10 Debt Myths!

There are hundreds of myths about the debt industry - everyone has a mate, family member, work colleague that has a story about debt problems. We've taken some of the worst debt myths in this post... enjoy! Please contribute your own too!

Debt Myth 1 - You can't tell anyone

Often people think they can't tell anyone about their debt problem or it'll result in receiving additional threats and worry more people. Millions of people each year turn to debt advice charities and receive debt advice. There are a number of different debt solutions available including Bankruptcy, IVA, Trust Deed, or Debt Management Plan. 

You are not alone - speak to a debt charity or tell a friend or family member. A problem shared is a problem halved.

Debt Myth 2 - Debt advice companies are all the same

Some debt companies will act within your best interests but most want to make money from your misery. Research and check out your debt company. We advise speaking to a debt charity who can give you informal debt advice

 

Debt Myth 3 -"Write off your debt"

In some debt solutions you can write off your debt but this will have a negative impact on your credit rating and make obtaining credit again in the future difficult. Rarely can you write off as much as the adverts say - it's typically 50% debt being written off in an IVA or Trust Deed.

Debt Myth 4 - I'll never have a bank account again

Lots of banks are now creating bank accounts for people who have a bad credit history. If you are entering a debt solution ensure you change banks if one of your creditors is the bank you currently bank with. 

Remember, ask for an account without an overdraft!

Debt Myth 5 - Paying fees for Debt Management

You DO NOT HAVE TO PAY FEES FOR A DEBT MANAGEMENT COMPANY! We've bolded it because it's one of the most mis-understood myths about the debt industry. There are fee debt management plans where you don't have to pay for the solution. Instead the creditors pay the debt management company fee so you don't have to. Speak to any debt charity - they'll steer you right!

Debt Myth 6 - Bankruptcy will take my home

Most people are scared their debt will mean they will lose their home. In Bankruptcy (and an IVA) the official receiver / insolvency practitioner is only interested in any equity you have in your assets. This means if your house has no equity or you live in rented accomodation you will not have to leave your house. 

If you earn an income where there is disposable money available to pay towards the Bankruptcy then an Income Payment Order may be in place for a total of 3 years.

Debt Myth 7 -Friends / Family can't buy my assets

Friends and family can purchase your assets as long as they are paying a fair price. It's always best to speak to a licenced insolvency practitioner about this before proceeding (especially in an IVA / Bankruptcy).

Essentially, the official receiver / insolvency practitioner wants the equity that's due so it can come from any party.

Debt Myth 8 -You can go to jail for not paying your debt

This is factually incorrect, you cannot go to jail for not paying your debt. You should repay your debt if you can but if you can't then you won't go to jail.

If a judge orders you to make repayments and you refuse then the judge can place you in jail as punishment however this would be for failing to follow a judges orders.

Debt Myth 9 - Your credit file will be damaged forever

If you enter an insolvency solution your credit file will be damaged with a default being added. This default will last for 6 years, after which period you will be able to gain credit and start to improve your credit rating again.

Debt Myth 10 - Bailiff's / Messenger at arms will enter my house

A bailiff (or in Scotland messenger at arms) are only allowed to enter your property if you invite them in.You should communicate with a bailiff / messenger at arms to come to an agreement regarding your debts, this avoids the problem spiralling out of control.