The number of debt management plans that are agreed each year is estimated to be 100000. The number of insolvencies in the UK hit a record high over the third quarter of 2009. We continue to buy on credit, run up credit card bills and take on loans that we might realistically struggle to pay back.
As a society, our debt management skills aren't so hot.
But should the government not lead by example? Instead of running us up into billions and billions and billions of pounds in debt - debt that taxes will have to pay back - should there not be an alternative approach.
Just a thought really. How can the individual be expected to be more finance savvy when our leaders are incapable?
Sunday, 22 November 2009
Friday, 13 November 2009
Is the Debt Management Industry be Regulated?
The Office of Fair Trading announced last week that it will hold a review of the debt management industry.
But as well as this, back in September 2009, the Government announced plans to discuss the possibility of regulating the industry to bring it into line with other finance sector businesses, such as mortgages and insurance.
I believe this is a phenomenal idea. The debt management industry needs regulation to prevent the most financially vulnerable people from being exploited for the gain of the greedy.
The sooner the better, in my opinion. Anyone providing debt management plans, debt relief orders, IVAs and other types of debt solutions should, I believe, be entirely regulated and the poorly operating businesses should be flished out of the industry altogether.
But as well as this, back in September 2009, the Government announced plans to discuss the possibility of regulating the industry to bring it into line with other finance sector businesses, such as mortgages and insurance.
I believe this is a phenomenal idea. The debt management industry needs regulation to prevent the most financially vulnerable people from being exploited for the gain of the greedy.
The sooner the better, in my opinion. Anyone providing debt management plans, debt relief orders, IVAs and other types of debt solutions should, I believe, be entirely regulated and the poorly operating businesses should be flished out of the industry altogether.
Tuesday, 10 November 2009
Credit Card Debt - Who Should We Blame?
The credit card industry has come under some fierce criticism for what has been deemed over-lending to those who will realistically always struggle to pay it back. And it's true that, prior to the recession that began in 2008, it was always that little bit too easy to get a credit card. In fact, companies like Capital One used to send me junk mail offering me one without me even applying? What's that all about? They offer you one when you open a student account aged 18 - and of course an 18 year old has an untarnished credit record and thus has no problem getting one. But this, in my view, is entirely unethical and irresponsible.
But should we really place all the blame onto the credit card companies? It's true that they have acted irresponsibly in a number of ways and that they are often all too happy to dole out cards with excessive interest rates as though they were sweeties at Christmas time. But where do we take personal responsibility? Where is the line at which we hold our hands up and say that we are fundamentally responsible for our own finances?
Granted, it's a little different when you're 18 and having what seems like free money thrown at you. But by 21, 25, 30... 40.... should we not know better?
I am all for responsible lending. But I am also all for a level of responsibility over one's own finances.
Take control of yours.
But should we really place all the blame onto the credit card companies? It's true that they have acted irresponsibly in a number of ways and that they are often all too happy to dole out cards with excessive interest rates as though they were sweeties at Christmas time. But where do we take personal responsibility? Where is the line at which we hold our hands up and say that we are fundamentally responsible for our own finances?
Granted, it's a little different when you're 18 and having what seems like free money thrown at you. But by 21, 25, 30... 40.... should we not know better?
I am all for responsible lending. But I am also all for a level of responsibility over one's own finances.
Take control of yours.
Debt Management Industry to Face OFT Review
Last week, the Office of Fair Trading announced that it will be carrying out a mass review into the debt management industry. It will be the first review since 2003, which in itself is pretty shocking in my opinion. And of course, since 2003 much has changed. There are now a number of online only companies, huge numbers of brokers have sprung up and so too has the number of complaints from consumers. And this is what has initiated this review.
So, in essence, the way it will work is that OFT will send out questionnaires to all the debt management companies. On top of this, consumers can have their say online and debt charities will be asked to give their opinion on how they believe debt management companies are complying with the minimum standards set.
All this seems to point to the fact that the debt management could soon be regulated in much the same way as the loans or mortgages sector is. The Ministry of Justice is debating that currently actually.
It would probably benefit consumers no end, in my opinion, for the debt management industry to come under regulation. It would put an end to the rogue traders in this sector.
So, in essence, the way it will work is that OFT will send out questionnaires to all the debt management companies. On top of this, consumers can have their say online and debt charities will be asked to give their opinion on how they believe debt management companies are complying with the minimum standards set.
All this seems to point to the fact that the debt management could soon be regulated in much the same way as the loans or mortgages sector is. The Ministry of Justice is debating that currently actually.
It would probably benefit consumers no end, in my opinion, for the debt management industry to come under regulation. It would put an end to the rogue traders in this sector.
Monday, 9 November 2009
What is an IVA?
Another debt solution available to those in financial trouble in the UK is the IVA. IVA is short for individual voluntary arrangement and has similar elements to a debt management plan. The biggest differences however are that, firstly, the IVA is often only available to those whose debt exceed £15000 and secondly this is government endorsed and thus a legal debt solution. That means it lacks the informality of the debt management plan. While this means you could not simply cancel an IVA as you would with a DMP, it also means that neither can your creditors.
