A guide to finances for people with HIV. Your finances

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1 A guide to finances for people with HIV Your finances

2 This booklet is part of a range of publications produced by Terrence Higgins Trust to support you in living well with HIV. Most of these publications are designed to be suitable for you whatever your race, nationality, gender or sexuality. Terrence Higgins Trust are very grateful to the HBOS Foundation for supporting the production of this booklet. The information provided in this booklet was correct at the time of print (May 2007). 1 Introduction 3 Section 1 : How to deal with debt 4 Sort out your budget 5 Identify your debts 8 Prioritise your debts 9 Approach your creditors 11 Section 2 : 12 Housing debts 16 Utility debts 20 Benefit and tax credit overpayments 21 Loans and credit arrangements 27 Section 3 : How to deal with Court proceedings 32 Bailiffs 35 Debt collectors 36 Prison 39 Section 4 : What does this mean? 40 Administration order 41 Bankruptcy 42 CCJ 42 Charging order 42 Committal hearing 43 Compound interest 43 County Court 43 County Court Judgement Contents

3 Contents 44 Eviction warrant 44 Individual voluntary arrangement 45 Liability order 45 Magistrate s court 45 Money-only judgement 46 Possession order 47 Priority debt 47 Secured debt 47 Time limitations 47 Unsecured debt 48 Walking possession 49 Section 5 : How to avoid debt 50 Maximise your income 51 Keep your costs down 52 Spread your costs 53 Section 6 : Who can help? Everyone gets into debt at some point in their life. Indeed, most people are in debt to some extent as we owe money for our rent or mortgage, and have gas, electricity and phone bills to pay. So we all need to budget to make sure that our income will cover our debts as well as our other living expenses, such as food. However, if your circumstances change suddenly or you haven t kept a close eye on your spending, you can soon find that you owe more than you can afford to pay back easily. Perhaps your income has dropped because you have had to take time off work for illness or treatment, or perhaps you have had to stop work altogether. It s all too easy in these circumstances to put off paying some of your bills, telling yourself that you will pay double next month. 1 Introduction If you have a credit card and pay back the minimum each month, this may seem like a simple way to pay for things in the short term. But do you know how much interest is added to the bill when you don t pay off the whole balance? This can make your credit card bill spiral out of control if you don t deal with it quickly.

4 2 Sometimes we simply don t remember all the people and organisations to which we owe money. This can happen easily if you are under extra stress due to living with HIV, or are feeling unwell and concentrating on your health. It can also be difficult to talk to organisations like banks or credit card companies about health problems you have which are contributing to debt or affecting your ability to cope with it. In this booklet we explain how to deal with the different debts that you may have. There s also advice on avoiding debts in the future (for example by making sure you are getting all of the income that you are entitled to). We also explain some of the words that you may come across, and list details of organisations that can advise and support you. Please bear in mind that the information in this booklet was correct at the time of print (May 2007) but it contains details about laws which could change. For example, the law on bailiffs may change (page 32). Please check with an organisation listed in the Who can help section that the information is still accurate. Introduction How to deal with debt 4 Sort out your budget 5 Identify your debts 8 Prioritise your debts 9 Approach your creditors 1

5 4 It s natural to be concerned about owing money. But it s also very tempting to ignore your debts if you have other issues on your mind, such as dealing with health and personal problems that have arisen due to HIV. However, if you make time now to assess your debts and deal with them, you might feel less stressed, which will be much better for your overall health. How to deal with debt And you don t have to do this alone. There are a number of organisations that can help you, depending on the kind of debts you have. Your local Terrence Higgins Trust (THT) office, THT Direct and your local Citizens Advice Bureau are just three of the places that you can turn to. You can find their details, plus a list of other useful organisations, at the end of this booklet. Sort out your budget The first thing to do is work out how much money is available to pay off your debts. To do this you need to add up your total income and subtract your regular expenses. TOTAL INCOME REGULAR - EXPENSES = AVAILABLE MONEY Broadly speaking, the difference is what you can safely use to pay off your creditors, although it s advisable to save a little for unforeseen costs. (A creditor is a company or person who you owe money to). There is a standard form called the common financial statement that you can use to assess your income and expenditure. You can find it on the internet, on the website of the British Bankers Association ( or Money Advice Trust ( Find it by searching for common financial statement. To maximise your income, make sure you are getting all the benefits that you are entitled to and are paying the right amount of tax. If you are living with HIV you may be entitled to more benefits than you think. You can read more about this in the section on How to avoid debt later in this booklet. Identify your debts It s easy to forget exactly who you owe money to, but it s important to consider all your debts rather than focusing just on one. To make things easier, on the next page there is a list of the main kinds of debt that you may have. Check through this list and tick the ones that are relevant (or that you think you may have). Don t panic if the list seems quite long. If you think about other people that you know, you will soon realise that they would probably be ticking as many boxes as you. 5 How to deal with debt

