Britain is a blame culture, more so than ever. The insolvency industry seemed to have gotten away with it until the whole ‘IVA Factories’ situation came about. Somebody, somewhere (I have no idea how or when) reached the conclusion that thousands of people on IVA’s had been miss sold there IVA which in turn created a panic amongst those on IVA’s that they had been ripped off by the ‘IVA Factories’. The internet began to buzz with individuals claiming they had been miss sold there IVA. At the time I was working as a post appointment administrator at an insolvency firm. There was a notable increase in the amount of clients calling in complaining about their IVA’s some using the immortal lines ‘I’m going to Watchdog’ or ‘we are going to sue your company’. When quizzed why they had suddenly felt like this most replied with a line like ‘we didn’t know what we were getting into and you didn’t tell us about bankruptcy’.
One client in particular called in and along with her husband eagerly encouraging her in the background began shouting down the phone about how we had ripped them off. She claimed the following:
We had not told her about having to re-mortgage her house in the fourth year.
Her creditors were not being paid.
She did not have to pay at Christmas.
Her friend was on an IVA and was paying less (this was evidence we were ripping her off).
We lied and said she would not have to pay overtime into her arrangement.
The client was about four months into her arrangement and when asked why she was complaining she advised us she had heard about people on IVA’s being mislead on the radio by a reporter (the press and IVA’s is a whole other topic I will be discussing soon). The company I worked for recorded every phone call made to clients and was excellent in terms of training staff. Every single one of the clients complaints was proved false.
The client was sent copies of all calls yet was still massively unhappy. They then claimed they had not read the proposal and would have signed anything to stop the creditor harassment. Of course I could sympathise with the creditor harassment, but not reading the proposal and not listening to what the advisor and drafter had told them? The client was still unhappy demanding payments be lowered and the length of the IVA shortened to three years. Quite rightly, the IP refused and the client was told the arrangement would continue. The client then posted on a forum about how badly they were being treated omitting every single piece of relevant information such they had been made aware of everything they were complaining about and they had not read their proposal. Within days there was host of disgusted replies tearing my company to shreds and calling for the client to take legal action.
Most incredible though was the ringleader of this online lynching was another insolvency practitioner self righteously preaching that action need to be taken against rouge IP’s ripping people off. Surely, in a time when IP’s were being savaged a more measured approach from the IP on the forum would have been sensible? But no. Here was an IP commenting on a case of which they knew nothing about and surely must have realised was perhaps very one sided. Human beings lie. If your IP refuses to give you payment break because they feel there is no reason not to make the payment what sounds better on a forum? Your IVA firm told you to pay because there was no reason not to pay; or your IVA firm still made you pay even when your sick mother needs around the clock care after her operation and the firm you work for aren’t going to pay you for the time off?
Many clients I dealt with did not blame themselves for the amount of debt they were in. It was their creditors fault for sending them credit card applications, which they filled in, sent back and then maxed out on numerous occasions. It was the systems fault for allowing the banks to lend money to people like them. They were victims of greed, and now they found out they could claim they were unfairly on an IVA and could now blame someone else (IP’s) for their ongoing misery.
Look on any consumer forum and there are people complaining. Many with good reason.. But many are simply people who WANT to complain, it is in their genetic make up to do so. The sad truth is it is these people have the loudest voice causing other people to follow suit. My advice, make your own mind up and for heavens sake READ YOUR IVA PROPOSAL.
www.ausdebtsolutions.net
www.ausdebtadvice.net
Monday, June 1, 2009
Bankruptcy Part One: Will I go to prison if I declare bankruptcy?
I was recently answering questions on Yahoo answers relating to personal debt when I came across someone who had asked the question ‘Will I go to prison if I declare bankruptcy?’. Before I responded with a resounding NO I began to read the replies. There were in total ten responses of which six stated the person would go to prison. How on earth had this come about, I posted a response saying the person would not go to prison and then received a torrent of abuse claiming I was spamming (even though I left no signature nor did I try and point anyone to another company) and trying to get the person who asked to go for an IVA.
Regardless of how the question was resolved I began to wonder how myths like this come to be and how I could help try and put a stop to these rumours. So, these posts are going to deal with bankruptcy and try and educate people as to how it works on the UK.