In much the same way as a Debt Management Plan works, you pay one set fee for a set period of time. It is a legal requirement, with an IVA, to use a licensed IVA provider. This provider assesses your budget and works out what you can afford to pay each month. He or she will then approach your lenders and if 75% of your creditors agree to the offer made, the other 25% have no choice but to accept. An IVA lasts 3 - 5 years and at the end of it, your debts are considered settled in full.
This does show on your credit record and is likely to adversely affect your chances of getting credit. However, this is a much better debt solution than bankruptcy and is a real alternative bankruptcy for those in the UK who are struggling with high amounts of debt.
In much the same way as a Debt Management Plan works, you pay one set fee for a set period of time. It is a legal requirement, with an IVA, to use a licensed IVA provider. This provider assesses your budget and works out what you can afford to pay each month. He or she will then approach your lenders and if 75% of your creditors agree to the offer made, the other 25% have no choice but to accept. An IVA lasts 3 - 5 years and at the end of it, your debts are considered settled in full.
This does show on your credit record and is likely to adversely affect your chances of getting credit. However, this is a much better debt solution than bankruptcy and is a real alternative bankruptcy for those in the UK who are struggling with high amounts of debt.
Sunday, 8 November 2009
Debt Management Plans
Another debt solution available in the UK to those who are unable to pay back their debts, is a debt management plan. This is a relatively informal debt solution, to be completely honest. While this has its benefits in the fact that it can often be easier to enter into, it does mean that none of your creditors are legally obliged to accept its terms.
In essence, a debt management plan is an informal arrangement between yourself and your creditors to repay debts owed. In most cases, a debtor approaches a debt management company to deal with the negotiations. There is a benefit in this, as creditors are simply often more likely to take notice of offers made by companies. Although, there is no harm whatsoever in approaching your creditors independently to try your luck.
What a debt management company would do, is take from you a detailed account of your income and expenses. They would use this to determine how much each month, after your living expenses have been deducted from your income, you can realistically afford to pay off your debts. They would then take this information and approach your creditors with it. If your creditors agree to the offer on the table, often involving you paying back less than you actually owe, then you simply make one payment each month to your debt management company, who then divides this accordingly between your creditors. The debt management plan lasts for a set period of time, often five years. At the end of this time, your debts are considered to be settled. Because this is an informal agreement, however, you can actually cancel it at any time you like - but so can your creditors. It will also probably show on your credit record.
There are an estimated 100000 debt management plans agreed each year in the UK at the moment. Most companies DO NOT charge for this service, so if you approach one who wants to charge you, I would recommend trying another. Often, this will only be available to you if your debts do not exceed £15000, although given the informality of this type of plan, this varies. They are aimed at those who have an income, who can afford to make a payment of some sort each month but who cannot afford what they are currently paying out.
In essence, a debt management plan is an informal arrangement between yourself and your creditors to repay debts owed. In most cases, a debtor approaches a debt management company to deal with the negotiations. There is a benefit in this, as creditors are simply often more likely to take notice of offers made by companies. Although, there is no harm whatsoever in approaching your creditors independently to try your luck.
What a debt management company would do, is take from you a detailed account of your income and expenses. They would use this to determine how much each month, after your living expenses have been deducted from your income, you can realistically afford to pay off your debts. They would then take this information and approach your creditors with it. If your creditors agree to the offer on the table, often involving you paying back less than you actually owe, then you simply make one payment each month to your debt management company, who then divides this accordingly between your creditors. The debt management plan lasts for a set period of time, often five years. At the end of this time, your debts are considered to be settled. Because this is an informal agreement, however, you can actually cancel it at any time you like - but so can your creditors. It will also probably show on your credit record.
There are an estimated 100000 debt management plans agreed each year in the UK at the moment. Most companies DO NOT charge for this service, so if you approach one who wants to charge you, I would recommend trying another. Often, this will only be available to you if your debts do not exceed £15000, although given the informality of this type of plan, this varies. They are aimed at those who have an income, who can afford to make a payment of some sort each month but who cannot afford what they are currently paying out.
Debt Relief Orders
A Debt Relief Order is a relatively new debt solution in the UK. This is a government initiative and is intended as an alternative for formal bankruptcy. The officially released statistics indicate that 11% of those who have previously declared themselves formally bankrupt would have been eligible for this alternative, had it been available during their bankruptcy proceedings.
Before I go on to discuss how a debt relief order works, I will share the eligibility criteria:
1. The debtor should be unable to pay his or her debts off.
2. The debtor's unsecured liabilities must be no higher in value than £15000.
3. The value of the debtor's assets should be no more than £300.
4. After living expenses have been deducted, the debtor should have no more than £50 of disposible income left each month.