6 6 How to deal with debt Specific debt Housing debts Rent or mortgage (including endowments, PEPs, ISAs and so on, if you have an interest-only mortgage) Council tax or community charge Utilities debts Water Your creditor(s) Specific debt Loans and credit arrangements Bank loans and/or overdraft Doorstep loans Credit cards and/or store cards Hire purchase or conditional sale Your creditor(s) 7 How to deal with debt Gas Catalogue debts Electricity Telephone (landline and mobile) Other loans (such as social fund, credit union) Business debts Cable/satellite television service Internet/broadband contract TV licence Benefits debts Benefit and/or tax credit overpayments Business loan Business overdraft Business rates Debts to suppliers Informal debts Debts to family or friends In section 2 of this booklet you can find out more about each type of debt so that you can handle each one appropriately.

7 8 Prioritise your debts Approach your creditors How to deal with debt The next thing that you need to do is sort out which debts you should deal with first. Debts can be divided into priority and nonpriority. The difference between them is the things that can happen. Priority debts are generally more serious if you don t sort them out. For example, you could face deductions from your wages or benefits, lose your gas supply or have goods repossessed. You could even face bankruptcy, lose your home or be imprisoned. This is why you should always deal with your priority debts first. These include: mortgage and rent arrears council tax and business rates benefit overpayments water, gas, electricity and TV licence social fund payments hire purchase Non-priority debts include: catalogues credit and store cards unsecured loans debts to family and/or friends Once you have sorted out your budget you should negotiate with your creditors as soon as possible. Remember to deal with your priority debts first. This is particularly important if you have missed some payments already. Sometimes a creditor may agree not to take any action for a short while, particularly if the problem is not your fault. There may be alternative payment options to let you pay off the debt over a longer period of time. Trust funds might be available if you are in real financial hardship. 9 How to deal with debt

8 10 How to deal with debt Sometimes a creditor may agree not to take any action for a short while, particularly if the problem is not your fault. In some circumstances you may be able to apply to the court for a temporary reduction in the level of interest and repayments due on your debt. This is called a time order. When you are considering which debts to pay off first, debts to family members or friends may be seen by other creditors as non-priority debts. But they can still be important for you to sort out. Nonpayment can seriously affect your relationships or even cause hardship to others. So try to strike a careful balance between the debts you pay off, and let relevant family members and friends know what is happening. It s good to be aware of your legal rights in relation to debt. Your local THT office, THT Direct or one of the helplines listed at the end of this booklet may be able to help you. They may also be able to offer you support in negotiating with your creditors if you don t feel confident in negotiating with them yourself. It s also useful to understand how different debts vary in terms of the options available to you, and the possible actions that may be taken by the creditor. We ll tell you more about this in section Housing debts 16 Utility debts 20 Benefit and tax credit overpayments 21 Loans and credit arrangements

9 12 Once you have worked out your income, expenditure, and priority debts, you can start to take positive action. But it s worth knowing all the facts before you begin. Some of the possible scenarios covered in this section may sound scary, but when you understand the full picture you can deal confidently with your creditors. By being more aware you will have a better understanding of what creditiors may suggest you do to manage or pay off your debts. And remember: by dealing with your debts now, you stand a better chance of avoiding some of the more serious consequences described here. If you need advice legal or general about any of these debts at any stage, then contact your local Citizens Advice Bureau or one of the money advice organisations listed in the back of this booklet. Terrence Higgins Trust and other HIV support agencies may have advisors who can help you with debt problems. 13 Housing debts Rent and mortgage payments If you are living with HIV then good quality housing is really important for your health. Rent or mortgage payments are likely to be one of your biggest costs. So if you lose your job, or your income is affected in any way by illness, you may find it hard to keep up to date with your payments. If you rent your home, you should find out straightaway if you are entitled to housing benefit. Even if you are working you may be able to get some assistance. Sometimes a higher than usual rate of housing benefit, called discretionary housing benefit, may be available. You could get this if your rent is high because you have specific housing needs due to health problems.