Firstly, and kind of contrary to what I have written above you can go to prison if you declare bankruptcy. However, this can only happen if you do not adhere to the terms of your bankruptcy and begin to indulge in some serious fraud then there is a chance you may go to prison. The vast majority of bankruptcy cases are fairly simple in that the person going bankrupt is doing so because they owe too much on credit cards and unsecured loans. Typically with these cases the person declaring bankruptcy will be assigned a trustees who will deal with their estate who will then effectively manage their finances for a period of 12 months.
Many people think trustees are a kind of government employed storm trooper who’s sole purpose is to ruin your life. Wrong. Trustees are for the most part (based on the ones I have met) kind, understanding human beings who are professional and fair. If a bankruptcy case is fairly straight forward in that the person declaring bankruptcy has no assets and all the debt is unsecured then the case will virtually be a case of signing some documents and making a payment for 12 months. All you have to do is do what you are told. Quite frankly if you are not capable of doing this or are so stupid you cannot understand the importance of adhering to your bankruptcies terms and conditions then you are an idiot and deserve some kind of punishment
In short, simply do as you are told and you bankruptcy will be a painless experience that will be over before you know it!
Regardless of how the question was resolved I began to wonder how myths like this come to be and how I could help try and put a stop to these rumours. So, these posts are going to deal with bankruptcy and try and educate people as to how it works on the UK.
Firstly, and kind of contrary to what I have written above you can go to prison if you declare bankruptcy. However, this can only happen if you do not adhere to the terms of your bankruptcy and begin to indulge in some serious fraud then there is a chance you may go to prison. The vast majority of bankruptcy cases are fairly simple in that the person going bankrupt is doing so because they owe too much on credit cards and unsecured loans. Typically with these cases the person declaring bankruptcy will be assigned a trustees who will deal with their estate who will then effectively manage their finances for a period of 12 months.
Many people think trustees are a kind of government employed storm trooper who’s sole purpose is to ruin your life. Wrong. Trustees are for the most part (based on the ones I have met) kind, understanding human beings who are professional and fair. If a bankruptcy case is fairly straight forward in that the person declaring bankruptcy has no assets and all the debt is unsecured then the case will virtually be a case of signing some documents and making a payment for 12 months. All you have to do is do what you are told. Quite frankly if you are not capable of doing this or are so stupid you cannot understand the importance of adhering to your bankruptcies terms and conditions then you are an idiot and deserve some kind of punishment
In short, simply do as you are told and you bankruptcy will be a painless experience that will be over before you know it!
Thursday, May 28, 2009
IVA Referral Fees
I once work for a debt management company who bought leads from other companies that did not offer IVA’s. The company is question was without doubt one of the worst debt management companies I have ever known, but even more questionable were the companies who provided them with leads.
In order for a company to propose an IVA it must have an insolvency practitioner. Many only offer debt management and will pass possible IVA leads over to companies that do, who in return will pay them a referral fee normally in the region of about one thousand pounds. This is an extremely grey area and is one that in my opinion needs urgent regulation in order to stop the unethical treatment of people in financial difficulties.
One example I came across whilst working at this company was a couple that had paid £900 (their disposable income) to a debt management company. The company had then forwarded their details to our company (who had an IP) and received a further payment of £1,000 as a referral fee and had in total received £1,900. Before the clients IVA was proposed our company operated a policy of taking an initial payment that was not used towards the clients IVA. As such the client had paid a total of £1,800 in the space six weeks of which none would be used to pay anything towards their debts.
The couple in question had called the first debt management company who had taken their details and ascertained they were eligible for an IVA. They had told them they needed to make a payment (which was calculated on their disposable income meaning that other people could be charged a substantially lower amount for exactly the same service) in order to proceed to the ‘next stage’. This ‘next stage’ consisted of giving their details to our company, who would propose the IVA. A good debt advisor will be able to identify that you are eligible for an IVA in minutes which begs the question how can these companies charge so much? The simple answer is that they are exploiting naïve people into paying for something that they don’t need to.
Companies that do this counter my argument by saying they are helping people get on the right track. However, there is also a darker side to this which I have seen in action also. Some debt management companies will ask clients to go on a debt management plan to ‘prove’ they can manage their funds after which they will be refereed for an IVA. In effect the company can take a first payment (which goes straight into the companies pocket) six months worth of management fees and then another last payment to be referred for an IVA. After which they can take another fee from the company they refer the case onto. Easy money.
