Frequently Asked Questions
1. Am I liable for my partner's debts?
If two people jointly enter into a credit agreement, they are both liable for the whole amount of the debt. This is known as 'joint and several liability'. For an agreement to be joint and several, it must be signed by all parties in the form required by the Consumer Credit Act. So, if you have not signed such an agreement, you are not liable for your partner's debts
However, joint and several liability can also apply to rent arrears on joint tenancies, or arrears on joint mortgages, to council tax payments for couples and to water/sewerage charges on properties which are jointly occupied. You need to talk to the individual creditor to obtain a clear understanding of the liability for the debt.
2. If I die does the debt die with me?
Any debts become the liability of your estate. If there were sufficient assets in your estate to settle your debts then this would be done by the executors. Creditors may sometimes attempt to claim payment from a partner or relative of the deceased, particularly if they lived with them, but if the estate cannot settle the debts, partners or relatives are not obliged to do so. There are several exceptions to the rule
It is always worth checking to see if there is payment protection or other insurance in place to clear the debts on death.
3. When can a creditor take me to Court?
If you are behind with the payments you agreed when you first took out a credit agreement, even if you are making reduced payments, your creditor can take you to Court by issuing a County Court Claim form. The cost of any resulting Court action will be added to the amount you already owe.
The creditor must formally let you know you are in default by issuing a Default Notice, before commencing Court proceedings
4. What effect will a judgment have on my ability to obtain credit?
County Court Judgments (CCJs) are recorded on the Credit Reference Files maintained by Credit Reference Agencies. The entry on your file may affect your ability to obtain further credit as most lenders check these files to help them decide whether or not to grant credit. Creditors record only factual information on individuals such as missed or reduced payments and the general 'blacklisting' of families or addresses is a misconception.
5. How can I find out what is on my credit file?
You can obtain a copy of your credit file by contacting one of the credit reference bureaux direct. There is a small fee for this information. Click on any of the links below to obtain more information.
6. What should I do if my account has been passed to a Debt Collection Agency?
Many creditors do not wish to collect reduced payments and often pass accounts to Debt Collection Agencies. The first letter you receive from the agent will be strongly worded and may contain threats of Court action. Don't panic. Make the agent a monthly offer of payment that you can afford and send them a copy of your budget. Start and continue sending the payment to the agent.
7. Is it possible for a student to get a mortgage? What are the pros and cons?
You should contact a local specialist mortgage adviser to answer this question. It is unusual to get a 100 per cent mortgage in this type of case and the size of the deposit which you can pay will influence the type of mortgage that can be obtained. Your parents may be in a position to provide a deposit or take out the mortgage. Before taking out any new finance, you should complete a personal budget which lists your income and you outgoings to ensure that you can afford the loan as well as any other additional expenditure, such as Council Tax, utilities, maintenance and so forth.
8. I have debts of £26,000 that I cannot pay off and I'm thinking of bankruptcy. What do I need to know and how do I go about this?
Bankruptcy could be an answer but it depends on your individual circumstances and additional questions need to be asked before advice can really be given. You should discuss these with an organisation that provides free, independent advice like the local Citizens Advice Bureau (CAB) or the Consumer Credit Counselling Service (CCCS) free helpline on 0800 138 1111. Bankruptcy can free you from overwhelming debts so that you can make a fresh start, subject to some restrictions and it also makes sure that any assets you have are shared out fairly among your creditors. I assume you don't own a house, as you say you are paying rent. If you do, you will be asked to give up your interest in your home. You will also be asked to give up any possessions of value, although there are certain items which are excluded. You can find out more details in the Insolvency Service Guide to Bankruptcy, by calling 0121 698 4241 or visiting their Web site http://www.insolvency.gov.uk.
9. I owe £4,000 on credit cards and I am struggling to keep up the repayments. What are my options?
You have various avenues you can explore.
10. Where can I find out how much benefit I am entitled to claim?
As this is largely dependent on each individual's circumstances, you are advised to contact your local Citizens Advice or local council welfare rights office who will be able to examine your circumstances in detail and offer advice accordingly. You can find more information at www.citizensadvice.co.uk.
11. Why does the mortgage lender not take fully into account both our salaries on a joint application?
A joint application is more at risk, because there is more chance of one of the applicants not being able to keep up their earnings and enable the couple to keep up mortgage repayments. This is particularly so with a couple — married or not. There is more chance of them having a baby and one person having to give up work.
13. I have seen a good deal offered by a building society for a very low rate of interest if I switch my mortgage to them. Should I do it?
These offers may be very tempting, particularly if you are in difficulties meeting your repayments now. However, read the small print. Make sure what the terms are after the initial period runs out — what will the interest rate be then?
15. Do I really need to contribute to a private pension scheme? Surely the welfare state will look after me?
Depending on your lifestyle, many people find that the basic state pension does not provide a good standard of living. The pension credit helps to boost your retirement income, but may not be enough. It is good sense to start putting something away now.
16. I am approaching retirement age, but am not sure how much pension I will get. How can I find out?
Apply for a pension forecast. You can do this by writing to the Department of Work and Pensions or visit their Web site at www.thepensionservice.gov.uk
This will tell you what pension you should receive and if you do not qualify for the full pension it will tell you what voluntary contributions you can make to boost your pension.
17. I need some money urgently, but the bank won't give me a loan or overdraft. Is there any alternative?
You could try a local credit union, particularly if the amount is not too high. If you want to buy something, you might be able to buy it on Hire Purchase or leasing. There may even be a "buy now pay later" offer — but don't go into this without the means to make the repayments. If you are on low income, the Social Fund may be able to help with emergency loans (apply to your local Social Security Office).
18. I have outstanding balance on my credit card, I have a loan and also an overdraft. Should I consolidate all of them?
Not necessarily. Many companies specialise in rescheduling your debts in this way. Although the monthly repayments may look invitingly smaller, you may well be locked into a loan agreement for a long period, and in the end you are paying back much more than otherwise.