10 14 If you own your own home, you may be able to get income support payments to help you pay the interest Council tax on your mortgage. Payment protection insurance is designed to help you meet your mortgage repayments if you get ill or lose your job. But check the small print as some insurance policies specifically exclude HIV related illnesses. It may be a good idea to talk to your landlord or mortgage lender. Tell them about the problems you are having with making payments, and what steps you are taking to sort things out. For more information on possession and eviction see pages 46 and 44 in section 4 of this booklet. Don t panic if your mortgage lender or landlord does decide to go to court. This can help you as the court may give you time to repay your debt by putting in place a repayment arrangement. However, if you don t keep up the payments according to this arrangement, your landlord or mortgage lender can go back to court and ask for a possession order or eviction warrant to be issued. An eviction warrant can then be suspended ( stayed ), but once it has been issued it does not go away. Courts will not always grant possession orders or eviction warrants. If possession proceedings are issued against you, you should seek legal advice. For more information on possession and eviction, see the section What does this mean? at the end of this booklet. If you do go to court, the court costs will be added to your debt. You can read more about dealing with court proceedings in section 3 of this booklet. If you have to pay council tax, you should find out if you can get a discount. There are many reasons why you may be eligible and it can make a real difference to your budget, so it is worth the effort. You should also check whether you are eligible for Council Tax Benefit. This can be backdated and so could help reduce your debt. If you apply for Housing Benefit, this will be treated automatically as an application for Council Tax Benefit as well. If you don t pay your council tax then your local authority can apply to a magistrates court for a liability order. This lets it do any of the following: take money from your wages or certain benefits use bailiffs to get money from you by taking possessions from your home and selling them (see page 32) make you bankrupt (see page 41) apply for a charging order on your property if you are a home owner - this means that when you sell your home you will be forced to repay the debt out of the proceeds of the sale, as a charging order from the court secures the debt on the property. 15

11 16 If none of these work then the council can go back A water company can apply to the county court for to court and apply for a committal hearing. At a a money-only judgement if you get in debt. This is committal hearing you could be sent to prison for similar to a liability order (see page 15) except that up to 90 days. Even after spending time in prison they cannot make you bankrupt. the original debt will not go away - you will still If this happens and you get the court papers, you be pursued for payment. This is why it is vital to should check whether you agree with the amount speak to an advisor as soon as possible if you are that has been claimed. If you do, complete the having problems paying your council tax. admission paperwork with an affordable repayment You can read more about dealing with court offer. If you do not agree with the amount claimed, proceedings in section 3 of this booklet. then you should complete the defence paperwork. It is worth seeking further assistance from your local Citizens Advice Bureau or other advice centre if you receive court papers. You can read more about dealing with court proceedings in section 3 of this booklet. Utility debts Water All utility debts are priority debts, but water debts are treated differently to the others. It is illegal for a water company to disconnect you for non-payment of water charges. If you do get into debt with a water company, ask if it has a trust fund to help you with paying your arrears and future charges. A Citizens Advice Bureau or THT office can help you do this. You may be able to cap your bill if you have a water meter and you are on a low income with a large family or you have certain disabilities. Again, your water company can give you more details. 17

12 18 Gas, electricity and phone bills If you are living with HIV then it is important that you look after your health by keeping warm and well-fed. Gas and electricity companies are duty bound to take notice of customers who are vulnerable, and HIV could be seen as a vulnerability. This means that they should allow you to pay off your arrears at a rate you can afford over a period of time. It can be difficult to talk about your health with utility companies. It is a decision for each individual, but letting companies know your situation may result in more favourable treatment. Like water companies, some gas and electricity companies have trust funds that may help with energy arrears, so do ask them about this. You may even qualify for special or reduced tariffs. It is worth asking your supplier about this, especially if you get Disability Living Allowance. Unlike water companies, however, gas, electricity and phone companies can disconnect you without going to court, although they should give you written notice first. If you arrange a debt payment scheme with your utility company, it is a good idea to meet it. Otherwise your supplier may apply to the court to fit a prepayment meter which takes into account the amount you owe and your current usage. The rate of payment for this kind of meter is usually higher than on a normal meter. Although I m a student in the UK, I have to work part-time to pay for everything. When I got ill I couldn t get any sick pay other than Statutory Sick Pay, but I still had to pay all of my bills, including my rent. Then I had to go into hospital as I developed breathing problems. When I came out my finances were a mess: I had rent arrears, and my electricity, gas and phone bills were all in the red. That was when THT rescued me. They helped me to negotiate with my creditors, explaining my health problems and asking for additional time to pay. They also applied to some trust funds, including Crusaid, St Martins in the Field Trust and British Gas Trust, to get money to help me clear my bills, which gave me a breathing space before I went back to work. If you feel that you are being treated unfairly by your energy company, contact Energywatch ( ). Similarly you can contact OFCOM ( ) if you have problems with your phone company. Make sure that you aren t paying too much for your utilities. Read section 5 on How to avoid debt to find out more. 19