When the couple who had paid the £900 to be referred to our company told me that had two young children and they had to forgo Christmas that year I felt ill. They were resigned to the fact they had been conned and told me that it was just one of those things and they would get on with it and move on. I could not get on with it and felt compelled to ask my manager if she thought it was ethical. ‘No’ came her response, ‘make sure you get their standing order back as we are down on fees this month’. For the record, the director of the company I worked for had a private number plate on his car, the last four digits of which were ‘IVA5’.
In order to avoid thieves like this make sure you doing the following:
Contact an insolvency firm directly (check IVA.com for a good list), don’t use a middle man, they will just screw you.
Ask if your first payment is going to be used toward your IVA payments. It is common to make a payment before you IVA is proposed as there is a lot of work involved in getting your IVA together. (for more information please check the next post which will be about first payments)
Don’t pay anything on your first phone call.
By bearing these in mind you might just save yourself some money and avoid the referral fee rip offs!
www.ausdebtsolutions.net
www.ausdebtadvice.net
In order for a company to propose an IVA it must have an insolvency practitioner. Many only offer debt management and will pass possible IVA leads over to companies that do, who in return will pay them a referral fee normally in the region of about one thousand pounds. This is an extremely grey area and is one that in my opinion needs urgent regulation in order to stop the unethical treatment of people in financial difficulties.
One example I came across whilst working at this company was a couple that had paid £900 (their disposable income) to a debt management company. The company had then forwarded their details to our company (who had an IP) and received a further payment of £1,000 as a referral fee and had in total received £1,900. Before the clients IVA was proposed our company operated a policy of taking an initial payment that was not used towards the clients IVA. As such the client had paid a total of £1,800 in the space six weeks of which none would be used to pay anything towards their debts.
The couple in question had called the first debt management company who had taken their details and ascertained they were eligible for an IVA. They had told them they needed to make a payment (which was calculated on their disposable income meaning that other people could be charged a substantially lower amount for exactly the same service) in order to proceed to the ‘next stage’. This ‘next stage’ consisted of giving their details to our company, who would propose the IVA. A good debt advisor will be able to identify that you are eligible for an IVA in minutes which begs the question how can these companies charge so much? The simple answer is that they are exploiting naïve people into paying for something that they don’t need to.
Companies that do this counter my argument by saying they are helping people get on the right track. However, there is also a darker side to this which I have seen in action also. Some debt management companies will ask clients to go on a debt management plan to ‘prove’ they can manage their funds after which they will be refereed for an IVA. In effect the company can take a first payment (which goes straight into the companies pocket) six months worth of management fees and then another last payment to be referred for an IVA. After which they can take another fee from the company they refer the case onto. Easy money.
When the couple who had paid the £900 to be referred to our company told me that had two young children and they had to forgo Christmas that year I felt ill. They were resigned to the fact they had been conned and told me that it was just one of those things and they would get on with it and move on. I could not get on with it and felt compelled to ask my manager if she thought it was ethical. ‘No’ came her response, ‘make sure you get their standing order back as we are down on fees this month’. For the record, the director of the company I worked for had a private number plate on his car, the last four digits of which were ‘IVA5’.
In order to avoid thieves like this make sure you doing the following:
Contact an insolvency firm directly (check IVA.com for a good list), don’t use a middle man, they will just screw you.
Ask if your first payment is going to be used toward your IVA payments. It is common to make a payment before you IVA is proposed as there is a lot of work involved in getting your IVA together. (for more information please check the next post which will be about first payments)
Don’t pay anything on your first phone call.
By bearing these in mind you might just save yourself some money and avoid the referral fee rip offs!
www.ausdebtsolutions.net
www.ausdebtadvice.net
Tuesday, May 26, 2009
Debt Solutions Advisors
If you contact a debt management company your first point of contact will be what are commonly called in the industry as an ‘advisor’. Like all salesman they have one interest; money. It is not uncommon for advisors at debt solutions companies to earn in excess of 50k a year. These people are multilingual in that they are all able to speak various dialects of bullsh*t.
Firstly, get this notion out of your head. There is no way you can solve your debt problems in a day. No way at all. Not even a chance. Before calling anyone make sure you know how much you owe. You will be asked and its best to know from the start to minimise the chance of wasting time further down the line. Once you have chosen a company to call (I would suggest calling at least three) you will mostly likely in the first instance speak to an ‘assessor’ who will take basic details off you like name, address, how much you owe etc…You will then be put through to an advisor and here is where you must be careful.
