Money Matters: Dealing with your debts

Transcription

1 Money Matters: Dealing with your debts

2 How to use this booklet Follow the steps in the order set out. If you don t understand something, speak to your Housing Manager. Lots of people are in debt these days, for lots of different reasons. Whatever the reasons for your debt, this booklet aims to help you with your debt problems. It shows you: How to work out your personal budget. How to decide which debts to deal with first your priority debts. If you can repay, how to make reasonable offers to your creditors. If you can t repay, how to deal with your creditors. If you are self-employed and in debt you will probably need to get extra assistance from a local Citizens Advice Bureau or the Money Advice Trust on This self help pack works on a system of separating debts into priority debts and non-priority debts. Priority debts are those where the creditor has the greatest sanction against you. For example: If you don t pay your rent you could lose your home If you don t pay your electricity bill you could be disconnected If you don t pay your magistrates court fines, bailiffs may call on you (we will give you more information later on about the powers of bailiffs). The ultimate sanction could be imprisonment if you fail to pay. Non-priority debts are those where the creditor has fewer or no sanctions to take against you, or where any enforcement is dependent on the creditor obtaining an order in the civil courts. These are typically credit debts such as: Store cards Credit cards Loans from banks, finance companies or door to door loan providers. We have produced this booklet to help you negotiate with your creditors. You may want to work through some of the sections with your housing manager. If you need more support, then you may want to contact your local Citizens Advice Bureau or call the Money Advice Trust. Your housing manager will aim to assist you to prepare a budget sheet or financial statement that enables all of your priority commitments to be met, including any arrears, housekeeping costs, travel to work, school etc. 2

3 Your housing manager will then help you calculate the available money left over after essential expenditure and help you to decide what approach to take with nonpriority creditors. For example, after looking at your essential expenditure and priority debts, they may be able to negotiate reduced payments to non-priority creditors where appropriate. Remember: if at any stage your housing manager feels that your debts need specialist help, you can contact a specialist adviser at Citizens Advice or the Money Advice Trust. Golden Rules Don t ignore the problem. It won t go away and the longer you leave it, the worse it gets. Don t borrow money to pay off your debts without thinking carefully. Get advice first. This kind of borrowing could lead to your problems getting worse and could even lead to you losing your home, if the loan is secured on it. If you have lost your job, or are off work because of illness, check whether payments are covered by payment protection insurance. If your income is low, check you are claiming all of the benefits and Tax Credits that you are entitled to. Your housing officer will be able to advise you on this. Get in touch with your creditors straight away and explain your difficulties. Go and see them, phone or write to them. Advise them that you are getting help through a self-help debt advice scheme. Use this pack to work out your income and expenditure. It will show you whether you have any spare money to offer to your creditors. Make sure that you tackle your priority debts and emergencies first. For example, debts which could lead to you losing your home or having your gas or electricity cut off, or even imprisonment. These are explained in more detail later on in this pack. Use this pack to help work out a reasonable offer to repay the money owed. Don t worry if it appears very small. Creditors prefer you to pay a small amount regularly than make an offer that you won t be able to keep to. There are example letters at the end of this pack that you can use for contact with creditors. Contact everyone that you owe money to. If you make arrangements to pay some creditors but not others, you could run into difficulties again. If the first person you speak to is unhelpful ask to speak to somebody more senior who may be able to agree to what you want. If creditors are difficult, don t give up trying to reach an agreement. If you need support with creditors that you believe are acting unreasonably, speak to your housing manager. Fill in the reply forms to court papers and let the Court have all the facts. This information will be used to decide if you owe the money and what instalments you should pay. 3

