Hillingdon & Ealing Citizens Advice. citizens advice bureau. A self-help guide

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1 Hillingdon & Ealing Citizens Advice citizens advice bureau A self-help guide to

2 CONTENTS 1. Introduction Dealing with your Debts 1 2. Personal Budget Stages First and Second Mortgage Arrears 5 4. Rent Arrears 6 5. Council Tax Arrears 7 6. Gas and Electricity Arrears 9 7. Example Personal Budget Stages Water Charges Some Additional Information Court Action on First and Second Mortgages Court Action on Rent Arrears The Child Support Agency Blank financial statement Sample Letters Useful Numbers 31 For the latest information on ways to manage your debts please look at which is the online information service from Citizens Advice.

3 DEALING WITH YOUR DEBTS Lots of people are in debt these days, for lots of different reasons. Whatever the reasons for your debt, this booklet aims to give you the best advice. It shows: How to work out your Personal Budget in order to make out a Financial Statement. You can use this to explain your money problems to the people you owe money to (your creditors ). Everyone wants you to pay their bill, but they do not stop to realise that you have got other problems. This booklet may stop them all chasing you for money at the same time. How to decide which debts to deal with first your priority debts. If you can make reasonable offers to repay your creditors. How to cope with court papers and procedures. Don t ignore the problem: it won t go away and the longer you leave it the worse it gets. Get in touch with your creditors straight away and explain the difficulties. Get a contact name if you can and go and see them or speak to them on the phone or write to them using the sample letters provided. 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. Make sure you tackle your priority debts first the debts which can mean losing your home or having your gas or electricity cut off, or going into prison. This leaflet tells you what these are. Don t panic! You can t go to prison for ordinary debts. Fill in the reply forms to court papers and let the court have all the facts. You should supply a copy of your Financial Statement. Try to attend court hearings. Take a copy of your Financial Statement with you. Don t think that going to court makes you a criminal; it s not that kind of court. Don t borrow more money to pay off your debts without thinking carefully. Get advice first. This kind of borrowing will usually make matters worse. Don t ignore creditors letters or phone calls. Always answer their letters. Don t give up trying to reach an agreement even if creditors are difficult. Remember we are here to help at each stage with letters and forms and we can explain what to do if you are asked to go to court. 1

4 What happens next? You have been given a self-help booklet by your CAB. This booklet is designed for you to work through yourself. You may find that you can deal with your debts by yourself by writing and talking to those who you owe money to. IMPORTANT You should not take out any more credit otherwise your creditors may refuse to negotiate lower payments with you. Do cut up your credit cards and return to your creditors. What do I do first? Contact your creditors using the sample holding letter. An example of one is shown in Appendix A. You should amend as necessary. Do this immediately, don t delay. The next thing to do is: Set aside some time when you know you won t be disturbed; and Gather details of all your debts and other bills; and Details of your living expenses. Why is it Important to Work Out My Personal Budget? Because it helps you: To see how much money is coming into your household. To see how much money is going out. To work out offers to creditors and courts which you can afford. To plan your future spending. You can use your Financial Statement to show your creditors and the courts how you have worked out your offers of payment. As you go through this booklet you will gradually collect the facts you need to fill it in completely. Stages 1 and 2 of your Personal Budget are about your income and expenses. Stage 3 is about money left over to pay creditors. When you have read the rest of the booklet you can transfer the information to the Financial Statement. Creditors are interested in what you spend each week or month. We suggest you send them the Financial Statement to confirm these details. 2

5 PERSONAL BUDGET STAGES 1 4 STAGE 1: MONEY COMING IN INCOME Fill in the boxes on your Financial Statement. Fill in either all weekly or all monthly figures, whichever suits you best. Don t mix the two. Add up the income of you and your family. Include: Wages and salary after deductions (normal take-home pay). Don t include overtime if it s not regular. Benefits including Child Benefit, Child Tax Credit, Working Tax Credit and Income Support if applicable. 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. To check whether you are entitled to benefits ask your local Jobcentre Plus (DWP), Housing Services and Inland Revenue (their telephone numbers are at the back). Tax Rebates Contact your tax office and ask them to check your tax code. STAGE 2: MONEY GOING OUT EXPENSES Work out with your family how much money you have to pay out each week/month on the basic living expenses on your Personal Budget. At this stage don t include any debts arrears or any credit payments. See if you can cut down on any of your expenses but don t cut down on basics like food, gas, electricity. You must try and make your expenses equal your income otherwise your debts will continue to grow. If your income is more than your expenses, you have an amount of AVAILABLE INCOME FOR ALL CREDITORS. The next part of the booklet explains how you should share this among your creditors. Rent/Mortgage payments. Check whether you are entitled to Housing Benefit or help with your mortgage interest or other housing costs through Income Support. Council Tax. Check whether you are entitled to a rebate or Council Tax Benefit. Water Rates. Water boards may accept weekly or monthly payments rather than half-yearly. Gas and Electricity. Work out the cost of your bills over the year. Divide by 12 if you are budgeting monthly. You can ask to pay by budget scheme or have a meter installed. Ask your local council about home insulation grants. If you are on Income Support you can pay for arrears by Fuel Direct. Housekeeping. Don t forget to include a small amount for miscellaneous expenditure on things such as entertainment, cigarettes and sweets. 3