Advisors are the most reverend members of any debt management company. Why? Because they bring in the money. Some debt management companies will monitor what there advisors are saying and ensure that they are giving decent, honest advice. Others will not. If an advisor claims anything like the following politely decline any further advice:
‘We can freeze all your interest and charges today’
‘We have special relationships with creditors’
‘Our proposals are always accepted’
‘We can offer a better service than other debt management companies’
Any statements like these are nonsense, I’ve heard many different variants of the above statements and most of the time the advisor will have no idea of the inner workings of an IVA or a Debt Management Plan. A good advisor will begin by assessing how much debt you have and how much you are able to pay each month after which he will identify a solution that best suits you. Never make a payment straight away. Never. Not even if you are 100% sure that the company you are talking too and the company you are going to go with. That first payment is not going to creditors, its going to the company so don’t pay anything until you have thought about your circumstances and what the company in question are offering to do for you.
After you have spoken to a an advisor they will likely send you a welcome pack that will include a nice cover with a couple smiling on a beach or on a sofa (because that’s what people in debt do) and statement of affairs (income and expenditure details) and a letter of authority. Make sure that if you are not sure about anything you call your advisor to ask them to explain in more detail and be sure that you are happy with what you have been told.
Advisors from poorly run companies will hound you to make a payment from the minute you have put the phone down on them. If you feel that you are being given the ‘hard sell’ move to another company. The closer you get to the end of the month the more advisors will hassle you because they will be getting closer to the deadline for when they must get there first payments in.
In short use your head. If someone is telling you something that sounds too good to be true then it is. Shop around and don’t commit to anything into you are sure.
www.ausdebtsolutions.net
www.ausdebtadvice.net
Firstly, get this notion out of your head. There is no way you can solve your debt problems in a day. No way at all. Not even a chance. Before calling anyone make sure you know how much you owe. You will be asked and its best to know from the start to minimise the chance of wasting time further down the line. Once you have chosen a company to call (I would suggest calling at least three) you will mostly likely in the first instance speak to an ‘assessor’ who will take basic details off you like name, address, how much you owe etc…You will then be put through to an advisor and here is where you must be careful.
Advisors are the most reverend members of any debt management company. Why? Because they bring in the money. Some debt management companies will monitor what there advisors are saying and ensure that they are giving decent, honest advice. Others will not. If an advisor claims anything like the following politely decline any further advice:
‘We can freeze all your interest and charges today’
‘We have special relationships with creditors’
‘Our proposals are always accepted’
‘We can offer a better service than other debt management companies’
Any statements like these are nonsense, I’ve heard many different variants of the above statements and most of the time the advisor will have no idea of the inner workings of an IVA or a Debt Management Plan. A good advisor will begin by assessing how much debt you have and how much you are able to pay each month after which he will identify a solution that best suits you. Never make a payment straight away. Never. Not even if you are 100% sure that the company you are talking too and the company you are going to go with. That first payment is not going to creditors, its going to the company so don’t pay anything until you have thought about your circumstances and what the company in question are offering to do for you.
After you have spoken to a an advisor they will likely send you a welcome pack that will include a nice cover with a couple smiling on a beach or on a sofa (because that’s what people in debt do) and statement of affairs (income and expenditure details) and a letter of authority. Make sure that if you are not sure about anything you call your advisor to ask them to explain in more detail and be sure that you are happy with what you have been told.
Advisors from poorly run companies will hound you to make a payment from the minute you have put the phone down on them. If you feel that you are being given the ‘hard sell’ move to another company. The closer you get to the end of the month the more advisors will hassle you because they will be getting closer to the deadline for when they must get there first payments in.
In short use your head. If someone is telling you something that sounds too good to be true then it is. Shop around and don’t commit to anything into you are sure.
www.ausdebtsolutions.net
www.ausdebtadvice.net
Thursday, May 21, 2009
Debt Management Plans Part One: To pay or not to pay?
Would you pay someone to do something you could easily do yourself? Sounds like an easy question to answer doesn’t it? Why would you knowingly give money to someone to perform a task that can easily be done yourself? Your motivation for doing so might come from the belief that you are paying for a service, that the company you are paying the money to know something more than you don’t and there expertise is the justification for paying them in the first place.
