Training August 2008

Debt

Training August 2008

Aims and Objectives By the end of the session you will: • Have reviewed your understanding of Debt law. • Understand how to diagnose Debt calls. • Be able to identify the correct referral option for the client.

What is debt advice? • Debt advice is the way in which we try to assist those who are experiencing difficulty in fulfilling their financial commitments • Debtor – the person that owes the debt • Creditor – the person the debt is owed to

Statistical examples • • • • • • •

1 in 5 borrow to pay household bills Average UK household debt £7,000 Average UK Mortgage debt £45,000 Average UK student loan £10,000 Less than 50% save money regularly Less than 20% make pension provision Over 1,000,000 people pay their monthly mortgage payment with a credit card.

Who falls into debt & why? • Long-term low income/benefit claimants • Sudden and dramatic loss of income • Ease by which credit is available

Liability • “Liable for” a debt means you are responsible for paying that debt • Normally only responsible for own debts • Can be responsible for debts of others - If you act as a “guarantor”

Enforceable Contract • If a valid contract exists, is it enforceable? • Agreement signatures • Regulated agreement – Consumer Credit Act – Catalogue debts

• Limitations Act 1980 • Minors • Faulty Goods

Enforceable Contracts • • • •

Undue Influence Duress Misrepresentation Extortionate Credit

Debt Reduction • Maximising Income – Benefit entitlements – Contributions from non-dependent relatives

Types of Debt • Priority debts – non payment could result in: – Being disconnected from an essential service – Losing your home – Losing essential goods or other services – Being imprisoned

• Non-priority debts – will not result in any of the above

Priority Debt • • • • • •

Rent or Mortgage Arrears Second mortgages and secured loans Tax and V.A.T. Council Tax Domestic fuel bills, (not water rates) Magistrates Court Fines

Priority Debts (cont) • Parking Penalties • Maintenance Payments • Benefit Overpayments

Priority Debts – Common Scenarios “ I have not paid my mortgage for two months and I am worried about how I am going to clear the arrears” “I am behind with my council tax and now the council are demanding I pay the full amount. What can I do?”

Non-Priority Debt • • • • • • •

Credit cards Personal loans Bank overdraft Water rates Catalogues Store cards Hire Purchase

Non-Priority Debts Common Scenarios “I have credit card debts of over £10,000 and I have fallen behind with the repayments. I am getting constant phone calls and letters from debt collection agencies, and I don’t know what to do”

Financial Statement • Concise summary of financial situation • Will be used as the basis of negotiation with creditors • If it shows that the debtor has no disposable income the creditor will often accept this and stop pursuing the debt • Creditors will often accept nominal payments towards the debt if the statement shows that this is all the debtor can afford

Financial Statement (cont) • The financial statement should contain the following information: – – – – –

All income (weekly or monthly) All essential expenditure All priority debts Disposable income Non-priority debts

Debtor Options for NP Debts • • • • •

Pro-rata payments Partial write-off Full write off Nominal payments “Time order”

Multiple Debts • If the debtor has many different debts there are a number of potential options to resolve this – Administration Order – Individual Voluntary Arrangement (IVA) – Bankruptcy

What can the creditor do? • “Money only” claim in the county court* County court Judgment (CCJ) – Recorded on debtors credit file – Affects credit rating – Makes it difficult to get credit in the future – Have to pay creditors costs

Enforcement of CCJ • If you don’t pay what has been ordered in a judgment there are several things a creditor can do: – Warrant of execution (court bailiffs) – Attachment of earnings – Charging order

Harassment • Office of Fair Trading (OFT) guidelines – July 2003 • It is illegal to harass or bully clients in the pursuit of an outstanding debt • Breach of guidelines – complaint to local Trading Standards office

Bailiffs • County Court Bailiff • Court Enforcement Officer • Private Bailiff

Powers of Bailiffs • Seizure of goods – If the court issue a warrant of execution, bailiffs can attend at your home and take your goods. These can be sold to pay off the debt.

• Warrant valid for 12 months after date of issue

Bailiff Access • Debtor does not have to allow Bailiff in • Bailiff must access premises by peaceful means – Being invited in – Climbing through an open window – Opening a door that is not locked

• Once peaceful entry gained, can enter by force on subsequent occasions • If no previous peaceful entry, can only use force when enforcing unpaid Magistrates Court Fine(s)

What can Bailiff’s Take? • Bailiffs can only levy on ‘goods’ • Can take everything except those items that are needed personally in employment, business, or vocation • Cannot levy from anyone other than debtor • Can levy jointly owned goods

Debt – Key Questions 1.

What type of debt – relating to a business or personal debt?