6 Telephone Bills. Don t forget to include your landline and mobile phone costs. Shop around to see if you can obtain a better deal by consolidating these payments. TV Licence. Consider buying licence stamps from the Post Office to save up for your next one. You can also pay by direct debit in instalments. Travelling Expenses. These should include travelling to work, school and for shopping. If you are running a car include tax, insurance, repairs, MOT servicing as well as petrol. Children s Expenses. These should include childcare costs, school meals, nappies etc. Clothing. Look at your clothing expenses over a year. Only include non-dependants if you pay for their clothing. Remember to include school uniform. As a rough guide, allow 5 per person per week. People on Income Support or Child Tax Credit only, (and not Working Tax Credit), may be able to get help with school meals and uniforms. Contact your Local Education Authority for more details. STAGE 3: MONEY LEFT OVER MONEY FOR CREDITORS To find out how much money you can offer your creditors, take away your total OUTGOINGS from your total INCOME to find out your AVAILABLE INCOME FOR ALL CREDITORS. STAGE 4: WHAT ARE MY PRIORITY DEBTS? The law gives different creditors different ways of getting their money back. Therefore, some debts are more important than others. Here is a list of kinds of debt and action that may result if you cannot reach an agreement. Debt Mortgage arrears/rent arrears Second mortgage/secured loan arrears Council Tax arrears Gas and electricity arrears Unpaid fines in the Magistrates Court Maintenance/Child Support arrears Tax arrears Action against you Re-possession of your home/eviction from your home Re-possession/Eviction Bailiffs/Imprisonment Gas or electricity cut-off Imprisonment Imprisonment Bailiffs/Imprisonment 4

7 Therefore these are priority debts. It is important to use your AVAILABLE INCOME FOR ALL CREDITORS to make agreements and settle these debts first. Don t make offers on your other debts until you have negotiated instalments to pay these priority creditors. If you have a mortgage, carry on reading. If you rent your home, turn to Page 6. FIRST AND SECOND MORTGAGE ARREARS The first mortgage is the loan you took out to buy your home. A second mortgage, also known as a secured loan, second charge or sometimes a consolidated loan plan, is a separate loan which is secured on your home. Check all your loan agreements to see if they are unsecured or secured on your home. If secured, treat them as priority debts because the lenders can ask the court for possession of your home if you cannot pay your monthly instalments. The property will then be sold to pay off your debts. The legal term for the company or building society who gave you your mortgage is a mortgagor. In this booklet we shall call them lenders. Mortgage Interest Rates If you have a loan which was used to purchase or improve your home, and you are getting Income Support, you may be able to claim mortgage interest payments. The Jobcentre Plus (DWP) now make these payments directly to your lender. Contact your local Jobcentre Plus (DWP) to see if you can make a claim. When should I contact my lenders? Do not delay contacting your lenders to explain your difficulty. It is never too early or too late to come to an arrangement. What payment arrangements will my lenders accept? Your will usually have to offer an extra monthly payment to clear the arrears. The lenders will normally ask for the arrears to be cleared over 12 to 24 months. But longer periods can be agreed in some circumstances even over the remaining terms of the mortgage. If you cannot manage to clear the arrears within the time which the lenders ask, explain why not, particularly if there are circumstances such as long illness, death of a partner, marriage breakdown or unemployment. If the value of your home is worth less than the mortgage, tell the lender. They will take this into consideration, when considering instalments off the arrears. Lenders are now becoming more willing to negotiate and may accept other payment arrangements, e.g. 5

8 Paying off the interest only for a short time Adding the arrears to your total mortgage debt Repaying the arrears over a specific time period Ask the lender about these or other options available. How do I deal with my second mortgage? Due to second mortgages being second in line to first mortgages, companies offering secured loans or second mortgages are often less tolerant of arrears. You may be able to apply to the County Court to get your normal monthly payment reduced by using a procedure called a Time Order. Again, you may be able to claim mortgage interest from the Jobcentre Plus (DWP), if the loan was used for home improvements. What if my lenders refuse to negotiate? Start paying what you can afford. This will help if your case goes to court. DO NOT HAND THE KEYS BACK WITHOUT SEEKING ADVICE What if my lenders take me to court? See page 18 RENT ARREARS Offer to pay your landlord a reasonable amount per week from your AVAILABLE INCOME FOR ALL CREDITORS to pay off the arrears. Use your Financial Statement to support your offer. Remember. If you get Housing Benefit, you can offer to have it paid direct to the landlord. This may make her/him more willing to agree to your offer. If you are on a very low income, do not be frightened to offer a small amount, if that is all you can afford. Rent Direct. If you get Income Support you can have a standard amount taken out of your benefit and paid direct to your landlord for rent arrears. This way you can point out to your landlord that s/he is sure of getting her/his money back, even though it may take a long time. 6

