Debt advice blog

Debts to council tax can feel like the most complicated and frightening debts to manage. As a priority expenditure council tax must be paid before other debts like credit cards, payday loans and personal loans. Council tax is paid to your local Government body to help your local area pay for services. Many people we help at Debt Support Trust can’t afford to pay their council tax because of their other unsecured debt problems.

Council tax departments may not contact you as regularly as your credit cards and other debts but they are vitally important. The council can take action to recover their money which we will discuss.

If you have debt problems with your local council then speak to our charity advisors at Debt Support Trust today. We’ve helped thousands of people with council tax debt issues. You can call Debt Support Trust on 0800 085 0226.

Council Tax Debts

Council tax debt problems are some of the quickest to become a concern. A reduction in income can mean paying for council tax is harder. People who are unemployed will get a discount, as will people who are living as a single person in a property. At Debt Support Trust people in debt often have to spend 10% of their income on their council tax, which can seem like a lot when there’s rent/ mortgage, food, gas, electricity and transport to pay for too.

Recent statistics show that 17% more people are struggling with council tax debts, compare to the same period last year.

Your arrears will quickly be passed to a debt collector, even if it’s just one monthly you’ve accidentally missed. The debt collector will want to organise a payment plan. If this payment agreement is broken then they will take further action against you to recover the money.

Council Tax Wages Arrestment

One of the actions some councils are taking when arrears exist is to organise a wages arrestment. This involves the council going to court and getting permission to take a percentage of your wages.

If you have a wages arrestment your employer will pay the money directly to the council each month. This means they are guaranteed to get their money back each month. You want to avoid a wages arrestment because it can be a substantial amount of your income and cause further money worries.

There are some local councils that won’t lift a wages arrestment once it’s in place, even if you’re planning to enter a debt solution like a debt management plan.

Help with Council Tax Arrears

It’s important to speak to a debt advice charity if you’re struggling with arrears. There are routes to resolve money worries which include payment plans, debt solutions and short term token payments.

The council will want their money back but they will be supportive and understand that you could have short term money issues.

If you need help to understand your options you should first speak to the local council about what they can do. Most councils will have a recovery or debt collection department. If you have council tax debts plus debts to overdrafts, loans and credit cards then speak to Debt Support Trust about the solutions available to you.

Complete the debt test or call 0800 085 0226.

Council Tax Debt Management

Your local council may have a debt management and debt advice department so you can contact them directly. They will explain their recovery process and help you come to an arrangement to repay the arrears.

If you agree a payment plan you should ensure to meet these repayments as you could only get one chance at a payment plan. These payments will be on top of your existing council tax liability for the current year. So, if your council tax is £130 per month then you could agree to pay £70 extra to pay off the arrears, meaning you have to pay £200 per month.

Help with council tax arrears is available from Debt Support Trust on 0800 085 0226. We work closely with many councils and can help you arrange payment plans or enter a debt solution which will resolve all of your debts, making paying council tax affordable in the future.

New research has found that unsecured debt problems are affecting children with 2.4 million children living in a household with a debt problem. The research also found that a further 2.9 million households were on the breadline and close to struggling to meet the monthly outgoing payments.

Many families tell Debt Support Trust that they would be OK if they didn’t have to manage their contractual obligations to their debts. Most families have to pay hundreds of pounds to their creditors every month just to meet the minimum repayment on their credit cards, loans and overdrafts.

The survey by The Children’s Society of 2,000 households where there is at least one dependent child found the average unsecured debt was £3,437, with one in five households in debt. However, debt solutions are available which can help.

Problems for Children with Debt

Children have commented that their family finances make their embarrassed and some children have experienced bullying as a result of the lack of money their family has.

The study shows that children are impacted by both the financial issues which arise from being part of a poor family and the societal stigma of being in debt. However, 49% of children did say their parent’s financial situation didn’t make them feel embarrassed.

Solutions to Resolve Debts

There are solutions which can resolve debt problems. Most people who are in employment will be able to contribute towards their debts each month, however the minimum payments have become too large and this is where the problem occurs. The minimum payment to debts may have been manageable once, but the costs of living, reduced income or consistent borrowing has made it impossible to make ends meet.