4 Always attend Court hearings. Take a copy of your Financial Statement with you. The District Judge at the County Court will use this to decide how much you should pay. S/he cannot send you to prison except for contempt of court. However, the Magistrates Court may be dealing with some of your priority debt, and may consider sending you to prison but only if s/he thinks you are deliberately not paying (see section on priority debts). Always keep copies of any letters or Court forms you send or receive. Are you having problems managing your money? Sometimes your debts can build up so much that you are unable to cope with them. Here s how to spot the danger signs. Missing more than one repayment? It is easy to forget to make a payment especially, if you have a change in your cash flow or find you need to make an unexpected payment. But if you miss two or more payments the people you owe the money to will become concerned and may look at action they can take to get the money from you. The payments are not reducing the debts? If you are paying off as much as you can each month, but the amount you owe is not reducing this can be very frustrating. Your payments are only covering the interest charges and not any of the debt. Borrowing from one creditor to pay another? This can seem like the only option so you can continue making payments, but it only makes the situation worse as the amount you owe increases. Paying out a large amount of your monthly income? If you have to pay a large chunk of your monthly income to your creditors you may find it impossible to manage day to day living expenses (rent, gas, electricity, food etc). This can be a real struggle and cause you to get into further debt. Not opening bills? Sometimes when things are becoming too much it is easy to want to ignore them and not open any of your bills or letters. Unfortunately, avoiding contact with your creditors will make thing worse as they will see it that you won t pay rather than can t pay. It is always better to contact the creditors as they often want to help you and may be able to rearrange your payments to make it easier for you. Creditors threatening legal action? Whoever you owe money to will eventually take steps to get it back from you. This could result in you being taken to court, losing goods (car, TV, stereo) or losing your home. If you are taken to the county court you could receive a county court judgement (CCJ) against you, which will affect your credit rating for years to come. Debts can build up very quickly and become overwhelming, making it very hard to cope. This could in turn affect your health and well-being. Relationships can also suffer. This self-help booklet will help you to work through your debts, prepare a financial statement and write to your creditors. 4

5 Step 1: Contact your creditors It is important to contact them straight away and explain your difficulties. Speak to them on the telephone, go and see them or write to them (see sample letter A ). If you have not heard from your creditors for a long time check with your housing manager before you make contact. Always check that you are liable for the debt, as usually you will only be liable for debts in your own name or joint names. However there are some exceptions e.g council tax arrears if you are living together as a couple. If you are unsure about your liability for any debts, check with your housing manager. Always keep copies of correspondence. Step 2: Emergencies If creditors are threatening disconnection, eviction or you have received court papers, you will need to take urgent action. Contact the gas or electricity company or your landlord and ask for time while you sort out your budget. Don t make offers until you are sure you can afford them. If you receive court papers, don t ignore them. You will need to complete a form of reply that comes with the court papers. You may want some support with this so first of all speak to your housing manager. They will then either help you to complete the form or alternatively you can get support from your local Citizens Advice Bureau. Always reply within the time limit. Step 3: Income & Expenditure There are income and expenditure sheets for you to use to prepare your personal budget. It may be a good idea to work the amounts out in pencil first so you can change them later if necessary. Before you start completing the forms, you need to decide whether you will work things out weekly, fortnightly or monthly and keep to this throughout. It is important for you to work out your budget because it helps you: To see how much money you have coming into the household; To see how much money is going out; To work out offers to creditors that you can afford; To plan your future expenditure. To calculate a monthly figure from a weekly figure, multiply the weekly figure by 52 and divide by 12, e.g. you receive wages of 100 per week, calculated on a monthly basis this will be: 100 x 52 = = Later on, you will use your Income and Expenditure sheets to prepare a Financial Statement, which will show your creditors how you have worked out your offers of payment. 5

6 Preparing your Income and Expenditure Sheets: Income Money coming in Add up your total income (yours and your partner s income). Include: Wages and salary after deductions (normal take home - pay). Do not include overtime unless this is regular! Benefits including Child benefit Disability Living Allowance and Attendance Allowance. Even though you must include this as money coming in, you should show a similar amount on the expenditure side as money needed for care or mobility problems. Contributions from other people who live in your home such as grown up children and elderly relatives (known as non dependants). Try to make sure that any non dependant is paying enough towards the household expenses and covering any shortfall in Housing Benefit and Council Tax Benefit, which is caused by them living with you. If your income is low you may be entitled to benefits and rebates e.g. Income Support, Tax Credits, Housing Benefit or Council Tax Benefit. If you need advice on benefits, contact your local Job Centre or Citizens Advice Bureau. Expenditure Money going out Work out with your family how much money you have to pay out each week, fortnight or month for basic living expenses. At this stage, do not include any debts, arrears or any credit payments, as you may not be able to afford them. Here are some points to consider that may help you to reduce your regular payments: Mortgage: if you are on Income Support or income based Jobseekers Allowance, are you receiving Mortgage Interest payments with your Benefit? Rent: check if you are entitled to Housing Benefit. Also, if you are on Income Support or Income-Based Jobseekers Allowance and you have rent arrears you may be able to arrange direct payments from your benefit to your landlord. If there is a shortfall in your Housing Benefit and you cannot meet all your rent, you may be eligible for a Discretionary Housing Payment. You would need to apply to the local council for this. If you think that this may apply, speak to your housing manager. Council Tax: check if you are entitled to Council Tax Benefit and/or see if you can arrange to pay weekly or monthly in instalments. If you are on Income Support or Income-Based Jobseekers Allowance you may be able to arrange direct payments from your benefit for arrears. The ultimate sanction for nonpayment of Council Tax is imprisonment so this is a priority debt. If there is a shortfall in your Council Tax, you may be able to apply for a Discretionary Housing Payment. If you think that this may apply to you, speak to your housing manager. 6