9 Is your landlord refusing to agree to your offer? If your landlord refuses to accept your reasonable offer, start paying what you can afford the arrears as well as continuing to pay your normal rent. This will help you if the landlord takes court action. What if my landlord takes me to court? See page 21 COUNCIL TAX ARREARS Paying the Council Tax to your local council is a priority debt because if you do not pay, court action can be taken which can mean: 1. You or your partner s goods can be taken away by bailiffs and sold. This is called distraint or distress. 2. Money can be taken from your earnings/income Support to pay for the charge. 3. You can be sent to prison if they believe non-payment was deliberate. Council Tax Benefit Check to see if you are entitled to Council Tax Benefit and if you are already receiving this benefit, check that you are getting the correct amount. Check if you are entitled to reductions in your bill, for example, if you live alone or only with dependants, you may be entitled to a 25% Single Person Discount. Contact your local Council Tax Department and Housing Services for further details. What should I do? Contact the Council Tax Department. Make an offer from your AVAILABLE INCOME FOR ALL CREDITORS to clear the debt before the next bill. You may be able to negotiate payments over a longer period. If you cannot afford to pay the arrears as quickly as the council demands, tell them and let them have a copy of your Personal Budget. Start paying what you have offered and keep trying to make an arrangement. What happens if I don t pay? If you do not make payments as demanded or arranged, the local Council will seek a Liability Order at the Magistrates Court. You will be told when the hearing will be and costs may be added to your account. 7

10 After the Liability Order If the Council gets a Liability Order against you, phone them to ask them what they are going to do next. Try to come to some arrangement to pay using your Financial Statement Sheet. If you cannot make an arrangement the Council will decide how they will enforce the Liability Order. Bailiffs The Council can ask bailiffs to visit your home and take goods, which may be sold to pay off the debt. This is called distraint. YOU DO NOT NEED TO LET BAILIFFS IN The bailiffs cannot force their way into your home, unless you have let them in before. Do not sign any papers the bailiffs may post through your door, otherwise you may be charged extra costs and the bailiffs may try to enter by force. Once bailiffs are involved, negotiation is likely to be more difficult. Do contact the bailiffs and advise them of your situation. Try negotiating either with the bailiffs or directly with the Council Tax Department to try to come to an arrangement. Use your Financial Statement to support your offer of payment and start paying immediately. Start making the payments even if they ve not been accepted yet. Other collection methods The Council could then look at other collection methods open to it. Deductions from Income Support: If you are on Income Support the Council can ask the Jobcentre Plus (DWP) to take a standard amount each week to pay for your Council Tax arrears. Attachment of Earnings: If you are employed the Council can ask your employer to take a fixed amount from your wages to pay your Council Tax arrears. Imprisonment: If the Council have used distraint and your Council Tax has still not been paid in full, they may apply to the Magistrates Court for an order for you to be sent to prison. You must attend the Magistrates Court and explain why you haven t paid your Council Tax (if you do not attend you could be arrested and forced to attend). Be sure to take your Financial Statement and list of other debts as the court will need to look at your ability to pay. At the hearing the Magistrates could make an Order of Committal to prison. If you pay the weekly amount you will not have to serve the prison sentence. But Magistrates should not send you to prison if you really cannot afford to pay. 8

11 Where the Magistrates make an order for payment If you fail to pay according to this Court Order, then you can be arrested and sent to prison. If matters have gone this far, only full payment of the Council Tax is likely to avoid imprisonment. If at any stage your circumstances change so that you cannot keep to the Court Order, approach the court immediately to see if it will consider reducing payments. Do not just stop paying. GAS AND ELECTRICITY ARREARS The gas and electricity supply companies can cut off your supply after a few weeks if you do not pay them. No court order is needed to cut off the supply. Even if you can t pay the whole bill, start paying a weekly amount now to reduce the debt. Contact the gas or electricity supply company and explain your difficulties. If the first person you speak to is unhelpful, ask to speak to someone more senior. The gas and electricity supply company have agreed to a Code of Practice which controls their powers to disconnect supplies. Ask them to give you a copy. Usually a payment arrangement must be agreed to stop your supply being cut off. The gas and electricity supply companies in your region should accept any of the following arrangements: Payment of gas and electricity you are continuing to use plus the arrears through a slot, key or card meter. This can be more expensive than paying by another method. Payment of the gas and electricity you are continuing to use plus a payment to the arrears on a weekly, fortnightly of monthly budget scheme. Payment of the gas and electricity bill by weekly or monthly instalments but paying off the whole amount before the next quarterly bill arrives. If you are on Income Support it is usually possible to arrange with the Jobcentre Plus (DWP) for an amount to be taken out of your benefit and paid direct to the gas and/or electricity supply company. This covers the gas and/or electricity you are continuing to use plus a standard amount from the arrears. 9