5. The debtor must be a resident of England or Wales.
6. The debtor must not have been involved in a Debt Relief Order during the previous 6 years.
7. The debtor must not already have been paying off debts to any creditor at a reduced rate.
8. The debtor must not be involved in any other type of insolvency procedure at the time of application for a Debt Relief Order. This could include things like bankruptcy, IVA or interim orders.
Debt Relief Orders (DROs) require an application to be made online. One interesting thing about the application process is that, if the eligibility criteria appear to be met with no exceptions, the Official Receiver can go ahead and complete and approve the application without the approval of the court.
Typically, a debt relief order lasts for 12 months. However, it's worth noting that creditors can apply to the court to extend this or, in the very least, to extend the restrictions that is imposes. During the course of the DRO, the debtor repays nothing on their debt unless their financial situation changes. However, a number of restrictions apply thoughout the course of it. Firstly, they must keep creditors informed of their financial situation - though creditors will not be permitted to chase payment if the financial situation does not change. In addition, anyone undergoing a DRO must not obtain credit in excess of £500 without telling the creditor about their DRO and must not condusct any business in a different name from that under which the DRO was placed, without telling those they do business with of their DRO. In addition, the debtor is not permitted to start up a business, nor accept a post as a company director without the explicit permission of the court.
However, once the Debt Relief Order is over, the debts are considered settled, though the fact that you have entered into a DRO at all is likely to be present on your credit record for six years.
Things you will need before applying for a DRO - an intermediary, who assists in completing the application and without one your application with be declined, and an application fee. The fee is less than £100, but nonetheless must be paid.
As you can see, the DRO is a means to an end of debt problems for those who simply have absolutely no money and relatively low debts.
Before I go on to discuss how a debt relief order works, I will share the eligibility criteria:
1. The debtor should be unable to pay his or her debts off.
2. The debtor's unsecured liabilities must be no higher in value than £15000.
3. The value of the debtor's assets should be no more than £300.
4. After living expenses have been deducted, the debtor should have no more than £50 of disposible income left each month.
5. The debtor must be a resident of England or Wales.
6. The debtor must not have been involved in a Debt Relief Order during the previous 6 years.
7. The debtor must not already have been paying off debts to any creditor at a reduced rate.
8. The debtor must not be involved in any other type of insolvency procedure at the time of application for a Debt Relief Order. This could include things like bankruptcy, IVA or interim orders.
Debt Relief Orders (DROs) require an application to be made online. One interesting thing about the application process is that, if the eligibility criteria appear to be met with no exceptions, the Official Receiver can go ahead and complete and approve the application without the approval of the court.
Typically, a debt relief order lasts for 12 months. However, it's worth noting that creditors can apply to the court to extend this or, in the very least, to extend the restrictions that is imposes. During the course of the DRO, the debtor repays nothing on their debt unless their financial situation changes. However, a number of restrictions apply thoughout the course of it. Firstly, they must keep creditors informed of their financial situation - though creditors will not be permitted to chase payment if the financial situation does not change. In addition, anyone undergoing a DRO must not obtain credit in excess of £500 without telling the creditor about their DRO and must not condusct any business in a different name from that under which the DRO was placed, without telling those they do business with of their DRO. In addition, the debtor is not permitted to start up a business, nor accept a post as a company director without the explicit permission of the court.
However, once the Debt Relief Order is over, the debts are considered settled, though the fact that you have entered into a DRO at all is likely to be present on your credit record for six years.
Things you will need before applying for a DRO - an intermediary, who assists in completing the application and without one your application with be declined, and an application fee. The fee is less than £100, but nonetheless must be paid.
As you can see, the DRO is a means to an end of debt problems for those who simply have absolutely no money and relatively low debts.
Introduction to 'Debt Solutions UK'
There is so much advice online about debt solutions that a lot of it becomes repetitive. I have found two problems with the info available online.
1. Much of it is aimed at an American audience and the debt solutions in the states differ greatly from the debt solutions in the UK.
2. Much of it is released by companies who simply want you to embark upon one of their debt solutions in order to profit from your financial situations.
So this blog will deal with debt solutions information and debt news specifically from the UK. And as I am affilliated with no companies, it will be entirely impartial. I will allow no guest posts from anyone affilliated and if I refer to a company in any way, shape, or form, it will always come with a means of advising readers that I have nothing to do with the company and could not possibly comment on what they are like as a company.
Impartial, honest advice, facts and opinions.
1. Much of it is aimed at an American audience and the debt solutions in the states differ greatly from the debt solutions in the UK.
2. Much of it is released by companies who simply want you to embark upon one of their debt solutions in order to profit from your financial situations.
So this blog will deal with debt solutions information and debt news specifically from the UK. And as I am affilliated with no companies, it will be entirely impartial. I will allow no guest posts from anyone affilliated and if I refer to a company in any way, shape, or form, it will always come with a means of advising readers that I have nothing to do with the company and could not possibly comment on what they are like as a company.
Impartial, honest advice, facts and opinions.
Subscribe to:
Posts (Atom)