2.

Extent of debt – is it just the one that they are telling you about or are there more?

3.

Are there any priority debts within the debts they have – i.e. could they lose their home if they do not keep up repayments?

4.

Have they taken any action to deal with their debts (or specific situation) before calling us?

5.

Has client sought any advice? If so, what advice given?

6.

Does the client want to contest the debt?

Dealing with Debt Calls • Key bits of info needed to be able to decide where you should refer a call • Outcome will be different depending on type and value of debt, ability to repay, previous action taken • To give the client the best service you must find out all this information before deciding where to refer them • Work with lots of debt organisations so there should be somewhere to refer every caller to

Key Points on Call Flows • The call flows will not cover every Debt query • They are not a mathematical formula • They are an aid to correct referral • They must be used together with key questions and your own judgement • We can add further call flows if we get significant numbers of calls in areas not already covered

Advice and referral options • • • • • •

Telephone specialist Debt helplines Face to face advice Self help resources Ineligible clients Out of remit referrals

Specialist Telephone Advisers Specialist telephone advisers deal with; – Eligible clients – Priority debts, – Debts where court action/bailiffs involved – Challenging debts – Clients with no ability to pay debts back – Urgent cases – Client wanting advice on bankruptcy – Business debts secured on personal property / Business Debts from a Business that is no longer trading. – Small Claims* Direct transfer into queues

Small Claims Debt Cases in Scope for Telephone Advice Telephone Advice: • Clients being pursued for a debt in the small claims, • Client is a creditor seeking to enforce order through the small claims court. Excludes: • Creditors seeking to enforce a business debt. • Very Basic Administrative queries.

Consumer Credit Counselling Service (CCCS) • Charitable organisation funded by credit industry • Specialise in debt management plans but also advise on IVA’s and bankruptcy – Must have at least two non-priority debts – Can help clients with priority debts* – Clients with some income to make repayments, could be benefits (But not meanstested benefits) – Cannot help clients who are contesting a debt • Warm transfer to dedicated team

Business Debts: Business Debts Can go to Telephone Specialist when: • The client was in business (except ltd companies) but is no longer trading. • The business debts are secured against their property.

National Debtline • Government funded helpline • National Debtline deals with; – Non-eligible clients wanting to challenge debts – Non-eligible clients unable to pay back debts – Clients wanting to challenge or re-arrange debts by themselves (self help pack on website)

• Often very busy so need to manage expectations • Offer cold transfer at local rate as well as Freephone number

Business Debtline • Part of National Debtline • Deals with; – Debts resulting from business deals – Debts resulting from bankruptcy of a business

• Small helpline, often very busy so need to manage expectations • Offer cold transfer at local rate as well as Freephone number

Face-to-face Advice Some callers may specifically request faceto-face advice • Very few solicitors do debt work, mainly CAB’s so may struggle to find a supplier • Think about urgency!

Ineligible clients • CCCS and National Debtline have no financial eligibility criteria so could help • Free advice is available from NfP such as CAB or Law Centre • Client could pay privately for face-to-face advice from Solicitor • CLA Leaflet – “Dealing with Debt”

Self Help Resources • These could be given to client if they are ineligible for specialist advice. • You should also consider giving these as another option if referring to face to face. • Clients will need web access for the self help resources

Out of Scope Clients Business Debts: The Client should be referred to Business Debtline; except where client meets criteria outlined earlier. CSA Debts – dispute that child is client’s responsibility The client should be referred to family solicitor

Linked Problems & Problem Clusters Client’s marriage has broken down and he is suffering from depression. He has lost his job due to persistent absence and has no money to pay his mortgage or his bills. Client has not received housing benefit and cannot pay rent. The landlord is now threatening to evict the client unless he makes a payment.

Debt Music Quiz “Pay your rates, pay your water rates, pay your rates, pay you taxes” “You’re Lovin’ gives me such a thrill, but you’re lovin’ won’t pay my bills. Now give me money, that’s what I want” “I’m just a poor boy from a poor family” “And he who laughs last owes you sweet nothing, nothing at all”

Debt Music Quiz “Money, get away, get a good job with more pay and you’re OK. Money, it’s a gas, grab that cash with both hands and make a stash.” “I work all night, I work all day to pay the bills I have to pay, ain’t it sad, and still there never seems to be a single penny left for me, that’s too bad.” “Young married couple in debt, ever felt had?”

Debt Music Quiz “I been laid off from work, my rent is due, my kids all need brand new shoes.” “I said pretend you’ve got no money, she just laughed and said ‘oh you’re so funny’” “But what can a poor boy do, except sing for a rock n’ roll band”