The options are

1. Continue to struggle: Many people continue to pay the debts because they don’t want to admit there is a problem. This is not generally recommended as it will delay the date when you are finally debt free.
2. Ask Friends/ Family: You could ask friends and family to see if they could help you with advice or money to repay the debts
3. Call Debt Support Trust: You can call our charity on 0800 085 0226 or complete a debt analyser for confidential help.

There are lots of different debt solutions which could help a person become debt free. It’s about understanding each option – the pros and cons – and making a decision based on what you think is the best for you. Speaking to Debt Support Trust is one way to get the debt advice you need and discuss the options.

A logbook loan or a bills of sale, you are effectively borrowing money and repaying the debt with interest, like any other credit agreement. However, if you fail to repay the loan then the company could seize your car by way of payment.

The interest rates on logbook loans can be very high and some people have complained about paying 6 times the initial amount borrowed in interest. Once the credit company has agreement that they can take your car as payment, they do not have to go to court to obtain permission, they can simply remove your vehicle.

If you have debt problems with logbook loans you can speak to Debt Support Trust on 0800 085 0226 or submit an email enquiry to contact@debtsupporttrust.org.uk.

V5 Logbook Loans

Your V5 form is your registration information for your car and should be stored safely. You can change the registration details on a V5 form to a new owner and this is what logbook loans companies do if you fail to meet the repayments.

Unlike a credit card or overdraft which are unsecured debts – the repayments are not tied to an asset – a logbook loan is secured against the asset, in this instance, a vehicle. Failure to repay the loan means the company keep the v5 or logbook and remove your car.

The debt level of a logbook loan can rise to high levels, depending on the value of the car and we’ve experienced £12,000 logbook loan debts at Debt Support Trust.

These types of loans are not as regulated as other forms of credit, like payday loans, so there is an increase in the number of people seeking financial support via the v5 loans.

Logbook Loan Problems

One known issue is that some people are borrowing money against their car and then selling the vehicle. Despite having sold the vehicle you are still responsible for repaying the debt. In this instance, people who have bought a vehicle where there has been an outstanding logbook loan remaining, have been left frustrated that their car has been repossessed.

This is just one problem with logbook loans but is a frequent issue which arises with these types of loans in the UK.

If you have a query about a logbook loan problem and need debt advice, then speak to Debt Support Trust on 0800 085 0226 today.

New debt figures released by the British Bankers Association have shocked many people by showing Bath as the debt capital of the UK.

The new statistics from the BBA broke down the amount of unsecured loans by postcode, showing BA1 9 as the highest amount of debt per person.

According to the report, each person in the BA1 9 postcode owes an average of £2,311 in unsecured debt, with an overall debt of £129, 701.

Debt By Postcode

Overall the postcode with the largest unsecured debt was SE28 8 with £13,531,774 owed, but this is in the South East London region.

The G75 8 in Glasgow had the second highest number of overall unsecured debt with £12,297,836, which like Bath has a lot of properties.

Many experts argue the reason these regions have such large unsecured debt is due to them having more assets such as property or vehicles.

Overall UK Debt

• Overall almost £30bn is owed in personal loans across the entire UK
• £901bn is stilled owed on mortgages, almost half (44%) is just in London and South East England
• London is the region with the most unsecured debt with almost £5bn owed

Dealing With Debt

Whether someone has a property which they are using to borrow or taking a personal loan to repay other debts, it’s possible either could be financially struggling.

We have experience of people who have borrowed an unsecured loan to repay another debt but only to get a lower interest rate and are financial secure.

In other cases we’ve witnessed people who have a property and they borrow in order to pay the mortgage because they are struggling financially.

It would be easy to assume affluent postcodes would borrow more money because they can afford to repay it, however that’s not always the case.

While they may have an asset, such as a house, to rely on should debts become too much that would also rely on the housing market remaining steady.

If anyone is struggling with making their credit commitments it’s important to seek debt advice on 0800 085 0226.