12 Example Here is an example of how one family coped with their debts. The Simpson family consist of Mr and Mrs Simpson and their two children aged 2 and 5. Mr Simpson works 40 hours per week and earns 10,000 per annum gross. Mrs Simpson stays at home looking after the children. They have the following priority debts: Rent arrears: 2,000 Council Tax: 100 Total: They have the following non-priority debts: Newhome Catalogue Co. Ltd 2,345 Wellington Trust & Savings Ltd 1,249 Flexible Bank Card Plc 5,500 Easicheck Financial Services Ltd 500 Total: 9,594 Mr and Mrs Simpson complete their financial statement as follows: 10

13 FINANCIAL STATEMENT Name... Address...Number in household INCOME Weekly/monthly Net wages/salary Partner s net wages Child Benefit Income Support Jobseeker s Allowance Pension Credit Child Tax/Working Tax Credits Incapacity benefit Retirement Pension Occupational Pension Maintenance/Child Support Other Benefits Other TOTAL INCOME (A) OUTGOINGS Weekly/monthly Mortgage Mortgage endowment policy Second mortgage/sec d loan Rent (after HB has been credited) Council Tax (after CTB credited) Water Rates Ground rent/service charge Buildings/contents insurance Life Insurance/pension Gas Electricity Other fuel Housekeeping TV rental/licence Telephone Magistrates Court Fines Maintenance payments Travelling expenses Car repairs, insurance MOT,tax School meals 7 50 Clothing Prescriptions Childminding Children s Pocket Money Other (B) TOTAL OUTGOINGS TOTAL INCOME (A) less p TOTAL OUTGOINGS (B) equals AVAILABLE INCOME FOR CREDITORS (C) PRIORITY DEBTS Mortgage Arrears Second Mortgage arrears Balance owed Rent arrears Council Tax Fuel debts: Gas Electricity Other Magistrates Court arrears Maintenance arrears Other TOTAL PRIORITY DEBTS REPAYMENT (D) Available Income for creditors (C) less Priority debt payments (D) equals Available Income for Credit Debts (E) List of credit debts attached Weekly/m onthly offer of repaymen t Date...Signature... 11

14 2 CREDITOR BALANCE OUTSTANDING Newhome 2, Wellington 1, Flexible 5, Easicheck PROPOSED REPAYMENT 9, This is an accurate record of details of my financial position at (date).../.../20... It has been prepared with the help of Hillingdon Citizens Advice Bureau (...Office) It is being sent to all the above creditors. Please note that all debts are being treated equally. Please freeze all interest charges, should these still be accruing. Please send me a paying-in book/standing order form * appropriate * Delete as Signed... finstat2.doc 12

15 After essential expenditure the Simpson family have left to pay off their debts. They successfully negotiate an arrangement with their landlord to pay 2.85 off the arrears each month and with the Council Tax department they agree to 2.85 per week. The Simpson family now have 7.72 per week to offer to their non-priority creditors. STAGE 5: HOW DO I REPAY MY CREDIT DEBTS? After paying your EXPENSES and making arrangements with priority creditors, you will probably only have a small amount, or maybe nothing left, to offer your other creditors. If you have nothing left, say so. Show your creditors by sending them your Financial Statement. If you have something left, this is how to divide it up; in our example family the Simpsons owe: Newhome Catalogue Co.Ltd 2, Wellington Trust & Savings Ltd 1, Flexible Bank Card PLC 5, Easicheck Financial Services Ltd TOTAL 9, After paying their priority debts the Simpsons have 7.72 per week left for their other creditors. When you have more than one debt you have to decide how to divide the money for creditors fairly between them. The normal way of doing this is called pro rata distribution. This means the biggest creditor gets the biggest share of the money. To do this divide the balance by the overall total owed and then multiply this figure by To convert this to a monthly amount multiply by 52 and divide by 12. This is what you can afford to pay the remaining creditors each month. This is how the Simpsons divide their 7.72 fairly between the creditors; multiply each individual debt by AVAILABLE INCOME FOR ALL CREDITORS (E) (in this case 7.72), then divide by the total amount owed (in this case ). Newhome Catalogue Co.Ltd ( 2,345 divided by 9,594 x 7.72 = 1.89) Wellington Trust and Savings Ltd ( 1,249 divided by 9,594 x 7.72 = 1.00) Flexible Bank Card PLC ( 5,500 divided by 9,594 x 7.72 = 4.43) Easicheck Financial Services Ltd ( 500 divided by 9,594 x 7.72 = 0.40) Use a calculator to work out your payments. You may find it easier to round your offer down to the nearest 10 pence. Most creditors are happy to accept this. 13