7 Fines: when you receive a fine at court you are given the opportunity to suggest a method of repayment. If you are in receipt of Income Support or income based Jobseekers Allowance you may be able to have direct deductions from your benefit. Alternatively you can pay with payment slips. As the ultimate sanction that can be applied for failure to pay is imprisonment, this is a priority debt. Child Support: You may have to pay maintenance through the Child Support Agency (CSA). You may be able to pay this by direct deductions from your Income Support or income based Jobseekers Allowance or direct to your ex partner. The CSA could also apply for an attachment of earnings order, which would enable them to collect the maintenance directly from your employer, or they may make an arrangement to collect it directly from you. Water rates: the water company may have a scheme allowing you to pay in weekly or monthly instalments. If you contact your water company they will provide further information. If you are receiving Income Support or income based Jobseekers Allowance you may be able to have a direct deduction from your Benefit to pay the arrears. If you have a large family or a specific illness and are on a watered metered scheme, you may be eligible for special financial assistance. Please speak to your housing manager if this applies to you. Gas and Electricity: you may be able to ask your supplier to pay by budget scheme or have a meter fitted. You may also be able to have deductions direct from your Income Support or income based Jobseekers Allowance to pay for these. TV licence: this is a priority payment because if you do not have a licence the Magistrates Court could fine you. There are different ways of paying for a TV licence. You can buy stamps from the post office, pay by direct debit quarterly or monthly from your bank account or if you are receiving Benefits you may wish to use the TV licence Cash Easy Entry option. The telephone number to enquire about this scheme or any other payment method is School meals: If you are entitled to Income Support, income based Jobseekers Allowance or Child Tax Credit, you may be able to claim free school meals. Free prescriptions or help with NHS costs (e.g. for glasses): Some people qualify for these such as those on Benefits or a low income. If you think you may qualify, talk to your housing manager, who can advise you. When completing your expenditure, remember: Housekeeping: we have listed most items so hopefully you won t forget anything. Try and separate out the amounts you spend on your weekly shopping and remember things like washing powder, soap, shampoo etc. TV/video: you should include the monthly rental. Most creditors will accept that these items are essential; however they may challenge expenses for satellite or cable television. Travelling expenses: this is in two sections public transport and car costs and should include travel to work, school and for shopping. 7

8 Magistrate Court fines: these are a priority and should be included in your essential outgoings. Please let your mentor/probation contact know immediately if you are behind with payments. Child Support/Maintenance: include voluntary payments and any payment ordered by the Courts, or the Child Support Agency. Clothing & Footwear: don t forget the cost of school uniform, work clothes etc Other : in this section, you should include any regular expenditure not already listed. You should also include irregular outgoings like birthdays, Christmas and an amount to be put aside to cover emergencies. Be wary of putting too high a figure. Creditors will not appreciate it! Remember: This is your expenditure so the figures should be your own and include all your regular outgoings. If you do not take into account all your expenditure you may find it very difficult to keep to any repayment plans, which will lead to further problems. Step 4: Available Income Before you transfer this information to your Financial Statement, work out your available income by taking away your total expenditure from your total income. This is the amount of available income for all your creditors. My outgoings are more than my income. What can I do? It is important that your expenditure is not greater than your income as your debts will continue to grow, you should: See if you can increase your income. You may be entitled to benefits or you may be able to start working or increase earnings. However, if you are already on benefits, ask your housing manager or check with your local Citizens Advice Bureau first, as your benefits may be affected if your income changes. You may also want to get your Income Tax Code checked. See if you can reduce any of your expenditure. You shouldn t cut down on basics like food, housing costs, gas, and electricity and should always pay priority debts. If your outgoings are still more than your income after doing these things, you may want to seek further guidance from a specialist debt advisor through the Money Advice Trust or local Citizens Advice Bureau. If your only income is from benefits, you may not have any available income. Minimum offers of repayment will still need to be made to any priority creditors, but you are unlikely to be in a position to make an offer to non-priority creditors. 8

