Debt Course Notes

Detailed fact sheets and sample letters at http://www.nationaldebtline.co.uk/scotland They will post hard copies if wanted for free 0808 808 4000.

Consumer Debt

1. Prioritise debts – high priority debts aren’t treatable by below steps.

2. Check income / benefit maximisation – including social fund, discretionary housing payments, British Gas Trust.

3. Write to all creditors with initial contact letter. “Mr X is a client of ours. I enclose a mandate form authorising us to act on his behalf and requesting correspondence be directed to us at this office. Mr X is in financial difficulties and he is unable to continue to meet payment to yourselves at the original rate. In order to help with this process, please inform me of the total sum outstanding on Mr X’s accounts with you. I would also ask that any interest charges be suspended on these accounts while this process is ongoing – please let me know whether or not that will be possible.”

4. Complete an income/expenditure form. An example is here.

5. Divide out monthly payment offer amount equally amongst the creditors, send them an offer letter. Include the clients completed income/expenditure form with this. “I enclose a completed income/expenditure form for Mr X. As you can see he has only £X available each month to pay his creditors. Based on this we are prepared to offer you payment of £Y per month. Please let me know if this offer will be acceptable to you.” Give full details of all the other creditors and amounts outstanding to them with this letter.

6. If and when all creditors accept offer, then over to client to start paying them.

7. After maybe two years or so, write to the creditors asking them to write off the outstanding debt altogether.

• Harassment – Not easy to stop, because they’re allowed to do it within reason, but you can complain to The Office of Fair Trading, who issue companies with their consumer credit license. For serious harassment go to police. Threaten to go to the OFT and the Financial Ombudsman if a debt agency contacts a client directly while you are in the above process of negotiating a repayment plan.

Housing

• If being threatened with eviction, it is important to get a lawyer as soon as possible. If you don’t have a lawyer you use already, then Shelter are able to arrange that. They are at 6 South Charlotte Street, 4th Floor, Tel: 0808 800 4444. It won’t cost anything if you are eligible for Legal Aid.

• You can also represent yourself in court, might be an option for simple cases or where it is, for some strange reason, not possible to get a lawyer. Only lawyers can speak on your behalf, so generally not much point turning up with a lay advisor or friend.

• Lawyers will sometimes advise you not to appear in court at all if is at too short notice to have a lawyer represent you in person. They can then seek to overturn any decision, which can be more difficult if you represented yourself in court.

• You can also write to the sheriff to have your side of the argument considered that way before the decision is made. Here a welfare rights / debt advisor could help draft the letter.

• You, as welfare rights / debt advisor, can stop a lot of the pressure for eviction just by stopping the arrears increasing. Check benefit entitlement maximisation.

• If you have a shortfall between housing benefit and rent, you can apply for a discretionary housing payment from Edinburgh City council (call 0131 469 5000 for a form).

Fuel

See separate page for more complete Electricity and Gas Guide. But simply:

• Gas and Electricity companies now often deal with arrears simply by installing prepayment meters. Those meters then get set to charge back the debt at a high rate from each card you insert. So it turns into self-disconnection. So you normally want to avoid prepayment meters.

• The Fuel Direct scheme is better alternative. That involves deducting bill payments direct from benefits by DWP. Phone the DWP to arrange that and fill out the simple form that they send you. But your power company gets to veto you moving on to fuel direct if they want to, and they often do – you have a better chance of succeeding if elderly, disabled, or with young children. You can always complain to Energy Watch if they are being unreasonable.

• If you have no recent history of fuel debt, you can insist on having the prepayment meters replaced with normal meters. Complain to Energy Watch if needed.

• British Gas Energy Trust pay out good sums of money just for filling in a form. This only works for British Gas customers though, no good for ScottishPower or the others. One good side effect is that British Gas (= Scottish Gas) will hold off hassling customers for repayment for all the time that the

Council Tax

Council Tax has powers to obtain a summary warrant automatically fast tracked through the courts without a hearing where you can defend yourself. As such, council tax should be treated as a priority debt over consumer debts (where court hearings are required).

Thanks to Scottish Parliament Legislation, Warrant Sales have NOT been abolished, but they have instead been renamed to 'Poindings' and made less severe. You will not be subjected to these now if you are on benefits such as income support and income based job seekers allowance (although Sheriff Officers and others may falsely threaten otherwise verbally to you). And, for those on wages who can be subjected to them, the goods they can take are more limited. TVs, cookers, fridges, beds, couches, are all safe. The main items at risk are motor cars, music centres, games consoles, and any other luxury items. Advance notice means you can with a bit of planning hide those sorts of items.

Seizing wages and bank accounts are more likely to be employed. Bank accounts being siezed can be horrible if it is done right when your two week benefit payment is made into it – you won't be able to get that money back and will need to apply for Crisis Loans to live on. You still have the right to insist that your benefits be paid in girocheques, even though Benefit Offices dislike that (so be prepared to insist and complain, and even threaten to appeal) – that allows you to prepare for a potential bank account seizure in advance.

Like consumer debt, preparing an income expenditure form will allow a reasonable repayment scheme to be agreed.

If you are on income support, income based jobseekers allowance, or income based employment and support allowance, sheriff officers cannot do anything to you other than deduct around £3 per week directly from your benefits. They might verbally threaten more, but that is the legal limit of their powers. As it happens, that automatic deduction rate is actually less than you would pay per week if paying off your own back, such has been the rise in Council Tax in recent years with court guidance failing to keep up. As such, it is now better to never pay any council tax and just let the automatic deductions be processed from your benefits. The only loss to the claimant is that a 10% surcharge is applied. But that surcharge remains theoretical unless the claimants circumstances change such as going back to work, when the debt could become an issue again with fuller repayments being demanded. Note that this sadly does not apply to claimants on Incapacity Benefit unless they also receive Income Support top up – such claimants still have to make arrangements to pay council tax manually or face consequences.

LILA Low Income Low Asset Bankruptcy

LILA is the route into bankruptcy for people who have low income and low assets.

For a one off fee of £100, plus the completion of a relatively simple application form, all your debts get cleared (except for recent Student Loans, which stay).

The drawback of bankruptcy is that it makes it difficult to get credit, including a mortgage, in the future - so is generally not a good idea for young people. Also, homeowners can/will loose their home as a result of bankruptcy, so also not good for them.

To qualify for LILA bankruptcy you need to be on:

• income support, or

• income based job seekers allowance, or

• working tax credit, or

• are otherwise on very low income, such as being paid minimum wage or being a part time worker.

Also

• you don't own a house

And

• you have total debts worth £1500 or more

And

• you pay the application fee of £100

More information here and application forms here.

Referring on to money advice agencies

Best if possible might be a money adviser at:

Edinburgh City Council’s Advice Shop

85-87 South Bridge, Edinburgh EH1 1HN

T: 0131 225 1255

E: welfare.rights.advice@edinburgh.gov.uk

More Training/Information

WiserAdviser Training

Money Advice Scotland organises and delivers the Skilled and Specialist training component of the wiseradviser training programme.

More details at http://www.moneyadvicescotland.org.uk/training/

Contact training@moneyadvicescotland.org.uk for queries relating to training events or alternatively you can call the training team on 0141 572 0035.