16 Interest All debts consist of the money borrowed and the interest. You will need to know if interest is still being added to any of your debts. If your new offer to the creditor is less than the interest being added on, your debt will continue to grow. So, you should ask the creditor to stop charging you any more interest. The letter in Appendix B is an example of how to lay out your offer letter. Send your offer letter with a copy of your Financial Statement to your creditors. If you have no money left over to send to your Creditors, see below. WATER CHARGES Bills for water charges are usually issued half-yearly, although you can ask to pay monthly, or, in exceptional circumstances, weekly. If you have arrears the water company will normally expect you to repay them before the next bill is sent. If you don t pay, the water company will usually send you a County Court Summons for the money you owe (see page 16 for court procedures). If you get Income Support and still owe at least half the year s bill you can ask the Jobcentre Plus (DWP) to take off your present water charge plus a standard amount towards arrears and pay it direct to the water company. No money for other creditors? It may be that after completing your Financial Statement and making offers to your priority creditors, you have no money left to send to your other creditors. Where this is the case you should send your creditors a letter either making no offer of payment or making an offer of a token 1 per month. Examples of both these letters are in Appendix C. Do not make an offer of payment that you will not be able to keep to. 14

17 SOME ADDITIONAL INFORMATION A Word about Hire Purchase (HP) Don t assume that all goods bought on credit are on HP. You can buy goods on all sorts of different credit agreements and the difference is important. Look at your original agreement or contact the creditor if you are not sure if an agreement is HP or credit. Creditors can only take back (repossess) goods if you have a Hire Purchase or Conditional Sale Agreement. This is because you are not the owner of the goods until you have made the final payment. This sort of agreement normally only applies to the purchase of motor cars/caravans/motor bikes. With nearly all other credit agreements you own the goods and the only action creditors can take is to start court action to recover their money. The HP company does not have to go to court to take back goods if you have paid less than a third of the total price. If you have paid more than one third of the total you owe in the agreement, then the goods cannot be repossessed by the HP company without a court order. What if my creditors put pressure on me to pay more than I can afford? If you do not pay, your creditors are allowed to keep reminding you from time to time. It is illegal for a lender to harass you by, for example, phoning you late at night, repeatedly at work or contacting your employer or your neighbours. You can t be prosecuted in the criminal court because you haven t paid these debts, but some lenders might try to make you think you can that s illegal as well. If you are being harassed in any of these ways talk to your local Consumer Protection or Trading Standards Department about what they can do to help you. If a collector calls for your payments you should not let them persuade you to pay more than the amount you have worked out. If you do, you will not be able to make payments to other creditors. Making Payments All banks, building societies and the Post Office now offer a basic bank account, many of which provide free standing orders. When you have made arrangements with your creditors you could use an account like this as a convenient way to make payments. Ask at a local branch of any building society about this. This is usually cheaper than using postal orders. Most creditors will send paying-in slips or books if you ask them to. 15

18 If collectors call weekly and you are offering a very small repayment you could ask them to call every month. Joint Debts If two or more people sign an agreement for credit, fuel, water, etc. they are jointly and severally liable. This means the creditor can pursue either or both of the borrowers for the whole amount. Except for Council Tax, you are not liable for your partner s debts unless you have signed a joint agreement. What if my other creditors take court action against me? Owing money on credit debts such as bank loans and overdrafts, mail order catalogues, etc. is not a criminal offence. Action to recover these debts will take place in the County Court. The County Court is there not to punish you, but to check what payments you may be able to afford. If court action is taken You will receive a default summons stating what your creditor claims from you. Send the Form of Reply (which came with the summons) to the creditor. You must state any offer of repayment and enclose a copy of your Financial Statement. Send a copy of both to the Court. If your creditor doesn t accept your offer, the court will decide what you should pay. There will not usually be any court hearing. If you disagree with the order for payment made by the court, you can ask for a hearing. You must do this within 14 days of receiving the order to pay. You will then be able to tell the District Judge about your circumstances in person. Monthly payments ordered by the court can be cut if you cannot afford them. You can apply for a reduction by using form N245 available from the County Court office. If creditors start County Court action to get their money back this can have advantages for you: Interest on credit debts will be frozen The court is likely to let you pay a monthly account, which you can afford. But it can only do this if you tell it about your income and expenses. If a County Court Judgement has been made against you and you have other debts, you might be able to apply for an Administration Order. The total of the debts must be less than 5,000 before you can apply. This is a way of putting together many debts and making one monthly payment into the court. The 16

19 court office then shares it among your creditors. Apply at your local County Court office. There can be disadvantages if creditors take County Court action against you: Court costs are added onto your debt, although creditors cannot add on what they wish. Court costs are fixed on a sliding scale depending upon the amount of money owed, including solicitor s fees. If you are sued through the County Court and cannot pay the money owed straight away your name will be on a Register of County Court Judgements for 6 years. If you pay off the debt this will be recorded in the Register but your details will not be removed for 6 years. If you do not pay the monthly amount, which the court orders, your creditors may take further action against you. So make sure you pay your monthly payments regularly or apply for them to be reduced if you cannot afford the first amount which the court fixed. REMEMBER If you do have to attend a court hearing, your name will not appear in the local paper, so do not worry about publicity. The County Court is not a criminal court and it is not there to punish anyone. Proceedings are usually informal. If you receive a letter or form from the court that you do not understand, take it to the court office straight away and ask for an explanation. The court staff and the District Judge who decides the cases are used to dealing with people who do not have a solicitor. 17