9 Step 5: What are my priority debts? Some debts are more important than others; these are called priority debts and should always be dealt with first because of the action the creditors can take: Rent arrears PRIORITY DEBT Mortgage arrears Second mortgage/ secured loan Council Tax Gas or electricity Magistrates Court fines Maintenance Income Tax, National insurance and VAT arrears Hire Purchase ACTION AGAINST YOU Repossession of your home or eviction from your home by bailiffs Repossession of your home or eviction from your home Repossession of your home or eviction from your home Seizure of goods by bailiffs or deduction from wages or Benefits/imprisonment Supply cut-off Seizure of goods by bailiffs or deduction from wages or Benefits/imprisonment Seizure of goods by bailiffs or deduction from wages or Benefits/imprisonment Seizure of goods by bailiffs or bankruptcy Repossession of goods If you are threatened with bailiff action, there is more information later in the pack about what you can do and the powers the bailiffs have. The above are all priority debts and it is important to use your available income to make arrangements to settle these debts first. Non-priority debts are still important, but offers should only be made after offers to priority creditors have been accepted, and assuming there is still available income. You will need to complete a Financial Statement before writing to most creditors. Examples of non-priority creditors are: Loans Bank overdrafts Mail order Personal debts to friends and family. Even if you have a County Court Summons or Judgement on any of these debts, it should generally still be regarded as a non-priority. However you will need to deal with Court papers as an emergency. Your housing officer may be able to support you to complete these forms or you can get help from your local Citizens Advice Bureau. 9

10 Step 6: Payments on priority debts There are no strict rules for working out how much to offer to individual priority creditors. It is a question of juggling with the amount of available income you have and ensuring that everyone gets an acceptable offer of repayment. Here are some ideas on how to arrange payments of your priority debts: Mortgage arrears and secured loans Do not delay in contacting your lender to explain that you are experiencing difficulties. You will usually have to offer an extra monthly payment to clear the arrears. The lender may ask for the arrears to be cleared in 12 to 24 months. Ask for a longer time to pay the arrears if you cannot afford to do this. Longer periods can be agreed in some circumstances, even over the remaining term of the agreement. Sometimes your lender may agree a different arrangement, e.g.: Paying off the interest only for a short period Adding the arrears to your total mortgage debt Mortgage direct for those on Income Support/income based Jobseekers Allowance. Increasing the mortgage term. While you are negotiating with your lender make whatever payments you can afford. If you have problems negotiating talk to your mentor/probation contact as you may need to be referred to the Project. WARNING: do not be tempted to take out a loan to repay the mortgage arrears. Often these are very expensive and could put your home at greater risk. Rent arrears Tell your housing manager as soon as possible to explain that you are experiencing problems paying your rent. Offer to pay a reasonable amount per week/month to clear any arrears. If your offer is refused, pay your normal rent plus the amount you have offered anyway. This will help you if your landlord takes Court action as it shows that you are trying to clear the arrears. If you have problems negotiating with your landlord you may want to seek further advice and support from Citizens Advice or Shelter. Gas and electricity arrears The gas and electricity companies can cut-off your supply in a few weeks if you do not pay them. They do not need a Court Order to do this. It is therefore very important to contact them to make a repayment arrangement as soon as you know you are going to have problems. It is a good idea to start paying what you can afford. The fuel company may accept one of the following arrangements: Weekly or monthly instalments Having a pre-payment meter fitted Direct payments from Income Support/income based Jobseekers Allowance. 10

