Author Topic: £42,000 of debts  (Read 4623 times)

carolee123

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£42,000 of debts
« on: Feb 01, 2012, 02:40:29 PM »
Hello I am a divorced woman of 58 years.For the last 3 years I have had three jobs one full time and two part-time jobs just so I can keep my head above water, I am so tired, fed up and always living on the breadline. Last week I had a cold call from a debt agency and he said he could reduce my debts and help me out, he then kept phoning me but I didn't answer, but then started investigating through the internet. I have always paid my debts on time even though most weeks I can't even afford to eat. I live in a council house so am renting. I have opened up another bank account as I have a loan, credit card and overdraft with my bank and have arranged to have my wages paid into this at the end of the month and once I have paid this months payments I will be cancelling all my direct debits and contacting CCCCS to help me, I will also be leaving one of my jobs as I really haven't the energy anymore.
What I want to know is I am due to retire in 6 and a half years, will they make me cash in my pension now? it's not worth much probably about £13,000 on retirement so quite a bit less now.Also is it likely all my creditors will accept an IVA, I have three loans, 2 credit cards, 1 overdraft and a catalogue your advice would be much appreciated
this

Rehan Kingsland

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Re: £42,000 of debts
« Reply #1 on: Feb 02, 2012, 11:54:51 AM »
Hi there,


Sorry to hear about the difficult time you are going through.


With regards to your pension, you can release funds from your pension at the age of 55. You would be forced to release funds from your pension by the trustee should you be made bankrupt. However, in an IVA, only some of your pension will be used to contribute towards the plan.


If an IVA proposal is drafted correctly, meaning that is shows that it is sustainable and realistic, then there is no reasons as to why your creditors won't accept the proposal.


I hope this helps. Should you require any further information, I would be happy to assist you.

James Falla

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Re: £42,000 of debts
« Reply #2 on: Feb 02, 2012, 07:23:54 PM »
Hello carolee 123
 
From what you have said it sounds as though you simply cannot go on as you are. If you are paying your debts but then do not have enough money to eat the situation simply has to change and you cannot keep working all hours as you will end up causing yourself health problems. 
 
You have done the right thing by opening a new bank account. This will protect your income going forward from your creditors. Have you had a look at how much disposable income you might have once you give up your third job This will tell you what you can afford to pay to your creditors each month in an IVA or indeed any other debt solution. If you can let me have this information I will be able to advise you further as to whether an IVA might be acceptable to your creditors.
 
In terms of your pension, I am afraid that I do not agree with Rehan Kingsland's comment. No-one and force you to touch your pension pot. A a pension is one of the only things that cannot be touched by creditors in an insolvency situation. If you declare yourself bankrupt, the official receiver / Trustee certainly cannot force you to release money from your pension. This is also the case if you start an IVA. You will not be required to touch your pension pot or release a lump sum from it. However if you were still making payments into it, these might have to be reviewed for the duration of your IVA.
 
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Rehan Kingsland

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Re: £42,000 of debts
« Reply #3 on: Feb 03, 2012, 10:03:44 AM »
Good points on the IVA Mr Falla, exactly what we would do also.


In terms of the pension, having been involved as a trustee in many cases where there are pensions which are realisable, we have in some cases taken some of the pension fund for the benefit of the creditors.


Please note there are a number of factors that need to be considered before a trustee would be entitled to the pension. It can be done


In an IVA however honestly, I've never taken a pension fund as it in theory defeats the purpose of undertaking an IVA - i.e to protect your assets which includes a pension.




James Falla

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Re: £42,000 of debts
« Reply #4 on: Feb 03, 2012, 11:45:41 AM »
Hi Rehan
 
I assume that you have acted as Trustee in cases where the individual was declared bankrupt pre 2000. The Welfare Reform and Pensions Act 1999 now protects all pensions arising from tax-approved pension schemes against being part of a bankrupt's estate, for anyone made bankrupt after 29 May 2000. So, for people who declare themselves bankrupt post 29th May 2000, the Trustee in Bankruptcy cannot control the pension to pay off creditors.
 
Of course, pensions from unapproved pension schemes can still form part of a bankruptcy's estate. However, these pensions are now extremely rare. If these cases do crop up the debtor could also take steps either through the Court or by agreement with the TIB to protect all or part of these types of pension. As such if carolee 123 declared themselves bankrupt now, their pension pot will simply be touched by the official receiver  / Trustee.
 
Having said that if someone reached pensionable age while still bankrupt or in an IVA and decided to take a cash lump sum fromm their pension, this would then be treated as a windfall. As such the advice has to be that if you reach pensionable age while you are still bankrupt, do not draw down a lump sum. The lump sum could of course be used as a settlement offer in an IVA as it would otherwise not be automatically included in the IVA payments.
 