20 COURT ACTION ON FIRST AND SECOND MORTGAGES What if my mortgage lenders take me to court? Remember you cannot be evicted from your home without a Court Order. Before the hearing Contact your lender or their solicitor to try and negotiate payments of the arrears. If you have arrears on a Second Mortgage, your lenders are required to send you a Default Notice. You may be able to apply to the County Court to get your monthly payment reduced. Court Documents If you have not reached an agreement, the lenders will apply to the local County Court to issue a Possession Summons, which will give you a date and time for a hearing in the County Court. With the summons comes the form N11 for you to fill in. The main question on the form is whether you admit that the lenders (called the Plaintiff ) are entitled to take possession of the premises. It is always best to answer No. Then there is a space for setting out your side of the case. Here you should explain: Why you got into arrears The monthly amount you are offering to clear the arrears If mortgage interest is payable by the Jobcentreplus (DWP) Your family circumstances Send back the form N11 to the Court with a copy of your Financial Statement within 14 days of receiving the summons. It is still worth sending the form back even after the 14 days if it will reach the Court before the hearing date. Remember: you can still negotiate with your lenders or their solicitors at any time. The Hearing If you cannot come to an agreement it is essential to go to the court hearing. When you get to court, make sure the usher knows you are there. Do not be afraid to approach the lender or her/his representative before the hearing to see if you can come to an agreement to present to the District Judge in court. But do not be pushed into offering more than you can afford. When you get into court, the District Judge will be the person deciding your case and should be called sir or madam. 18

21 What you should ask for Many mortgage lenders have now said they are willing to accept mortgage interest only. Ask if your lender will accept this. If you can pay the whole of the arrears in a short space of time, say 6 months, you should ask for an adjournment; or Make an offer of repayment that you can afford supported by your Financial Statement. If none of the above are acceptable in your circumstances, ask the court to adjourn to enable you to seek further advice. Explain to the District Judge why you cannot offer more and point out the figures shown in your Financial Statement. If the District Judge thinks your offer is fair, s/he is likely to make a Suspended Possession Order. This stops the lender repossessing your home as long as you pay the amount ordered each month. If you keep to the arrangement, the lenders cannot take the matter further. If you find you cannot pay the amount, which the court has ordered, you must go back and ask for the Order to be changed. Use form N244, available from the County Court office; or If you cannot make any payment at all or the arrears are totally out of control, ask for an adjournment to try to sell the house yourself. This is better than letting the lenders take possession, evict you and sell it. But before doing this read the section on getting rehoused on page 20. If the court accepts none of these, the District Judge can make an Outright Possession Order. This means that at the end of a set period (for example 28 days), the lenders can take the next step towards repossession of your home. If this happens, seek further advice immediately. Warrant of Possession If you do not or cannot pay according to a Suspended Possession Order; or If the time given on an Order for Possession is coming to an end; Contact your lenders immediately to try and make an arrangement. If you cannot make an arrangement, your lenders can apply to the court for a Warrant of Possession. This means you will get a letter from the court bailiffs giving you a date and time when they will come to evict you. You may be able to stop this. 19

22 If you still want further time to pay or you want to make a new offer to pay the arrears, you should apply for the Warrant to be stopped (suspended) on form N244 giving: the number of the case. the warrant number. the reasons why you ve not been able to pay. your new offer. A new court hearing will then be fixed so that you can: Make an arrangement with your lender Ask for the warrant to be suspended or if this fails, ask the court to give you more time to sell or get rehoused. If this fails come back to us for further advice. Eviction If all your efforts to remain in your home fail, you will be given an eviction date. On the day of eviction bailiffs may force their way into your home and remove your furniture and possessions, or secure the home with your possessions inside. You will then have to contact the lender to get them back. Getting Re-housed Many people believe that the Council must re-house people who are evicted or are homeless. This is wrong! Only some homeless people have a right to be re-housed and, even if the Council is prepared to offer you another home, you may not have any choice about where it is. If you think you are going to be evicted, contact your local Housing Needs Department straight away and ask what they will do for you. 20

23 COURT ACTION ON RENT ARREARS What if my landlord takes me to court? Remember if you are a secure or protected tenant you cannot be evicted without a Court Order. What will happen before the landlord takes me to court? The landlord will send a letter asking you to pay off the arrears. Contact the landlord straight away and try to reach an agreement. If you cannot make an arrangement to pay off the arrears, some landlords send a second letter or may get their solicitor to write to you. Before landlords can take court action they must send you a formal letter, which is called a Notice of Seeking Possession if you live in a council house, or a Notice to Quit (for others). These must be served on the tenant before court proceedings can be issued. They do not mean you have to leave your home. Contact your landlord straight away and try to reach an agreement. If you are a Housing Association tenant seek advice. If you ve not been able to make arrangements with your landlord and the time limit on the Notice has run out your landlord can then ask the court to send you a Possession Summons which will give you a date and time for a hearing in the County Court. The Court Papers You will be sent a summons with a form called Particulars of Claim which sets out your landlord s case for gaining possession of your home. With these papers you will also get a form called an N11, which you should fill in. The main question on the form is whether you admit that the landlord (called the plaintiff ) is entitled to take possession of the premises. It is always best to answer No. There is a space for setting out your side of the case and here you should say: Why you got into arrears How much you are offering to pay off the arrears If you ve got any family to support Even if your landlord has already refused your offers of repayment do not be tempted to offer more than you can really afford to the court. You may want to claim some money from your landlord (known as counterclaiming ) for example for repairs, which should have been made. You can also claim for damages, which have resulted from your landlord s failure to keep the property in good repair. 21