13 20 TV Licence We all need a licence to watch television. If you don t have one the consequences can include a magistrate s court fine of up to 1000, bailiff action and even imprisonment. If you can t afford to pay a full year s licence in one go, there are a number of options to let you pay in instalments. You can read more about this in section 5 on How to avoid debt. And you can find out more about dealing with court proceedings in section 3 of this booklet. If you are registered blind, you are entitled to a 50% reduction in your licence fee. Benefit and tax credit overpayments Loans and credit arrangements Bank loans and overdrafts Almost everyone has a bank account. Once you have one, banks will probably inundate you with offers to lend you money in one way or another. It can be very tempting to take up their offers if you are getting into debt. But you will still need to pay back what you owe, plus interest on the amount you have borrowed and possibly an arrangement fee. Remember that overdrafts tend to have higher rates of interest than loans, and repaying an overdraft will eat into your wages or benefits. If you miss a payment on a loan, the next payment will be twice as much. In addition you may pay administration charges for missed payments. 21 If your local authority, the Department of Works and Pensions or HM Revenue and Customs say it has paid you too much benefit or tax credit, you may not have to pay all of it back. In general you would need to prove that it was the agency s fault and that it would cause hardship should you be asked to repay it. If you believe that the overpayment was not your fault, then you should get advice to help you decide what to do next.

14 22 If you get into trouble with your bank you could try to: renegotiate the repayment open an account with another bank with a longer-term loan or lower rate overdraft. In either case, remember that if you extend the period over which you pay back the loan or overdraft, you may end up paying more in total because of the added interest. However, authorised overdrafts usually incur less interest than unauthorised ones, so you may be better off with a longer repayment period on an authorised overdraft. Doorstep loans Make sure you shop around if you do need to borrow money this way, as interest rates and fees vary considerably. Ask for a clear outline of repayment costs, including all fees and charges, so that you can choose the best deal for your circumstances. If you feel you are getting into trouble with bank loans or overdrafts, seek advice from one of the organisations listed at the back of this booklet. Remember: many people in the UK have borrowed money this way so you are not unique, but you should ensure you make your repayments regularly. Someone might knock on your door and offer to lend you money, with weekly repayments collected from your doorstep. It can seem a very convenient way to borrow money or pay off other debts. This is particularly so if you: don t have a bank account, have already got a loan or overdraft, have had money problems before, have bad credit history or low credit ratings, find it difficult to get out because of your health. However, these companies charge very high rates of interest and target the most vulnerable sections of society. They will also try to lend you more money before the original loan is paid off, which means that you pay compound interest this is interest paid on top of the original interest charge. So, before you take a doorstep loan, think long and hard about other ways to get credit, such as through the social fund or your local credit union. Social fund loans are available to people who get Income Support, income-based Job Seekers Allowance or Pension Credit, and need help with the costs of important items that they can t afford through their regular income. These loans are interest-free and are administered by Job Centre Plus. 23

15 24 25 Credit unions are financial co-operatives. That means they are owned and run by members who have a common bond, such as the same employer or trade union, or who live in a particular area. They will consider giving loans to members who have been regular savers for a certain minimum period. Any loan will be related to your savings and what you can afford to repay. Doorstep lenders can go to the County Court to recover the money you owe them. If they are successful you would have to pay the costs and you would have a County Court Judgement (CCJ) against you which may make it more difficult for you to get other forms of credit in the future. You can read more about dealing with court proceedings in section 3 of this booklet. If you do get into trouble paying off a doorstep loan, speak to the loan company as soon as possible. However, if you feel this isn t appropriate or you feel intimidated, contact one of the organisations listed at the end of this booklet and they will try to help you resolve the situation. Credit cards and store cards Your bank, and many other companies, will regularly offer you credit cards, and many shops also offer credit in the form of their own store cards. They can seem very enticing, with 0% interest offers, points and payback schemes, and the option to defer payment until your next salary or benefit payment. If money is tight, it can seem a great way to pay for a holiday or Christmas presents. But if you don t pay back the outstanding balance every month, the final cost can be much higher than you realise. Once any introductory low interest rate offer expires, the charges can be up to 59% APR (annual percentage rate). This means that for every pound you owe at the beginning of the year, you would owe another 59 pence by the end of the year. If you miss any payments you will probably also have to pay an additional charge. This is typically around 20, plus extra charges for any letters sent to you as a result of the missed payment. Store cards typically charge much higher rates than credit cards. If you find that you cannot pay back everything you owe and the interest rate is high, then consider getting a new credit card that offers interest-free payment periods for balance transfers (the debt that you transfer across). You ll sometimes have to pay a balance transfer fee, so make sure that the total cost makes this viable. And shop around, as fees and interest-free payment periods vary. There are several websites that list and compare the latest deals. If you are having trouble repaying the balance on your credit or store card, seek specialist advice as soon as possible.

