10 Debt Myths Busted – A Must Read
When you’re in serious debt one of the biggest hurdles you face is that people don’t tend to talk about their problems. So, we thought it would be helpful if we busted some of the biggest myths surrounding debt, before you take the first steps to getting yourself out of your current siutation.
Myth # 1 - You're alone
The fact is, there are over a million people that turned to either a formal debt solution like bankruptcy, an IVA or an informal solution like a debt management plan to solve their debt problems. You are anything but alone and your situation is not going to surprise a trained debt advisor.
Myth # 2 - Debt experts always act in your best interests
It is possible to interpret ‘best interest’ in a number of very flexible ways and advice can be very much dependent on your position on whether you are looking to do the best for the individual (you) and your creditors (the people you owe), just you and to hell with the creditors, or just your creditors. Add to this the lure of the revenues that can be made by managing a debt solution and you have a very flexible advice spectrum. This is why we advise you talk to a debt advice charity with a fair and balanced approach to their advice – here’s a list we recommend.
Myth # 3 - An IVA can write-off up to 90% of your debt
IVA’s are designed to make your debt affordable and it’s true that a significant part of your debt can be written off, however the average is closer to 50% and the highest is closer to 75%. Whether you’d qualify for an IVA and how much you can write-off is information you will only get if you call a debt organisation like the ones on this debt charity list.
Myth # 4 - I won’t get a bank account if I am made bankrupt
It is certainly difficult to get a bank account if you’re made bankrupt, but it’s not impossible. The Co-operative Bank and Barclays have a good track record of offering bank accounts to undischarged bankrupts. Check out the comments on our petition.
Myth # 5 - It’s OK to pay fees for a debt management plan
Where a company provides a service they are entitled to earn a fair return, after all they are a business. However, the UK has organisations offering free debt management plans which don’t involve monthly fees. By using these organisations, all of your new affordable monthly repayment goes to reducing your debt. This advice saves the average person thousands in fees over the life-time of a debt management plan. To find out if debt management is right for you and to get a free debt management plan use this list of debt charities.
Myth # 6 - You will lose your house if you become bankrupt
Losing your home is the biggest fear most people have when facing bankruptcy. There is no simple answer to this question, but what is true to say is taking your home is always seen as a last resort. If there’s a way of you keeping your home it will normally be found. This can include you making an offer to buy the official receivers claim on any equity in the home or opting for a solution like an IVA where your home is protected. This is definitely an area to get really good advice.
Myth # 7 - You can’t sell your home or possession to a friend or family member to avoid them being taken
When you declare yourself bankrupt your Trustee has the power to investigate your financial affairs without your consent.
You must not sell your assets to anyone for less than fair price and you must account for what you did with the money.
But you can sell your share of a house for example to a friend, but it has to be for a fair price and the money has to go towards your debts.
If you dispose of or hide an asset this is called a "Transaction to the detriment of creditors" and is a bankruptcy offence.
Myth # 8 - Your employer is going to find out you’re in serious debt
Bankruptcy is the only debt solution that involves your name being published, but even then, it’s unlikely your employer is going to see your name in an obscure publication like the ‘London Gazette’. Debt solutions like IVA’s and debt management plans are private affairs and are between you and your creditors or debt help organisation.
If you’ve not received help and your creditors take you to court, they can obtain a court judgement against you. They will then apply for an attachment of earnings, demanding that your employer deducts money from your wages to pay the debt. The amount will be set by the court.
Before they apply for an attachment of earnings a creditor will need to know who you work for, they will often phone employers to confirm you work for them. They should not be discussing your business with your employers or identifying themselves as debt collectors.
It is very important you get some advice, to be able to stop further action.
Myth # 9 - You’ll never be able to borrow money again
If you get help and manage your finances responsibly, your credit rating will improve. Solutions like bankruptcy and IVAs only stay on your credit file for 5 years so in what is usually 6 years, all records of this difficult time have been removed from your credit file.
If you’re in a debt management plan you can borrow money but it’s possible the interest rates will be high so don’t. However, you may want to get a bad credit card and REPAY IT EVERY MONTH as a way of improving your credit rating.
Myth # 10 - Bailiff are entitled to come into your house
Bailiffs have no rights of entry into your property unless you invite them in. However not letting them in is not a solution to your debt problem and you need to get help, not ignore it.
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