It is also important to mention that if someone is currently drawing monthly income from a pension, then these payments would be included as income fore the purposes of calculating disposable income in bankruptcy and determining whether an income payment agreement should be made.   
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Rehan Kingsland

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Re: £42,000 of debts
« Reply #5 on: Feb 03, 2012, 11:47:32 AM »
I couldnt agree more James.

James Falla

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Re: £42,000 of debts
« Reply #6 on: Feb 03, 2012, 11:54:27 AM »
Thanks Rehan
 
Its great to have your input. I hope you will continue to post.
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John Smith

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Re: £42,000 of debts
« Reply #7 on: Feb 14, 2012, 04:59:18 AM »
Hi Carolee 123.

A situation like this is pretty sticky, as the definition of "income" can be clouded. If you have been making automatic payments towards a pension, the bank could question you about where the money is coming from. If money is getting very skint, then cancel any absolutely unnecessary payment. I know some people wont agree with that ,but ,If you cant eat then the bank soon wont have anyone to charge. If you have a good relationship with your boss, or your job is very 'small business and everyone knows everyone' ,you might be able to ask for a small but significant pay-rise. Just enough to keep you tiding over. Also, with the economy how it is you might want to save up money till the value is high and pay off a lot of debt with 'little' money. Renting is also a bad situation. see if you can rent-to-buy and this may help you to get debt free faster. If you aren't in a 1 on 1 relationship with your boss, you may want to think about other jobs. 1 on 1 relationships with bosses always help when it comes to income flow. The more your boss realises your a human being, the more likely they are to help you out with said pay rises or 'froans' (Friend Loans). Not that i recommend Froans, as they can get awkward if things get messy.

There is one other option. If all else fails, you could try a Debt solution package. most people don't trust them but they aren't all bad and scummy. Check my link for a couple of my loan solution guides. Please realise this is only a last resort and i dont want you to think im advertising or anything. You just gotta try everything.

Good Luck  :)

John Smith

James Falla

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Re: £42,000 of debts
« Reply #8 on: Feb 14, 2012, 03:27:33 PM »
Hello John
 
I am confused by your comment regarding the definition of income and how this can be "clouded". I am not sure what you are getting at there. Overall Carolee was asking about whether she would be made to cash her £13000 pension pot. As we have established, this will not be the case if she starts an IVA or considers bankruptcy to help resolve her debt problem.
 
In terms of cancelling unnecessary payments, I think we need to be careful here. If you are strugling with debt, it is absolutely right to cancel payments to your unsecured creditors until a solution can be put in place (although you need to understand the consequences of doing this if you do not get a debt management solution in place quickly). However you must be sure to continue to pay all of your household bills and in particular your mortgage, rent and council tax etc.
 
I totally disagree with your comment that renting is bad. This is simply not the case. And the suggestion that trying to buy your own house will somehow help you to get free of debt faster. I am sorry but this is just not the case.
 
I do like the suggestion of asking for a pay rise. However I think this will be a tough call for most people and so using a debt management solution may be the only option. It is not true to say that most people do not trust them. If implemented properly they can be the best (and often only) sensible way to resolve personal debts. However borrowing more money is certainly not the answer. In most cases this is a sure fire way to make a debt problem worse.
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Simon Wyllie

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Re: £42,000 of debts
« Reply #9 on: Feb 14, 2012, 06:26:27 PM »
Hello James.
 
Some excellent points there.
 
Having worked within debt advice for many years, I have to say I don't really recognise the suggestions made by John Smith as being those that mainstream debt advisers would propose.

James Falla

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Re: £42,000 of debts
« Reply #10 on: Feb 15, 2012, 07:04:35 PM »
Thats why we are here Simon. To try and help people make sense of it all, give them good clear advice and challenge information which is sometimes simply wrong.
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Simon Wyllie

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Re: £42,000 of debts
« Reply #11 on: Feb 21, 2012, 02:50:13 PM »
What a shame that's required though James.
I wonder if the new debt management guidance due soon will "up the stakes" in terms of the requirements on debt advisers to demonstrate competence (perhaps via qualifications) if their firms are to become or remain licenced?

James Falla

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Re: £42,000 of debts
« Reply #12 on: Feb 24, 2012, 06:13:14 PM »
We can only hope Simon. However I fear that the real problem is the policing of such good intentions. I think the OFT are struggling to police their current debt management guidelines. As such I will be surprised if they introduce any new measures which would require even more overhead on their behalf. However we will see..... 
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Simon Wyllie

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Re: £42,000 of debts
« Reply #13 on: Feb 28, 2012, 01:05:47 PM »
I guess we'll find out soon enough James!

fmurphy1970

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Re: £42,000 of debts
« Reply #14 on: Apr 11, 2012, 07:31:45 PM »
Hi carolee123,


I hope things work out for you. Sounds like you are taking the right steps to start reducing your debt. I'm sure you will do it.