16 26 Hire purchase and conditional sale When you buy expensive goods, such as cars or furniture, you may agree to pay the vendor month by month over one or more years. Do you realise, though, that although this lets you use what you have bought, the goods are not legally yours until you have made the last payment? And they can be repossessed at any time. If you keep up your payments you shouldn t have any trouble. After you have paid one-third of what you owe, the creditor will need to take you to court to get the goods back if you default on your payments. However, if you then make an offer of repayment that is acceptable to the court and the creditor, the court order can be suspended. Unfortunately, if the creditor does repossess the goods and sell them at auction, you will still be liable for the remaining balance. If you are getting into difficulty with hire purchase or conditional sale agreements, ask for specialist advice from one of the organisations listed at the end of this booklet. You can read more about dealing with court proceedings in section 3 of this booklet. How to deal with Court proceedings 32 Bailiffs 35 Debt collectors 36 Prison 3 27

17 28 Court proceedings How to deal with... If you have got into debt and haven t been able to resolve payment issues with your creditor, you may have to deal with the courts, bailiffs or debt collectors. Understanding how they work will give you a much better chance of resolving the situation in your favour and avoiding more serious consequences. In this section we also explain the reality of any threat of prison. This can be a real worry if you are in debt, but the truth is that being sent to prison is very unlikely to happen to you. For further help on any of these subjects, get in touch with your local THT office, THT Direct or your local Citizens Advice Bureau (see pages 54 and 55 for more details). Creditors generally only resort to going to court if they haven t been able to agree a suitable repayment plan. They may make a money-only claim against you in the County Court, which means that: You will have a County Court Judgement (CCJ) registered against you. The CCJ will affect your credit score, which may make it more difficult for you to borrow money in the future. You may end up owing more money as you may have to pay the creditor s court costs. There may be advantages to you in going to court if you haven t been able to reach an agreement with a creditor. The court will usually set out a repayment plan that you can afford, and may stop more interest being added to your debt. And as long as you pay what the court says you must pay, the creditor cannot take any further enforcement action. Also, if you are experiencing a financial or personal crisis, the court may suspend payments for a period of time. So it is important to be as open as possible with the court about your personal circumstances. Usually only the judge will see what is written on your admission, unless you disagree with the creditor about the amount claimed against you. 29 How to deal with...

18 30 What do I do if I get sent a claim form? The money-only claims procedure starts when the creditor asks the court to send a claim form to you. You only have limited time to respond if you receive one, so get specialist advice as quickly as possible to help you fill it in. What will I need to know? If you are going to admit a claim, you will need to make a realistic offer of payment. To do this, you ll need to know how much you can afford to pay back regularly, so get some advice as soon as the claim form arrives. Can I defend a claim? How to deal with... If you believe the claim made against you is wrong, speak to a specialist advisor as soon as possible who can tell you what to do. What happens if I don t send the form back? If you don t respond to a claim form, the creditor can ask for judgement to be entered by default, and the court will then order you to make the payments that the creditor asks for. So don t ever ignore a claim form or put off filling it in: act straightaway. If you haven t been able to fill in a claim form because you were in hospital or because it was wrongly addressed, you should get specialist advice immediately. 31 How to deal with...

19 32 What happens if my circumstances change and I can t afford the payments? You can apply to the court to reduce the payments. What happens if I don t make the payments? If you don t make the payments ordered by the court, the creditor can use enforcement action against you. Such actions can include: a warrant of execution (use of bailiffs see below) attachment of earnings (direct payment from wages or benefits) charging orders (legal action to secure the debt against your home). If this happens, you should immediately get advice on your rights and the actions you should take. How to deal with... Bailiffs With most debts, bailiffs only get involved if you can t come to an arrangement to repay a creditor, and then only after your case has been to court. However, this doesn t apply to HM Revenue and Customs bailiffs. Bailiffs usually work by putting pressure on you to let them take your possessions to repay your debt. However, there are some important things about the way they work that you need to understand. Please note that although this information was correct at the time of writing (April 2007), there are proposals to change the law on bailiffs powers. Please contact one of the organisations on pages 54 and 55 to get upto-date information and support on dealing with bailiffs. Do I have to let a bailiff into my home? No. Whatever they say, bailiffs are not normally allowed to force themselves into your home unless they have been inside your home for the same debt on an earlier occasion. What should I do if a bailiff comes to my door? Don t let them in. Instead, you can try to negotiate acceptable payment terms with them. If this doesn t work, close the door and get advice immediately. Remember: a bailiff cannot force entry into your home and this includes putting a foot in the door when you are attempting to close it. If they harass you, contact the trading standards department at your local council. If you are being physically threatened, call the police immediately. What can they do if I let them in? Bailiffs can take what is called walking possession of some of your belongings. This means they can take them away then, or make a list of what they intend to sell at auction and collect it at a later date, to be sold to cover your debt. They can also come back into your home, but only to take items to cover the same debt. Whatever they may say, they do not have the right to enter your home again to take walking possession of your goods for a different debt. 33 How to deal with...