11 Council tax arrears Normally the Council will want you to clear the arrears before the next bill is issued in April, but if you can show that this will not be possible you may be able to negotiate to pay over a longer period. If you cannot reach an agreement, the Council will seek a Liability Order at the Magistrates Court and then may use any of the following enforcement methods: Seizure of goods - the council can ask bailiffs to visit your house to remove goods to sell to cover the debt. Attachment of earnings where payments are taken directly from your wages. Deductions from Income Support/income based Jobseekers Allowance Imprisonment- but this would be used only as a last resort if the court considers non payment to be deliberate and wilful. If you have problems negotiating with the Council or they are about to enforce a Liability Order (for example send the bailiffs to your property) speak to your housing manager. Magistrates Court fines You could be in serious trouble if you do not pay your fines and do not make any arrangements with the Court. Contact the Court immediately and tell them if you cannot afford the repayments. They are likely to arrange a means enquiry so that hopefully a more affordable payment arrangement can be ordered. In hardship cases the Court may even consider remitting some of your fines. If you do not make payments, the Court will do one of the following: Use private bailiffs to seize and sell goods. They may even be able to take a car parked nearby if it is registered in your name. Further details on Bailiffs later in the pack. Make deductions from your Income Support/income based Jobseekers Allowance. Make deductions from your wages Order you to be sent to Prison but this would be used only as a last resort if the court considers non payment deliberate and wilful. There will be a means enquiry before this happens, which you must attend with a copy of your financial statement. If the Court issues an arrest warrant, explain why you have not paid. The Court may agree a new arrangement that is more affordable and suspend the warrant. Maintenance/Child Support If you are in arrears with your maintenance, contact the Court/Child Support Agency immediately. They may allow you to pay an amount on top of what you are already paying to clear the arrears. If you do not pay your maintenance the CSA or Court may: Use bailiffs to seize goods and sell them Order you to be sent to Prison if they consider you are deliberately not paying. 11

12 If you have problems negotiating with any of your priority creditors, your housing manager may be able to help or you can get further support from the Citizens Advice or Money Advice Trust. Step 7: Preparing your financial statement You should now be ready to prepare the financial statement: Transfer all the information from your income and expenditure sheets, apart from your agreed payments to priority creditors, to the left hand side of this shorter document. You will need to combine some items of expenditure under the various headings. You have now shown your regular income and expenditure, but no payments towards debts/arrears. Complete all the boxes that apply to you and show on the right hand side your available income for priority creditors by deducting total expenditure from total income. Now complete the section headed Priority Creditors showing the level of your arrears and the agreed repayments. Add up the totals at the bottom of the section to get the figure for Priority debt payments. Complete the next section using the above figures to work out if you still have any available income for offers to non-priority creditors. If you don t have any available income left, you can still list your creditors on the next page and then move on to Step 8. If you do have available income, this can be offered to your non-priority creditors. This may only be a small amount and will need to be divided fairly between them. This will mean that the creditor you owe most to will be offered the most and the one that you owe least to will be offered the least. This is called pro-rata distribution and the formula for calculating these offers is shown below. Complete the next page of the Financial Statement, listing all your creditors and the amounts owed to each. Add up the total owed to nonpriority creditors. You can now calculate the offers: Available Income x Individual Debt Total amount owed for non-priority debts = Offer to Individual Creditor An example of a pro-rata calculation: You owe Newhome catalogue 500 Flexi bank 350 Easy loan 825 Total debts 1,675 Your available income for non-priority creditors is 20 per month. 12

13 Your offers would be: Newhome catalogue 500 x 20 = Flexi bank 350 x 20 = Easy loan 825 X 20 = You can use a calculator to work out these payments. Your housing officer will be able to help you with completing the Financial Statement and calculating the offers to creditors. Step 8: Making offers and sending letters It may be that after completing your Financial Statement and making offers to your priority creditors you have nothing left to offer to your other creditors. If that is the case, you should still write to them and enclose a copy of your Financial Statement. Explain why you are having financial difficulties and ask your creditors to freeze interest and charges, and to hold action until your circumstances improve suggest a period of perhaps 3/6 months without payments. You can use sample letter B in this pack. If there are exceptional circumstances, you could ask the creditors to consider writing off the debts. You can discuss this with your housing manager. You should not make any offer of repayment that you will not be able to afford. Remember to keep a copy of the Financial Statement and all letters you send. If you are able to make offers of repayment to non-priority creditors, you should send an offer letter and a copy of the Financial Statement to each of them. You could use sample letter C". If the new offer you make is less than the interest being added the debt will continue to grow, so you should always ask the creditor to freeze the interest charges. If there is a County Court Judgement on your debt, you will need to ask the court to vary the order. Ask your housing manager about this. 13

