The Debt Advice Online Blog

With so much in the news about the state of the worlds banks, you could be forgiven for trying to fix the worlds problems and not concentrating on your own situation. If you’re one of the millions in this country with a little more parked on your credit card than is healthy you may have heard that debts incurred on UK credit cards before April, 2007 may actually be written off under certain circumstances. Yep, that’s right. Written off! We here at Debt Advice Online firmly believe that if you borrow money you should pay it back. No questions asked. We also believe that certain credit card companies have been far too exuberant when it comes to hiking their interest payments after the low or zero % introductory period, which has given them a less than favourable reputation.

So here’s the deal. Your credit card company is required to produce an original copy of the agreement that it had with you, and if this credit card company no longer has this document then the debt incurred on the credit cards becomes unenforceable by law. Now before you get all excited, do not misunderstand what is meant by this. The debt that you have on your credit card is not wiped off. It remains there, but the credit card company cannot legally process any claim for it.

To put it another way, the debt on your credit card stays put, but the credit card company cannot legally ask you to repay it unless they find your original agreement. If you are the kind of person who can bide their time, then you will probably like to know that there is an act of law called the Limitation Act of 1980, which is a six year rule. Under this Act the debt on your credit card becomes non-existent after six years from the last time it was acknowledged.

There are several agencies that can take up your credit card debt problems, and offer to have your debt written off. These agencies provide you with this service against a fee, while they deal with your credit card debt within the legislation which controls such claims. Now I have to officially remain impartial here and not mention any names of companies who have a darn good team who could help you if you so chose. Ahem.

You probably won’t be surprised to learn that since 1995, write-offs of credit card balances rose substantially from £0.1 billion to £1.6 billion in 2003.

It was also the nineties that saw the start of the sharp rise in credit card debts, with the rise flattened to around £1 billion, however if we factor in debt write-offs which rose sharply during 2001 and 2002, the overall debt was pushed up to around £2 billion.

Generally speaking, given the current climate, you will want to get on top of any credit card bills you have especially if those bills are mounting each month. It is wise to look into the possibility of having your credit card debt written off, but if that isn’t possible then working out a sensible repayment plan could be your next best alternative. Debt Advice Online has some great people who can walk you through your options, plus they can help you get the creditors off your back if you are getting constant phonecalls and letters and it’s getting too much for you to cope with.

You would think that the banks would want you to start saving rather than borrowing more money to ensure they had the safety of capital in their coffers, but even today, with not just banks but entire countries going under, you can still pick up a friendly looking credit card with 0% APR for the first sixteen months! Whilst that is a little crazy to my mind, you may think we’ve got it good when in some countries banks send unsolicited credit cards to people with instant balances of 1000’s of pounds even before they’ve signed anything. That is just asking for trouble!

So take care with your credit card, try to get it repaid on time, paying more than the minimum balance, so you actually pay back more than the interest, but also look into clearing your credit card either by yourself or if your not feeling confident with the paperwork try one of the specialist agencies.

Till next time.

Michael Ford

When you are not able to re-pay your debts due to your financial difficulties, you have certain solutions at hand. You can take up the matter with your creditors, and explain to them convincingly the matter of your financial instability, and let them make concessions on the terms on which the loan was given to you. You can negotiate the interest rate, and get the fees levied on the loan waived off.
The total outstanding balance could also be negotiated to an affordable level. Along with this, the lenders might consider bringing down the amount on your installment payments to make it easier for you. If you like, you could also approach your creditors through credit agencies, or a lawyer who takes up the matter on your behalf.

The second option is to sign on a debt management plan. In case you are going through a deep financial crisis, and you are not being able to re-pay your debts, you might consider taking advice from a credit counsellor. The credit counsellor might advice you to go in for debt consolidation, where all your debts are merged into one. This task is mainly done by credit agencies, which take up the matter with your creditors, and bring down your liability to an affordable level. In this case you pay only one installment every month to the credit agency, who distributes the money to your debtors.

There is yet one other option which is available in UK, where you actually write-off a part of your debt. You might have solutions to your debt problem through debt management or remortgages, but these would only provide you with a relief in interest rates, and waiving off of certain fees. These do not let you write-off debts, but in fact replaces one debt with the other. On the other hand, writing off debts provides you with greater financial relief. You may go and file for bankruptcy to write off all your debts, but the consequences may become severe, and this should be kept as a last resort.

The Individual Voluntary Arrangement (IVA) in the United Kingdom provides a solution to debtors, where you can write-off a large percentage of your debt, provided you are found eligible. The amount that could be written off depends upon your financial capability to pay back your debts. IVA is a debt relief solution which is backed up by the United Kingdom government. If you are going for IVA, there is one aspect which is very important. The IVA must be accepted by your creditors. Once your creditors accept IVA, it becomes legally binding, and this would mean that the amount of debt to be written off has been agreed upon, and cannot be changed by the creditors even two years later. You, as a debtor, are legally protected against this.

The draft of the proposal is generally drawn up by a licensed Insolvency Practitioner on your behalf, which is provided to you for your comments. After finalising the issues, the document is sent off to all your creditors. The creditors, however, besides rejecting or accepting the document, may want changes, and these changes would only be incorporated into the document after you have approved them. The Insolvency Practitioner has to make sure that you truly have a deep financial crisis in hand, and also that you are capable in keeping up with the payment of your debt after it has been partially written off. These have to be ensured by him before he makes his recommendations.

The process of writing off becomes legally binding as and when the creditors accept the terms. Though the creditors cannot change their minds regarding what they have agreed to, there could be problems in the arrangement if you fail to keep your part of the promised payment of installments. You and your creditors are legally bound by IVA, and it is an arrangement that has been done by the Insolvency Practitioner who is also responsible to supervise the arrangement as far as its smooth running is concerned.

The IVA contract ensures that you are not put under any pressure of paying more than what you can afford. The total re-payment of the consolidated debt has to be paid by you over a fixed period of time. IVA is an arrangement which is totally private, and it is kept between the people who are directly concerned with your debt. While your debts are being governed by IVA, you are allowed to take out fresh mortgage on your property if you so desire. IVA ensures protection of your home, and your employment.
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