After the second programme in the series Lawrence Gold and Lisa Colclough from the CAB answered your questions during a live chat.
You can read the full transcript here but don't forget you can check out our Expert Advice section or read the transcripts from our first and third live chats.
Host: Hello, and welcome to tonight’s Live Ask Chat with Lawrence Gold and Lisa Colclough.
Yasmin: My husband died suddenly last Oct and I'm struggling to maintain a home on a £26k salary. I still can't seem to balance the books. I'm 42 years old - I've got a bad credit rating, 4 credit cards (3 full) and a bank loan.
Answer: I would like to reassure you that there are options available for you to deal with your debts. Debts generally come into one of two categories. They are either priority (such as rent, council tax or utilities where non payment can lead to the loss of an essential service) or non-priority (such as credit cards, loans, catalogues and overdrafts where non payment cannot lead to the loss of an essential service).
As some of the debts you mention are non-priority debts, I suggest you complete a thorough budget sheet of income and expenditure to enable you to work out what (if anything) you can afford to pay to your creditors after your essential living expenses. If you cannot afford the total contractual monthly installments to your creditors, I suggest you work out a reduced offer that you can afford.
When working out your offers of payment, I suggest you divide up any surplus income you have fairly between your creditors, so that the biggest debt gets the biggest chunk of you available income. It is best to negotiate in writing with a copy of your budget sheet, explaining your circumstances fully and ask for all interest and charges to be frozen. Start making the payments you have offered straight away. Remember to keep a copy of all your correspondence.
National Debtline produce detailed guidelines on how to negotiate in this way, including standard letters which will help you write to your creditors. This information can be obtained from the website (www.nationaldebtline.co.uk) or by calling 0808 808 4000.
Nev: Hello, does switching your credit card balance every 9 months to evade interest harm your credit rating?
Lawrence:In short it can but it's unlikely. However banks and building societies do like people being sensible with their money so switching too often may get noticed and they may become suspicious.
Lisa: Also, balance transfer fees are going to start coming in soon so it wont be free to transfer your debt to a new card.
If you do switch cards I would encourage people to make a calendar reminder to remember to switch or pay off their debt when the interest comes in. The banks will not remind you when the interest charges start and that's when you can get caught out.
Sean: Can you recommend a company that will take over the management of my money and make sure that all my bills are paid on time and efficiently?
Lawrence: If it's debt management go to PayPlan or CCCS. If it's not debt management you should try get help to manage your money yourself. Get a budget set up and try to manage your money through that.
Spanna: Do you ever recommend bankruptcy as a better alternative to working to pay back large debts?
Lisa: Depending on the situation we would sometimes recommend it but it would depend on what the level of debt is and what assets you have.
Lawrence: It should always be the last resort though.
Leebie: What can I do to improve my credit rating? I have a couple of loans which I pay off every month without ever missing a payment but I can't seem to get a loan to consolidate them due to a low credit rating.
Lawrence: A credit rating is easy to improve using a few simple steps, but it could take a year or even years to take effect. Firstly get a decent bank account, use it sensibly to show you can manage your money. Don't miss any repayments and get a couple of store cards. Spend small amounts on them and pay them off regularly. It helps if companies know you can pay off debts. You should also get on the electoral register.
Lisa: If you have a low credit rating you should also get a copy of your files as if there is something adverse on there you need to know - it could be resolved through an agreement.
Joz: What is a DMP?
Lawrence: It stands for debt management programme.
Lisa: It's a agreement to pay back your debt at less than the amount that you are contracted to pay. It will be set up between you and a debt management company. CCCS and Payplan do this for free.
Chisp72: A friend of mine recently had £5000 taken from her account fraudulently. Her bank doesn't want to know, is there another way for her to recover this money?
Lisa: She needs to report it to the police, it will help with negotiations. Most banks take it seriously and I am surprised to hear they don't want to know. I'd write a letter of complaint to the bank, write a letter to the head office to get an official response but most banks do take this very seriously so there must be more to it.
Dafs: I recently discovered that I had a CCJ (County Court Judgement) against my name, as I had not informed my store card administrators of a change in my address. I have since paid the amount off in full and have a certificate of completion, however as I did not discover the CCJ until 6 weeks after the judgment date it is still on my credit file. I want to apply for a new bank account how will the CCJ affect this?
Lisa: It's unfortunate as yes, it will affect future applications but you should contact the company and try convince them to remove it. If your judgment is shown as satisfied this can help. There are also a fair few banks who have specific accounts design for people with CCJs. You should be able to find a list on the FSA website.
Jt8277: I have about debts of 15k with an annual salary of 24k but still can seem to budget properly to pay it off. Can you suggest some resources that will help me?
Lisa: If you are struggling to do this yourself you can visit an advisor who can help.
Lawrence: Get yourself a budget planner and list down all your outgoings each month in priority order. Then work out the incomings you need to keep on top of the payments.
Alison1: Where do I go to seek financial advice to make sure I am getting correct & sound advice? Also do you have to pay for their services, or am I best making an appointment with my bank first off to try to find a way forward and get into the black?
Lawrence: Yes you can speak to a bank manager for free but they don't always look at the debt situation as a whole.
Lisa: There are plenty of places that give debt advice for free, who are trained to specifically deal with the issue. Try National Debtline or the CAB.
Vera: I just saw the programme and recognise Mike's situation. My boyfriend has two daughters who seem to think casually about spending money they don't have. They are 16 and almost 14 years old. What can my boyfriend and I do to prevent them ending up in debt? How much responsibility do or don't we give them?
Lawrence: I think it should be taught in schools. I would like to see money management on the national curriculum.
Lisa: Education groups are starting to look at these issues in schools.
s0z0s: If I was made bankrupt, when would it be discharged and how would long would it remain on my credit file? Even after discharge would it seriously hamper my chances of getting credit from the traditional lenders?
Lawrence: It usually takes a year to be discharged but it stays on your credit record for six years. That means it will affect you getting money for six years.
Laura: Are students loans regarded as a credit commitment when applying for a mortgage?
Lawrence: Yes - anything that comes out of your salary will be taken into consideration. With student loans a certain percentage comes out of your gross salary, and that is what your mortgage is based on.
Shena: Having just watched the programme, what do you think is a reasonable sum of money that should be saved on a annual basis, when our income is £29,000 gross, with no mortgage and no outstanding debts.
Lawrence: As much as you can afford but you should seek some financial planning advice to help you decide what will be the most effective method of using your money.
Harry: Can you have your child's bank accounts that have 'switch' cards on them frozen to stop their spending and can you monitor them with high street banks
Lawrence: You can't do anything due to the data protection act but they can only have a switch account at 16. They also
shouldn't be overdrawn as they are not allowed to borrow at that age. So unless you are a guarantor for their account the banks can't give out any information.
s0z0s: I have heard that one missed payment does not have a negative effect on your credit file, however I am told that 2 missed payments do. Is there any truth in this?
Lisa: Any missed payment makes some difference however it would be small. Two missed payments definitely will make more of a difference.
Please note: The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.