24 Send Form N11 back to the court with a copy of your Financial Statement within 14 days, or as soon as possible after the 14 days. Remember, you can still try to come to agreement with your landlord or her/his solicitor at any time. The Hearing If you cannot come to an agreement it is essential to go to the court hearing. When you get to court, make sure the usher knows you are there. Do not be afraid to approach the landlord or her/his representative before the hearing to see if you can come to an agreement to present to the District Judge in court. But do not be pushed into offering more than you can afford. When you get into court, the District Judge will be the person deciding your case and should be called sir or madam. What you should ask for You could ask the court to refuse to make a possession order if it would be unreasonable to do so. If you can pay all the arrears in a short space of time, e.g. sorting out a Housing Benefit claim, you should try asking the District Judge to adjourn before the hearing. If you agree with the landlord about the amount of arrears, you should make an offer of repayment that you can afford from your AVAILABLE INCOME FOR ALL CREDITORS. If you are on Income Support or a low income, do not be afraid to offer a very small amount if that is all you can afford. If the District Judge thinks your offer is fair, s/he is likely to make a Suspended Possession Order. This stops the landlord repossessing your home as long as you pay the amount ordered each month. If you keep to the arrangement the lenders cannot take the matter further. If you find you cannot pay the amount which the court has ordered, you must go back and ask for the order to be changed use form N244, available from the County Court Office. If you do not attend the court or none of these arrangements can be made, the District Judge can make an order for outright possession. This means that at the end of a set period (for example 28 days) the landlord can take the next step towards repossession of your home. Warrant of Possession If you do not or cannot pay according to a Suspended Possession Order; or If the time given on an Order for Possession is coming to an end; Contact your landlord immediately to try and make an arrangement. If you cannot make an arrangement, your landlord can apply to the court for a Warrant of Possession. This means you will get a letter from the court bailiffs giving you a date and time when they will come to evict you. You may be able to stop this. 22

25 If you still want further time to pay or you want to make a new offer to pay the arrears, you should apply for the Warrant to be stopped (suspended) on form N244 giving: The number of the case The warrant number The reasons why you ve not been able to pay Your new offer A new court hearing will then be fixed so that you can: Make an arrangement with your landlord Ask for the warrant to be suspended Or if this fails, ask the court to give you more time to get rehoused. Eviction If all your efforts to remain in your home fail, you will be given an eviction date. On the day of eviction bailiffs may force their way into your home and remove your furniture and possessions or secure the home with your possessions inside. You will then have to contact the landlord to get them back. Getting Re-housed Many people believe that the Council must re-house people who are evicted or are homeless. This is wrong! Only some homeless people have a right to be re-housed and, even if the Council is prepared to offer you another home, you may not have any choice about where it is. If you think you are going to be evicted, contact your local Housing Needs Department straight away and ask what they will do for you. 23

26 THE CHILD SUPPORT ACT MAINTENANCE FOR CHILDREN You may be paying maintenance in several ways if you have financial responsibility for a child who is no longer living with you: Money either to a child or ex-partner on a voluntary basis, called voluntary maintenance. Money to a child or ex-partner that has been ordered by the court, called maintenance. Money for a child to the Child Support Agency (CSA). This is called child support. If you get into arrears the CSA will try to come to an agreement on how you will pay off the arrears, but if you continue to fall into arrears with these payments the consequences vary according to the way you are paying: If you fall into arrears of voluntary maintenance your ex-partner could take you to court and ask that an Order is made ordering you to pay. If you fall into arrears of Child Support or maintenance ordered by the court, the consequences could be very serious. If you get into arrears the court can order a means enquiry hearing to assess how much you can afford. Following this the court may order your employer to make a deduction from your wages, or instruct bailiffs to attend your home and take your belongings. In some circumstances the CSA can apply to the magistrates' court for an order either to commit to prison or to disqualify from holding or obtaining a driving licence, for non-payment of arrears of child support. What do I do if I can t afford to pay? If your financial circumstances change and you can no longer afford to keep up with the child support payments contact the CSA as soon as possible and ask them to recalculate how much you should be paying. Complete a financial statement to show how much you can afford. You must take advice urgently if you fall into arrears of child support. 24