20 34 Remember that what you think something is worth and what it actually fetches at auction may be different. The bailiffs fees may also be deducted from the proceeds of the auction. It is worth noting that after this you will still be liable for any outstanding balance. Can they take anything I keep outside my house? Bailiffs can take possessions that are kept outside your house, such as your car. How can I stop bailiffs from coming? If the court has issued a warrant of execution because you haven t made payments to your creditor as ordered by the court, then County Court bailiffs may get involved. However, you can ask the court to stop them by filling in a form, with a statement about what you can afford to pay. But you must then make these payments. How to deal with... Debt collectors Debt collectors are not the same as bailiffs. They can t take any direct action against you, apart from asking you to pay. What happens if a debt collector threatens me? It is a criminal offence for a creditor to needlessly distress you as part of a campaign to get you to repay a debt. Harassment includes: threatening you with criminal action when this isn t legally possible pretending to be from the court sending letters that look like court forms telling other people, such as family, friends or employers, about your debt to put pressure on you to pay or asking them about your whereabouts. If you are being harassed, contact the trading standards department at your local council straightaway. If you are being physically threatened, call the police immediately. 35 How to deal with...

21 36 I d had a really good job so I got used to Prison paying for goods by credit card. But after getting into a bit of a bad scene I ended up in prison where I was diagnosed with HIV. How to deal with... Being sent to prison is a great fear for many people with serious debts, but most of the time it is extremely unlikely. When could I be sent to prison? You can be sent to prison only if the magistrate believes that you won t pay, rather than are unable to pay, your debts. (Imprisonment is not possible if action is being taken in a County Court.) If this is the case, the court will probably make a suspended committal order. This means that the magistrate will set an amount for you to pay each week or month. It s only if you miss any of these payments that you will be sent to prison. If you miss a payment you will be sent a warrant to be arrested and brought before the magistrate. If you receive a warrant, seek immediate specialist advice from a solicitor. Can I be sent to prison for any kind of debt? No. Apart from fraud, a prison sentence can only be given in a magistrate s court and only for specific kinds of debt. These include not paying: fines from a magistrate s court council tax business rates maintenance for your husband, wife or children. When I came out of prison I had no job, no home and was quite unwell, but my debts were still there. For a long time I was too scared to do anything about it. I stopped opening my post and that made it worse, because there were important things like Housing Benefit forms I wasn t dealing with. In the end I got into arrears with my rent and was threatened with eviction, which is when my HIV nurse sent me to THT. They went to court on my behalf and made arrangements for me to pay off my arrears at a low amount per month. I didn t want to consider making myself bankrupt, so THT negotiated with my non-priority creditors and they agreed to accept token payments of 1 a month as I was only getting Income Support and couldn t afford any more than this. Finally, THT made sure I was getting all the income I was entitled to by applying for Disability Living Allowance. 37 How to deal with...

22 38 How to deal with... If your debt is due to a crime such as fraud, prosecution for this could lead to prison. Examples of this are if you have fraudulently applied for state benefit or taken credit when you have no intention of repaying it. If you are accused of fraud you should speak to a criminal law solicitor. You can be sent to prison only if the magistrate believes that you won t pay, rather than are unable to pay, your debts. 4 What does this mean? 40 Administration order 41 Bankruptcy 42 CCJ 42 Charging order 42 Committal hearing 43 Compound interest 43 County Court 43 County Court Judgement 44 Eviction warrant 44 Individual voluntary arrangement 45 Liability order 45 Magistrate s court 45 Money-only judgement 46 Possession order 47 Priority debt 47 Secured debt 47 Time limitations 47 Unsecured debt 48 Walking possession

23 40 Bankruptcy What does this mean? In this section we explain some of terms you may come across if you are sorting out your debts. If you want further explanation about any of these, or need help with other terms not covered here, contact your local Citizens Advice Bureau or one of the organisations listed at the end of this booklet to find out more. Administration order If you have at least one high court or county court judgement against you, and your total debts are no more than 5000 (figure correct January 2007), you can apply for an administration order. With this, you can make regular payments to the court at a rate you can afford. The court then sends payments, split equitably, to your creditors. Creditors usually can t take further action against you. The administration order can include non-priority debts, council tax, rent arrears, gas, electricity and water arrears. You can also ask the court for a composition order, which is a way of fixing the payment period. You pay your debts at a rate you can afford for a set period, normally three years. After this time any money you still owe is written off. Bankruptcy is a court order that you can apply for if you are in debt. Most creditors can no longer pursue you for your debt once you have been made bankrupt. Once a bankruptcy order has been made you don t have to deal with your creditors. A government agency called the official receiver will take control of your money and property and deal with your creditors. They will investigate the reasons for bankruptcy. Your bankruptcy will normally be discharged within a year. After that time you are no longer considered bankrupt and the court has no more control over your assets and income. However, if you have disposable income the Official Receiver can require you to make regular payments at a level you can afford for up to three years. Bankruptcy is not an easy option, and you should get expert advice before applying to make yourself bankrupt. It is normally the right option when you have large debts that will take many years to repay. But it may not be suitable if: you have a certain type of job (for example, if you work in finance or you are a solicitor) you own (or are buying) your own home you have other assets you are likely to inherit money or goods during the bankruptcy period. 41 What does this mean?