14 Remember: Once your creditors have accepted your offer it is important to make the regular payments as agreed otherwise they may take legal action against you. Don t ignore letters the problem won t go away Keep copies of all correspondence If your circumstances change, let your creditors know If you have trouble negotiating or receive Court papers, advise your housing manager Let your housing manager know if you are having difficulties. There are specialist support services that can help you. What do all these words mean? APR Annual Percentage Rate The total yearly amount you will pay on a loan including the interest rate and any extra costs, such as service charges. Interest rate The higher the interest rate on the loan, the more you have to pay. This is usually worked out as a percentage. If you were to borrow 100 and are paying a yearly rate of interest of 25% at the end of the year you will owe 125. If you have savings, the bank would owe you interest instead. If you were to put 100 in a savings account with a 5% yearly interest rate, at the end of the year the bank would owe you 5 on top of your 100. ATM Automatic teller machine A cash machine which pays out cash when you put your card in. Direct debit Instead of paying by cash or writing out a cheque each month, you can fill in a form, which allows a company to take money from your account. This is most commonly used for bills that are different each month, for example phone bills. Standing order This is set up by you telling your bank to transfer a particular amount of money regularly to another account, such as a creditor, on a date you choose. Overdraft If you take out more money from your bank account than you have put in, you will have an overdraft. There are two kinds: Authorised overdraft: you agree with your bank beforehand how much your overdraft will be. You will be charged an interest rate for this facility. Unauthorised overdraft: This is where you spend more than you have in your account without the bank agreeing, you will have to pay a lot of charges and a much higher interest rate. 14

15 Information about Bailiffs collecting Fines/Council Tax It is very important that, if the bailiffs call at your home, you do not let them in. Unfortunately bailiffs have the power to make forceful entry into your home, if the debt is for Magistrates Courts fines, whether they believe you are at home or not. Bailiffs may not choose this course of action very often. If the bailiffs do gain entry they could earmark goods which they could remover to sell at auction at a later date. If you have a car, it would be best not to park this outside as they could legitimately take it to sell to pay off the debt. Fines and council tax are priority debts and if you do not make arrangements to pay them, the Court or Council could eventually decide to send you to prison. However they should not do this if you show willing and try to make arrangements to pay. You will need to offer the bailiffs at least 5.00 per week, which is the lowest amount that the Magistrates Court or Council would normally accept for people on means tested benefits or very low incomes. If the bailiffs do not accept the offer, and cannot gain entry, then they will eventually return the debt to the Magistrates Court. At this point you can write, with support from your housing manger, to the Court or Council, and make a sensible offer that you can afford. Very occasionally the Court will issue an arrest warrant but that depends on the circumstances of the case. It would be a good idea to set aside the amount offered each week so that if the fine is returned to the Court, you can go to the means enquiry ready to make the payments that you would have made to the Bailiffs. If you set aside the money offered for Council Tax, this can immediately be paid to the Council as a gesture of good will. Do you have to let the bailiffs into your home? You do not have to let the bailiffs into your home. Once the bailiffs have gained access peaceably, and validly levied distress, they may be able to use force to gain entry on any subsequent visit. You must not assault the bailiffs to prevent entry. Bailiffs have a right to enter your home, but only if they can do so peacefully, unless the debt is Magistrates Court fines. It will not be classed as a peaceful entry if the bailiffs: Break a window or door Push past someone who is in the house who has opened the door but who does not wish the bailiffs to enter knock down fences or gates Open a window which is not already partially open (even if it is unlocked). Remember: if you let a bailiff into your home and then try to deliberately exclude them when the visit again, the bailiffs will probably enter your home forcibly. Bailiffs are allowed to enter your home by: climbing in through an open window opening a window or door that is partly open opening a door that is closed but not locked 15