In the case of Debt Management plans you will find there are two types of companies. The first instance, and tragically the most common type of debt management companies are those who I call ‘forwarders’. In short all they do is the following. You pay them all you can afford each month. They take 17.5% as a management fee and forward the rest pro rata to your creditors. You receive a payment a statement each month saying who has been paid and how hopefully a balance. Now, what are you paying that 17.5$ towards? Could you not do it yourself with a calculator and a book of stamps? Ask yourself, what are they doing? Debt Management are easy money and there are people who are millionaires through simply forwarding your money to creditors.
These companies are run by class A assholes. I have worked for them. They do not care about you or your situation, they care about the 17.5% commission you give them each month. They do not invest money in staff development and employ people who will simply open letters and update a computer system. I have seen this in action. They do not take notice of the fact balances are increasing or correctly log that a debt has passed out to a collection agency. They will seldom contact your creditors or you unless they have a reason to you (like you have threatened to leave). In short, they do nothing that will help you get out of debt. Companies like this are passive in nature in that they let everything come to them.
Then there are the few companies however who will help do everything for you. I know this because I have worked for them also. These companies will do everything to help you and actively contact creditors to resolve your financial situation. Your fee is being spent on a more ‘active’ approach and it does work. Key to a Debt Management plan is the relationship your debt management company has with creditors. Good debt management companies will have a dedicated creditor liaison department who will proactively be contacting your creditors to get arrangements in place and resolve any issues with your finances.
Good debt management companies are a rare breed. If you are considering a debt management plan here are a few tips to help you:
Ask what training the staff at the company have had and perhaps ask a test question such as ‘How after are your staff given refresher training on current collection procedures’. If the answer is anything like ‘No’ simply avoid.
Ask if how many cases are assigned to each administrator. A good amount is about 300 cases per administrator. Anymore and you may not get a good personal service.
Find out if the company has a creditor liaison department. If not, avoid they are not going to help you.
Don’t pay anything until you have spoken to at least three companies.
This is going to be the first post in a series about Debt Management plans and will be updated over the coming weeks.
www.ausdebtsolutions .net
www.ausdebtadivce.net
In the case of Debt Management plans you will find there are two types of companies. The first instance, and tragically the most common type of debt management companies are those who I call ‘forwarders’. In short all they do is the following. You pay them all you can afford each month. They take 17.5% as a management fee and forward the rest pro rata to your creditors. You receive a payment a statement each month saying who has been paid and how hopefully a balance. Now, what are you paying that 17.5$ towards? Could you not do it yourself with a calculator and a book of stamps? Ask yourself, what are they doing? Debt Management are easy money and there are people who are millionaires through simply forwarding your money to creditors.
These companies are run by class A assholes. I have worked for them. They do not care about you or your situation, they care about the 17.5% commission you give them each month. They do not invest money in staff development and employ people who will simply open letters and update a computer system. I have seen this in action. They do not take notice of the fact balances are increasing or correctly log that a debt has passed out to a collection agency. They will seldom contact your creditors or you unless they have a reason to you (like you have threatened to leave). In short, they do nothing that will help you get out of debt. Companies like this are passive in nature in that they let everything come to them.
Then there are the few companies however who will help do everything for you. I know this because I have worked for them also. These companies will do everything to help you and actively contact creditors to resolve your financial situation. Your fee is being spent on a more ‘active’ approach and it does work. Key to a Debt Management plan is the relationship your debt management company has with creditors. Good debt management companies will have a dedicated creditor liaison department who will proactively be contacting your creditors to get arrangements in place and resolve any issues with your finances.
Good debt management companies are a rare breed. If you are considering a debt management plan here are a few tips to help you:
Ask what training the staff at the company have had and perhaps ask a test question such as ‘How after are your staff given refresher training on current collection procedures’. If the answer is anything like ‘No’ simply avoid.
Ask if how many cases are assigned to each administrator. A good amount is about 300 cases per administrator. Anymore and you may not get a good personal service.
Find out if the company has a creditor liaison department. If not, avoid they are not going to help you.
Don’t pay anything until you have spoken to at least three companies.
This is going to be the first post in a series about Debt Management plans and will be updated over the coming weeks.
www.ausdebtsolutions .net
www.ausdebtadivce.net
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