24 42 Compound interest What does this mean? There are some types of debt you will still have to pay after bankruptcy. These include magistrates fines, maintenance, benefit overpayments, debts from fraud and student loans. You will also have to make payments to the Official Receiver of 335 and 150 court fees. (Figures correct April 2007). You can, however, apply to have the court fee waived if you are receiving certain benefits or can t afford to pay it. CCJ See County Court Judgement (on opposite page). Charging order A charging order is a process of changing an unsecured debt to a secured debt through a court order. If you own your home, a charging order from the court will mean that if you sell your home the debt will be repaid automatically out of the proceeds of the sale as the order will be registered with the Land Registry. Committal hearing This is a hearing in a magistrate s court about a debt where the ultimate sanction is imprisonment. The aim is to establish whether you have the means to pay but are deliberately evading payment or whether there is some other reason for non-payment. Creditors usually only apply for a warrant to have you sent to prison as a last resort. If you owe money and are paying interest on it, then take out a further loan from the same source before repaying the first, you may end up paying interest on the original interest charges. This can substantially increase the amount you have to pay back. To avoid compound interest never take out a second loan from the same source without fully repaying the first loan. County Court County Courts are local courts that deal with minor civil cases. Most debt issues are dealt with by County Courts. County Court Judgement If a creditor successfully makes a money only claim against you, a county Court Judgement (CCJ) will be registered against you. This can affect your credit rating and make it more difficult to borrow money in the future. Creditor A person or company to whom a debt is owed. Debtor A person or company who owes a debt. 43 What does this mean?

25 44 Eviction warrant Liability order What does this mean? If you do not voluntarily leave your home on the date given in a possession order, your landlord or mortgage lender can apply to the court for an eviction warrant. In most cases an eviction warrant is needed before they can send bailiffs to evict you. For certain types of tenancies landlords may not need to get a possession order before applying for an eviction warrant. Individual voluntary arrangement An individual voluntary arrangement (IVA) is a legally binding arrangement between you and your creditors that is drawn up by a qualified insolvency practitioner often an accountant. You must agree to pay money as a lump sum, in instalments or both. The advantage of an IVA is that your creditors may write off part of the debt and not take court action against you or make you bankrupt. You will often have to pay the insolvency practitioner before you can set up the IVA. You will also have to pay all the costs and fees, and a large amount of the debt, so an IVA is realistic only if you have a fair amount of spare money or things you can sell to pay your debts. If you are considering this option you should shop around to compare insolvency practitioners advice and charges, as they are businesses who need to make a profit. For this reason you should always get independent advice before signing an IVA. This can be given by a magistrate s court if you don t pay a debt where the ultimate sanction is imprisonment, such as your council tax, business rates, child support or court fines. A liability order lets the local authority do any of the following: take money from your wages or certain benefits use bailiffs to get money from you by taking possessions from your home and selling them make you bankrupt apply for a charging order (see page 42). Magistrate s court This deals with criminal and some civil cases, including debts where the ultimate sanction for non-payment is imprisonment. Magistrates can impose up to six months imprisonment or 5000 fines but cannot make County Court judgements. Money-only judgement A money-only judgement can be given by a County Court if you do not pay your debts. This lets the court: take money from your wages or certain benefits use bailiffs to get money from you by taking possessions from your home and selling them (see page 33) apply for a charging order (see page 42). 45 What does this mean?

26 46 Possession order What does this mean? This may be granted by a court if you do not keep up rent or mortgage payments. If you are renting, the timescales for a possession order vary according to the type of tenancy agreement you have. In some circumstances if you do not leave the property by the date given in the possession order, then an eviction warrant may be needed by the landlord before they can actually evict you. Priority debt These are the debts that you should pay back first, as the consequences for not paying them are more serious than for other debts. (See page 8 for a list of priority debts). Secured debt A secured debt is a loan where the borrower has given an asset (e.g. a house) to which the lender has access in the event that the borrower fails to make the loan repayments. 47 What does this mean? Time limitations The Time Limitations Act 1980 gives creditors a maximum amount of time to start legal proceedings. For most debts this is six years, or 12 years for mortgages. If you have not paid anything towards a debt or acknowledged the debt in writing or by phone for more than six years, you should get specialist advice before you speak to the creditor about the debt. Unsecured debt A loan where the lender has no entitlement to any of the borrower s assets in the event of the borrower failing to make the loan repayments. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, where the debt is secured on property.

