National Debtline

Consumers caught in the debt trap will have faster and easier access to reliable and independent financial advice, with the launch of a new telephone debt advice pilot. Debt advice lines are being piloted in three sites around the UK: Birmingham, Fife and Cornwall, which will give advice and help consumers to draw up debt repayment plans to manage their debts.

The Birmingham pilot is based upon an established money advice phone line - National Debtline - which has operated largely in the West Midlands since 1987. The new service will use the existing freephone number.

The following case studies are all people who have been helped by the debtline recently.

Case Study 1 - Edgeware, Middlesex

Case Study 2 - Halifax, West Yorkshire

Case Study 3 - Leeds, West Yorkshire

Case Study 4 - Middlesex

Case Study 5 - Birmingham

Case Study 6 - Kings Lynn, Norfolk

Case Study 1 - Edgeware, Middlesex

Reduced salary, priority and non-priority debts, called the National Debtline several times

"Thank you very much, well done…you've saved my family, house, sanity…."

This was the opening line of a letter received by National Debtline in January of this year.

Mr D. had first contacted NDL in June 1999. He has £40,000 of credit debts - credit cards and one unsecured loan. He had been made redundant from his previous job and while he had found new employment, he had taken a significant salary drop. With this previous job he had always been able to meet his contractual payments comfortably. The reduction in monthly income by approximately £600, however meant that he couldn't - for a couple of months the family tried to juggle the finances but it soon became clear that this strategy could not work permanently. They had exceeded their overdraft limit at the Bank and sever direct debits (including the mortgage payment) had not been paid.

Mr D contacted National Debtline in despair. The adviser he spoke to explained the importance of meeting priority payments first (for example the mortgage). They then explained the sanctions available to the unsecured creditors and how to calculate the reduced repayments that Mr D could realistically maintain. Mr D was sent a copy of the self-help information pack "Dealing with Your Debts" which included in it a sample letter that Mr D could use to write to his creditors with the reduced offer of repayment.

Some creditors accepted Mr D's offers straightaway however two refused. He contacted Debtline again who advised him to send the payments anyway to prove his willingness to pay. They also sent him a further sample letter which could be used to ask his creditors to reconsider. This led to one of these creditors accepting, however the final creditor sent the debt to a Collection Agency.

When Mr D heard this he was worried that the Collection Agency would have greater powers than the original creditor. He contacted Debtline again who reassured him that this was not the case and suggested that he make the original offer again. Mr D did this and by December 1999 all his offers had been agreed.

Mr D appreciates that his creditors will regularly request reviews of his arrangements with them and Debtline have sent him a "Review pack", which will assist him in this. He hopes that in future he will find employment at a higher salary and will then be able to increase his payments.

Case Study 2 - Halifax, West Yorkshire

Used credit cards for Christmas presents, expecting overtime would cover payments. Overtime cancelled, got advice on doing pro ratas.

Mrs A contacted National Debtline in February. She was very worried, as she has used her credit cards and store cards to pay for her Christmas shopping, with the expectation that her overtime in January would ensure she could clear the bills in full. Unfortunately her employer had to cancel all the firm's overtime and as a result Mrs A struggled to meet the minimum payments.

As her creditors put more pressure on her she paid them with what ever she had without thinking whether she could meet other household bills.

NDL advised her to work out a budget which would cover all her household bills. She could then use the remaining money to work out repayment offers to her creditors after she had prioritised her debts. She did this and wrote to her creditors explaining the reasons for her financial difficulties. 

As Mrs A has provided detailed information and kept her creditors fully informed of her circumstances, they were willing to accept her offers.

Case Study 3 - Leeds, West Yorkshire

Husband lost job, illness, insurance not paying out, mortgage possession hearing, credit debts.

Mrs B contacted NDL in considerable distress. A year earlier, her husband has been forced to give up work due to mental health problems. As a result the she, her husband, and their two children were reliant on her part time wage and his incapacity benefit.

While he had been working, Mr B had taken out several loans and also had various credit cards. At the time he had taken out payment protection schemes but after he had to leave work he found that the insurance companies refused to pay, as the insurance did not cover mental illness. As a result the creditors were still expecting their full monthly payments.

The family have struggled on with Mrs B juggling the bills, but things came to a head when she received a Court Summons for repossession of the mortgaged property.

When Mrs B rang Debtline the adviser she spoke to explained the need to produce a list of her income and expenditure and to then prioritise her debts (according to the creditors sanctions), so that all her essential expenditure could be met and priority arrears reduced. The adviser explained how to negotiate repaying an affordable amount per month towards the mortgage arrears in addition to the monthly payment and explained what Mrs B would need to do at the Court hearing.

The next step was to use any remaining available income to offer repayments on Mr B's credit debts. There was £25 per month available and Mrs B was advised to divide this between the credit debts on a pro-rata basis and write to each of the creditors with a personal budget and an offer of repayment.