16 using any keys which are found to unlock a door or window using ladders to climb in upstairs or over walls climbing over a wall or fence from a neighbouring property breaking down an inner locked door once entry has been gained through an outer door breaking open locked cupboards, wardrobes and so on, once peaceful entry has been gained through an outer door being invited in by the client or some other responsible person. If the bailiffs have previously gained entry peacefully, or someone invited them in, they can return and use force, if necessary, to get back into the property. New benefit changes to look out for: Employment and Support Allowance (ESA) This is the new benefit that will replace Income Support (as sick) and Incapacity Benefit. The benefit is aimed at focusing on what a claimant can do rather than what they can t. Eligibility will be based on a new assessment, which replaces the current Personal Capability Assessment. The purpose of the new assessment is so that a Doctor or another medical professional can assess what needs to be done to enable you to return to work. There are two types of ESA, a contribution based payment, which is dependant on National Insurance contributions and an income -based payment. Initially, there will be a 13 week assessment period, when a basic allowance is paid, the same amount as Job Seekers Allowance. Then depending on the support needs and/or abilities identified, there are two components which can be added onto the basic allowance. Work related activity component, or Support component Anyone claiming ESA will be expected to take reasonable steps to return work. Each claimant will be allocated a Personal Advisor who will advise on the support and training that is available to help them back to work. Benefit can be reduced if the claimant fails to undertake interviews, assessments or activities without good cause. Local Housing Allowance (LHA) This allowance is the set amount that Housing Benefit will pay towards private rented accommodation. The system has been introduced in the hope that it simplifies the Housing Benefit system and gives claimants more choice. LHA only applies to private rented accommodation, if you rent from a Local Authority or Housing Association, you will not be affected. The allowance is based on where you live and who is in your household, not necessarily the actual amount of rent you pay. For example, a single person under 25 renting in Tunbridge Wells will be paid per week Housing Benefit 16

17 A couple, with two sons under the age of 15 renting in Tunbridge Wells will be paid per week Housing Benefit If the amount of Housing Benefit payable (as set by the Local Housing Allowance) is less than the rent set by landlord, you will be expected to make up the shortfall yourself or seek cheaper accommodation. However, if you find a property that is cheaper than the amount set by the Local Housing Allowance, you will be allowed to keep the difference, up to a maximum amount of 15 per week. The rent will be paid direct to the claimant rather then the Landlord. In exceptional cases where the claimant would clearly struggle to manage the payment if it is was paid direct into their bank account, the Local Authority can pay direct to the Landlord, this would usually be a short-term arrangement. 17

18 Sample letter A Creditor s name Address Your address Date Dear Sir/Madam Re: Account Number I/We have been experiencing some difficulty in meeting my/our financial commitments. In order to work out offers of repayment to all my/our creditors, I/we would be grateful if you could forward me/us an up to date balance of my/our account along with details of any interest being charged. (I/We would also appreciate a copy of the original agreement with yourselves.) In the meantime I/we hope you will agree to suspend action on my/our account until offers of repayment can be worked out and consider the suspension of any interest charges. Your co-operation in this matter is appreciated Yours faithfully Your name & signature 18

19 Sample letter B Creditor s Name Address Your address Date Dear Sir/Madam Creditor Ref Re: Account number I/We have now received replies from all my/our creditors. My/Our difficulties have been due to The enclosed financial statement details my/our income and essential expenditure. At present, my/our income is only sufficient to meet my/our essential expenditure. I/We hope that you will consider freezing interest and any action on my/our account for a period of 3/6 months, due to my/our circumstances. After this time, I/we hope to be in a better position to make payment proposals to my/our creditors. Should my/our circumstances change I/we will make contact with you immediately. Your cooperation in this matter is appreciated and I/we hope you will be able to accept my/our current position. Yours faithfully Your name & Signature 19

20 Sample letter C Creditor s name Address Your address. Date Dear Sir/Madam Creditor Ref: Re: Account number I/We have now received replies from all my/our creditors and am/are able to make offers of repayment. My/Our difficulties have been due to.. The enclosed financial statement details my/our income and essential expenditure along with offers to our creditors. Whilst these offers are less than I/we should be paying, l I/we feel that they are realistic in my/our present circumstances. I/We would be grateful if you would consider this offer and also agree to suspend interest and charges given my/our situation. Should my/our circumstances change, I/we will contact you immediately with a revised payment proposal. Your co-operation in this matter is appreciated and I/we look forward to your acceptance of my/our proposals. Please send me a payment book. I will commence payments on. Yours faithfully Your name and signature 20