27 48 What does this mean? Walking possession If you allow a bailiff to enter your home they can take walking possession of some of your goods. This means that they can take them, either then or at a later date, to sell to repay your debt. Bailiffs have no right to enter your home unless they have previously done so in relation to the same debt. You can read more about how to deal with bailiffs on page How to avoid debt 50 Maximise your income 51 Keep your costs down 52 Spread your costs

28 50 Instead of having to deal with debt, it s better to try to avoid getting into debt in the first place. Take the time to check through the following points and you should stand a better chance of staying debt-free. How to avoid debt YOUR INCOME If you need help with any of these, or find it difficult to know what action is best to take because of your personal circumstances, contact THT as we have specialist advisors who can help you. Maximise your income Tax Are you getting all the tax relief and allowances that you are entitled to? Are you being taxed under the right code, especially if you have recently changed job? Contact your local tax office (see the telephone directory) to find out more. Benefits and tax credits Find out whether you are getting all the benefits and tax credits you are entitled to. There are several different benefits available for parents, carers, disabled people and people living with long-term health problems such as HIV. Even if you are working, you may be entitled to more help than you think. Savings and bank charges If you have savings, check that they are working as hard as they can do. For example, interest payments on savings accounts vary considerably. Also, some current accounts pay interest if you don t go overdrawn. Some bank accounts or credit cards have annual charges or hidden fees, so check you are getting a good deal. There are a number of websites that compare the offers from banks and building societies for you, but always check the specific details yourself before signing anything. Remember to check overdraft fees too. Keep your costs down Utilities Whether you are a spender or a saver, there is no point in paying more than you have to for life s necessities. Use online comparison services to find the cheapest deals on gas, electricity and telephone services, and investigate fixed term rate deals. Remember that this is now a very competitive market and there are several companies offering services, so it s quite likely that you will be able to find a cheaper supplier. Also, if you get both gas and electricty from the same supplier you may get a duel fuel discount. Mortgage If you have a mortgage, speak to a financial advisor about the various options on offer to see if you can get a cheaper deal. But make sure yours suits your current situation and is likely to match your needs in future too. 51 YOUR OVERHEADS How to avoid debt

29 52 How to avoid debt Bills Some companies offer cheaper deals to people who pay bills by direct debit. Get the cheapest loan If you are planning a major purchase, like a new car, then look for the cheapest way to buy it. Often a bank loan will have a lower interest rate than any payment option offered by the manufacturer. Spread your costs Some costs can be spread over a period of time without incurring much, if any, extra cost. If you are receiving benefits there may be extra options available to you too. TV licence TV licences can be paid for in a variety of ways: you don t have to pay a whole year in advance. Instead you can pay for the first year s licence over six months, and then your payments are halved so that you are always paying half a year ahead. You can pay weekly (if you receive certain benefits), monthly or quarterly at PayPoint outlets. Pay with cash, not credit Unless you can confidently pay off your whole credit card bill every month, try to pay for as much as possible by cash or with a debit card. That way you can get into the habit of spending within your budget and saving credit for emergencies (or, better still, not using it all). 6 Who can help?

30 54 Advice UK A network of local advice centres. To find your nearest centre telephone Business Debtline For advice and help with dealing with business debts. Telephone: Citizens Advice Find your local Citizens Advice Bureau in the phone book or by using the CAB website. Community Legal Service Direct Provides free information direct to the public on a range of common legal problems. Can also help you find a high quality local legal adviser or solicitor. Telephone Consumer Credit Counselling Service Registered charity providing free, independent, impartial and realistic advice for people in financial difficulty. Telephone: Credit Action Charity advising on money management. action.org.uk National Debtline For advice and help on dealing with personal debts. Telephone: Who can help? Terrence Higgins Trust Some local THT offices have workers who can help you with your debts, budgeting and maximising your income. All offices should be able to refer you to local debt and money advice services. If you don t have a local THT office covering your area, THT Direct will be able to help you contact a local HIV support agency nearer you. THT Direct: For details of local services, information, advice and support, contact us: We welcome feedback about our publications. Please with your thoughts. Terrence Higgins Trust couldn t exist without the support of our donors, volunteers and fundraisers. If you would like to find out how you can support us go to 55 Who can help?

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