Mrs B was then sent NDL's self-help pack which went through in detail all that the advisor had explained.

Several months later Mrs B contacted NDL to thank them for their help. She had paid off her mortgage arrears and had therefore been able to increase her repayments to her credit debts.

Although these debts will still take some time to pay off, Mr and Mrs B know that they can afford the repayments and are in control of their finances again.

Case Study 4 - Middlesex

Mortgage shortfall - full and final settlement

Mr T contacted NDL as he had received a demand for a debt of £29,000 relating to a house that he had left four years previously. He had brought the property with a joint mortgage with this then partner. Unfortunately they had separated and Mr T had never done anything about getting his name taken off the mortgage. As he had not been in contact with his ex-partner he had forgotten about the house and the letter he had received came as something of a shock.

The adviser explained to Mr T that this debt was called a mortgage shortfall and was probably the result of either the property being repossessed or his ex-partner handing back the keys on the property. The property would then have been sold for less that was owed on the mortgage.

This type of debt has become increasingly common and although Mr T's ex-partner had stayed in the property after he left the lender was still entitled to pursue him as well as the mortgage had been taken out in joint names.

The adviser suggested that Mr T ask for details of how the property has been sold, to check that the lender had made an effort to get the best price possible. They also suggested that he ask for a breakdown of the £29,000 to establish how the lender had calculated this amount.

The adviser explained that if Mr T was unhappy with any of the costs he should question them with the lender. Otherwise Mr T would need to look at either negotiating a monthly repayment on the debt or making an offer in full and final settlement. Mr T had only two other small debts and did not want to consider bankruptcy. The adviser also outlines the creditor's options in terms of enforcing the debt.

The adviser sent Mr T a copy of NDL's mortgage shortfall fact sheet and encouraged him to ring again if he needed further advice.

Two months later Mr T called again. He did not feel he could question any of the £29,000 and had decided that he wanted to make a full and final settlement offer. His parents had agreed to lend him up to £5,000 to offer the lender. 

The adviser suggested that Mr T write to the lender with this offer, explaining that he had little surplus income and not assets which might be sold to clear the debt. The adviser sent a sample letter which Mr T used to write his letter.

Initially the lender responded asking for £6,500 and Mr T called NDL again. The adviser suggested that Mr T persevere and make it clear to the lender that this was his final offer.

The lender agreed to Mr T's offer.

Case Study 5 - Birmingham

Bankruptcy, rented property

Mr and Mrs O approached NDL as they felt embarrassed abut their debt situation and did not want to be seen visiting their local advice centre. They were concerned about confidentiality but the adviser assured them that NDL would not release their details to anyone else.

The couple had run a private care home for the elderly, but the home had failed and they had been left with business debts of £25,000. In addition they had borrowed heavily to try and keep the business afloat and had personal loans of £17,500. They had lost their home through the failure of the business, and expected a mortgage shortfall of at least £20,000.

They were rehoused in Council property and were receiving Job Seekers Allowance. Mr O was worried about the threatening letters he and his wife were receiving from creditors. His wife was depressed, and her health was suffering.

The adviser suggested that his wife should visit her GP, who might be able to advise that she was entitled to additional benefits, such as Disability Living Allowance.

The adviser also suggested the couple declare themselves bankrupts. They had no assets and Mr O did not want to work while his wife was so ill. Bankruptcy would enable the couple to deal with their debts. As a couple in their 50s, Mr and Mrs O considered that they were unlikely to be needing credit in the future, and were willing to consider anything that might make their lives easier.

The adviser explained the process of going bankrupt and sent some information. A week later, the couple agreed to declare themselves bankrupt, and were guided though the process by the adviser.

Case Study 6 - Kings Lynn, Norfolk

County Court bailiffs

Ms J rang NDL having received a Warrant of Execution through the post. The adviser explained that this was for not paying a County Court Judgment and asked whether Ms J had any CCJs. Ms J said she had one for £100 a month but had only managed to send £50 the previous month after her hours had been reduced at work. The adviser explained that the creditor had obviously asked the Court to send bailiffs to enforce the debt.

Ms J was very worried but was advised that bailiffs could not break into her home and there was a straightforward way of dealing with this.

The adviser told her to ring the County Court and ask for an N245 form. This could be used to suspend the bailiff's action and also vary the amount per month that had to be paid, as Ms J could no longer afford £100 a month. The adviser told Ms J to list all her income and expenditure on the N245 so that the court could see that her income was reduced. Ms J was positive that she could afford £50 a month after all her other bills and so she said she would offer that. The adviser warned Ms J that she would have to pay a fee when she made the application.

The next day Ms J faxed a copy of the N245 to NDL as she wanted to be sure that it had been filled in correctly. NDL confirmed that if had been and she sent it to her local County Court.

She contacted NDL three weeks later to confirm that the payments were now set at £50 per month.

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