27 FINANCIAL STATEMENT Name... Address...Number in household INCOME Weekly/monthly Net wages/salary Partner s net wages Child Benefit Income Support Jobseeker s Allowance Pension Credit Child Tax/Working Tax Credits Incapacity benefit Retirement Pension Occupational Pension Maintenance/Child Support Other Benefits Other TOTAL INCOME (A) OUTGOINGS Weekly/monthly Mortgage Mortgage endowment policy Second mortgage/sec d loan Rent (after HB has been credited) Council Tax (after CTB credited) Water Rates Ground rent/service charge Buildings/contents insurance Life Insurance/pension Gas Electricity Other fuel Housekeeping TV rental/licence Telephone Magistrates Court Fines Maintenance payments Travelling expenses Car repairs, insurance MOT,tax School meals Clothing Prescriptions Childminding Children s Pocket Money Other TOTAL OUTGOINGS (B) TOTAL INCOME (A) less TOTAL OUTGOINGS (B) equals AVAILABLE INCOME FOR CREDITORS (C) PRIORITY DEBTS Mortgage Arrears Second Mortgage arrears Rent arrears Council Tax Fuel debts: Gas Electricity Other Magistrates Court arrears Maintenance arrears Other TOTAL PRIORITY DEBTS REPAYMENT (D) Balance owed Available Income for creditors (C) less Priority debt payments (D) equals Available Income for Credit Debts (E) List of credit debts attached p Weekly/m onthly offer of repaymen t Date...Signature... 25

28 2 CREDITOR BALANCE OUTSTANDING PROPOSED REPAYMENT This is an accurate record of details of my financial position at (date).../.../20... It has been prepared with the help of Hillingdon Citizens Advice Bureau (...Office) It is being sent to all the above creditors. Please note that all debts are being treated equally. Please freeze all interest charges, should these still be accruing. Please send me a paying-in book/standing order form * as appropriate * Delete Signed... finstat2.doc 26

29 Appendix A HOLDING LETTER Asking creditors to withhold action whilst you compile a Financial Statement. Your name Your address Creditor s name Creditor s address Date Dear Sir/ Madam Account number I/we have got into financial difficulties. I/we are writing to all creditors to obtain an accurate picture of my/our financial situation. I/we would be grateful if you could provide us with the following information: 1. Date and Balance owed 2. Arrears balance 3. Terms of the repayment 4. Additional or other charges currently being applied to the account 5. Copies of the original agreement [where relevant] 6. Copies of any default notices or details of other recovery action When I/we have received replies from all our creditors we will be completing a comprehensive financial statement and making realistic offers of repayment. I/we hope to be able to do this in a month. I/we would be grateful if in the meantime you would freeze all interest and charges on the account? Yours faithfully Signature 27

30 Appendix B OFFER LETTER Once all replies from creditors have been received and you have completed a financial statement. Your name Your address Creditor s name Creditor s address Date Dear Sir/ Madam 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 small I/we feel they are realistic in my/our present circumstances. I/we hope that you will give consideration to the suspension of interest 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 Signature 28

31 Appendix C NO OFFER/TOKEN OFFER LETTER When you have received replies from all creditors and compiled a financial statement but have no disposable income. Your name Your address Creditor s name Creditor s address Date Dear Sir/ Madam 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 insufficient 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 three months, due to my/our circumstances.or *However we are keen to begin making payments on this account and as a gesture of goodwill I/we wish to offer a token payment of 1pm. (*delete as appropriate) 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 co-operation in this matter is appreciated and I/we hope you will be able to accept my/our current position. Yours faithfully Signature 29

32 Appendix D NO CHANGE OF CIRCUMSTANCES LETTER When an arrangement has been agreed with your creditors and they write asking if there has been any change of circumstances. Your name Your address Creditor s name Creditor s address Date Dear Sir/ Madam Account number I/we have previously come to an arrangement to pay each week/ month on the above account. I/we enclose a copy of an up-to-date financial statement. As you see my/our circumstances have not changed and we therefore ask if I/we can maintain the original agreement for another six months? Thank-you for your consideration in this matter. Yours faithfully, Signature 30

33 USEFUL NUMBERS ADVICE AGENCIES National Debtline am 9pm Mon Fri and 9.30am 1pm Sat Offers free, confidential, impartial advice on dealing with debt problems. Has a range of sample letters on its website. Consumer Credit Counselling Service am 8pm Mon Fri Offers free debt counselling, budgeting and money advice. Also has internet-based Debt Remedy Service to identify the most appropriate financial remedy for you. Payplan am 9pm Offers a full range of free and realistic debt solutions, online debt advice and debt management plans. The UK Insolvency Helpline hours Offers debt advice and debt management for individuals, businesses, students and homeowners with debt problems. Shelter am 4pm Mon, Tues, Thurs, Fri and 1pm 4pm Wed days a week Offers housing advice on renting and leasehold, paying for a home, repossession and eviction, and emergency advice on homelessness. TaxAid Helpline am 12pm Mon - Thurs Offers free, confidential and independent tax advice to anyone on a low income (employed, self-employed, retired or on benefits). Business Debtline (for the self-employed) am 4pm Mon Fri BENEFITS Jobcentre Plus (DWP) Housing Services (for Housing Benefit/ Council Tax Benefit) Inland Revenue (for Tax Credits) Updated April

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