When searching for help regarding debt a common belief is that bankruptcy is the only advice available. In reality, there are numerous debt solutions which can help resolve money worries. At Debt Support Trust our charity advice line offers debt help on a wide range of solutions. So, if bankruptcy is the correct solution you will be speaking directly to our bankruptcy advice line and will be offered tailored advice based on your specific financial situation.

If you would like to check whether bankruptcy is the right debt solution for you, why not try the 10 minute debt test? Or you can call our debt charity advice line specialists today on 0800 085 0226.

Should I Go Bankrupt?

Before deciding whether you should or shouldn’t go bankrupt, you must seek impartial debt advice from a registered debt charity. This ensures you’re not making the wrong decision which could affect your employment, assets or credit file.

If you are struggling to meet your minimum contractual repayments to your debts then bankruptcy could be the correct option. However, there are other factors to consider when determining the right debt solution for you. For example, do you have any assets with equity, such as a house? If so, you could be asked to sell your house in bankruptcy to repay the debt. In other debt solutions you could retain your property and become debt free.

If your are in employment then you could be asked to make a contribution to your bankruptcy each month under and Income Payment Order. This arrangement lasts for 3 years, despite bankruptcy only being 1 year.

There are other pros and cons of entering bankruptcy to deal with debts. Bankruptcy may not hold the same implications for one person as it does for another. There are also two routes to enter bankruptcy so speak to our bankruptcy advice line today on 0800 085 0226 to get specific bankruptcy help.

Typical Bankruptcy Questions

There are often questions that people considering bankruptcy have. Some of the most common questions are:

What is the cost of Bankruptcy?

Bankruptcy costs vary depending on the route you’re deciding to enter. If you are suitable for a DRO route to bankruptcy then the cost is £90. Otherwise the cost is £700 at the local court. If you’re on a low income then the bankruptcy application cost at your local court could be reduced to £525.

In Scotland, the bankruptcy application cost is £200.

How do I make myself bankrupt?

You can make yourself bankrupt by going to your local court or speaking to a money advisor who can help you organise a DRO. You should give Debt Support Trust a call on 0800 085 0226 to discuss which route is best for you.

Can you help me with bankruptcy?

Yes. We can help you determine whether bankruptcy is the right debt solution, which route is suitable and even help with paperwork.

You can email us for assistance contact@debtsupporttrust.org.uk or call 0800 085 0226.

Somebody else is making me bankrupt, what can I do?

When somebody else is making you bankrupt you should seek debt advice as quickly as you can. Time is generally of the essence to help you avoid bankruptcy, if that is what you want. If somebody else is making you bankrupt then you do not have to pay the bankruptcy fees, which would save you money

The latest TV ad from controversial payday loan company Wonga has been banned by the Advertising Standards Authority.

The ban comes after the ASA received 31 complaints from from viewers claiming the ad was “misleading”.

Payday loan companies have been criticised for getting people into debt through high interest repayments.

Some people argue it’s far too easy for people to take out payday loans, with most not doing credit checks.

The Wonga advert claims to explain how the interest rate they have to show is almost misleading about the real cost.

The advert says,

“Right, we’re going to explain the costs of a Wonga short-term loan”

“Some people think they will pay thousands of per cent of interest”

Many viewers felt this was an attempt by Wonga to “trivialise” RAPR and the real cost of taking out a payday loan

The recent complaints over the Wonga advert were due to four main points; the ASA listed these as,

1. Most complainants challenged whether the ad was misleading, because it confused as to the interest rate applied to a Wonga loan
2. Some challenged whether the ad was misleading, because it implied that the representative APR (RAPR) was irrelevant to a short-term loan.
3. Some challenged whether the ad was irresponsible, because it encouraged viewers to disregard the RAPR and thereby trivialised the decision to take out a short-term loan.
4. A few challenged whether the ad breached the Code, because the RAPR was not sufficiently prominent.

The ASA agreed the advert was not incorrect but did feel it was misleading, they said,

“Whilst we acknowledged that viewers taking out and repaying the loan within the stated time period would not repay 5853% of the loan, we were nevertheless concerned that viewers would be left without a clear understanding of how the information in the on-screen text could be applied to a Wonga loan, given the ad’s assertion that the representative APR was not indicative of the cost of the loan.

Before anyone takes out a payday loan it’s important they have a clear strategy on how they will repay the high interest loan.

If it’s possible to borrow from friends or family this route should be taken because it will save them money and is less likely to lead to debt problems.

New research commissioned by the Sutton Trust has found that almost three quarters of students completing their studies will never repay all of the money they borrowed. Most people will be repaying their student loans well into their 40s and 50s as the vast majority fail to repay their loan. While student loans are different to regular unsecured loan debt problems, it still represents a problem for society with increasing numbers of people becoming indebted.

Student loans are used to cover living costs and tuition fees in England, Wales and Northern Ireland. The Institute for Fiscal Studies wrote the recent research and considered the knock-on impact of tuition fees increasing since 2012.

The study suggested that the average student in England would leave further education owning almost £45,000.

Student Debt: What Has Changed

The cost of tuition fees has increased and this is directly impacting the amount of money students have to pay in order to gain their qualification. The change in debt has risen because of the new fee structure rising on average from £24,754 to £44,035.

The tuition fees are the main cause of concern for students in England with fees rising from £3,000 in 2011 to £9,000 in 2012.

However, students don’t have to repay the loan until they earn at least £21,000 per annum, whereas it used to be £16,910. The interest rate on the loan has increased too. The new interest rate is 3% which is lower than many unsecured loans, however if the loan isn’t being repaid monthly then the debt is simply increasing.

Can Student Loans Be Written Off?

The short answer is yes, student loans can be written off. A new style student loan can’t be included in a bankruptcy, IVA or Trust Deed but they could still be written off.

If you have not repaid your loan after 30 years of borrowing the money then the outstanding balance will be written off. You have to pay a percentage of your income above the threshold back to the loan once you’re in employment, however outstanding amounts after 30 years will be legally written off.

The new research suggests that 73% of people will have some of their student loan written off, compared to 32% of people in the old system. The typical amount of money which could be written off is around £30,000.

If your first loan was taken out during the 2005/06 academic year in England, Wales or Northern Ireland then any outstanding loan is written off aged 65, instead of the new 30 year rule.

In Scotland, if your first student loan is pre 2005/06 then any loan remaining to be repaid is written off aged 65. From 2006/07 any debt to student loans will be written off after 35 years.

For some debt solutions, coming into inheritance can result in people being made to offer their windfall into the debt solution.

If someone knows they are going to be coming into money it can change which debt solution is best for them and should be made clear when receiving debt advice.

Inheritance & Insolvency Solutions

An insolvency debt solution is where a person is unable to repay the full amount owed or meet their monthly contributions towards their debt on time. It’s these solutions which could see people lose any inheritance which is left to them by a loved one.

In an IVA, Trust Deed or Bankruptcy solution, any inheritance, lottery win or general windfall must be provided for the benefit of the creditors. This means you could repay all of the debt and any fees or charges.

Bankuptcy/Sequestration

Both the English and Scottish version of bankruptcy will affect a debtor the same way in regards to inheritance.

When someone enters bankruptcy or sequestration any disposable income or available equity must be made available throughout the term of the solution. So, if somebody enters the solution and comes into money during the term of the solution, they would likely be asked to provide this towards the bankruptcy specialist.

While the debt solution will last for 1 year in bankruptcy, any available money received within that period must go towards repaying the debt.

IVA/Protected Trust Deed

When entering either an IVA or a protected trust deed a person in debt is agreeing to repaying what they can afford over a fixed period of time. This means the payments can change during the debt solution term.

A trustee will be appointed to monitor the finances, negotiate with creditors and essentially take control of their assets.

It would be the job of the insolvency specialist to make sure the creditors got back the money they were due and anything extra, if that was possible.

Anyone coming into inheritance while in an IVA or protected trust deed will need to pay it towards the debt along with the fees for the debt solution.