Archive for October, 2009

Bankruptcy Annulment and Consumer Credit

Friday, October 23rd, 2009 at 0  

Q&A

1. What is bankruptcy annulment? 

Bankruptcy annulment is a way of cancelling a bankruptcy, at the discretion of the court using grounds specified in the Insolvency Act 1986. It can only be used in limited circumstances and you should always seek specialist advice before considering your options. 

2. Where can I go for help and advice?

Citizens Advice 

For advice and information on debt and other topics, visit your nearest Citizens Advice Bureau – check the phone book for the address. 

National Debtline 

If you live in England, Wales or Scotland phone 0808 808 4000 or visit the National Debtline website for debt advice and information. 

Consumer Credit Counselling Service 

For debt advice throughout the UK – including Northern Ireland – phone 0800 138 111 or visit the Consumer Credit Counselling Service website. 

The OFT has a duty to protect the interests of consumers by ensuring the fitness of those holding or applying for consumer credit licences. The OFT also has a duty to monitor social and commercial developments relating to the provision of credit and related activities. 

The OFT is monitoring the lending and broking of secured loans to consumers that have recently gone bankrupt where the purpose of the loan is to annul the bankruptcy. 

Background 

Where an individual has become bankrupt, the Insolvency Act 1986 allows the individual to apply to court to have the bankruptcy 'annulled' in certain circumstances. One of the ways in which a bankruptcy may be annulled, subject to the discretion of the courts, is where the bankruptcy debts and expenses of the bankruptcy have been paid off. 

There is a small but growing market in the UK of lenders and brokers that approach recently bankrupted homeowners offering short-term loans secured on the property in order to annul the bankruptcy before arranging for a remortgage. 

A short-term loan is used to repay all outstanding unsecured debts and other costs and an application is made to annul the bankruptcy. Once the bankruptcy is annulled, a remortgage is entered into in order to repay the short-term loan. 

Request for information 

The OFT is interested to hear about consumers' experiences of such services as part of its ongoing research into this market. We would be particularly interested to hear from consumers who have experienced problems in this area, for example, who may have taken out a short-term loan to finance a bankruptcy annulment, and were then unable to remortgage to pay off the short-term loan. 

The OFT would also welcome further information from other interested parties, trade bodies, debt advisers and licensees. 

If you have any comments, information of submission that you would like to make to the OFT to assist us in this research, please contact the Secured Lending Team: 

Secured Lending Team – 2N18 

Fleetbank House 

2-6 Salisbury Square 

London 

EC4Y 8JX

Email: secured.lending@oft.gsi.gov.uk

Responses by 30 October 2009 would be appreciated.

 

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

Consumer Credit Debts & Write off

Friday, October 16th, 2009 at 0  

There has been much hype over recent months over claims that loan and credit card debts taken out before 6th April 2007 can be written off due to recent changes in the law. Whilst much of the information surrounding this issue is inaccurate or misleading it is true that in some cases lenders are unable to issue legal proceedings to recover monies that are owed to them. This is because some of their credit agreements lack what are called 'prescribed terms' and are therefore considered 'irredeemably unenforceable'.


What is the background?
In order to protect the public from unscrupulous lenders, the Consumer Credit Act was added to the statute books in 1974. It requires that most companies that offer goods or services on credit or those that lend money to consumers are licensed by the Office of Fair Trading.  It is a criminal offence to trade without a licensing arrangement.
The Consumer Credit Act also requires certain credit arrangements to be set out in a specific way and that these arrangements must contain certain information. Without this information these agreements are not enforceable.
Credit agreements where the amount of credit or hire exceeded £25,000 were excluded from control until 6th April 2008.  Whilst pre-existing agreements above £25,000 remain outside CCA regulation, all new credit and hire agreements are now covered by the 2006 Consumer Credit Act.
The Consumer Credit Act was worded in a way that lenders would be unable to enforce repayment of the loan or credit in court if they did not comply with the provisions of the Act.
Is it possible to write off debts?
There has been an increasing trend of consumers attempting to write-off their debts in recent months, partly thanks to a large number of advertisements from claims management companies seeking to exploit loopholes in the Consumer Credit Act legislation.
Where an agreement was signed before 6th April 2007, if a borrower doesn’t pay their debts the lender can apply to a court for an enforcement order to recoup their money.  However, there are certain circumstances in which the court does not have power to enforce the agreement. The loan or credit agreement therefore remains unenforceable and the lender is unable to recover any money from the borrower using legal means.
For example, when lenders cannot produce copies of the original credit agreement that a borrower signed, or if the agreement failed to correctly state one of the Act’s ‘prescribed terms’ (such as the Annual Percentage Rate (APR)) firms claim that borrowers may be able to get your debt written off.
For agreements made on or after 6 April 2007 the court now has discretion under the 2006 Consumer Credit Act 2006 to enforce an agreement which does not comply with the Act's requirements. 
Despite some reporting to the contrary, cases of this type are continuing to be heard and the outcomes decided on their own particular facts.
Companies who promise to help
Many firms have appeared in recent months claiming in their advertisements to be able to get you out of your credit card or personal loan debt. There are some companies suggesting that up to 80% of agreements are unenforceable.
These companies generally charge a fee to assist you get rid of the debt, sometimes as a percentage of the amount you save. Whilst in certain circumstances as detailed above there are agreements which may be unenforceable, many of them are.  If you believe that your agreement is unenforceable and you are not making repayments you may well be incurring legal costs and default charges should it be proved that you are mistaken. You may also incur charges to a claims management firm even if your case is unsuccessful.
Firms that provide regulated claims management services must be authorised by the Regulator and you can search on line to see if the claim management firm you are proposing to use is regulated. 

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

COMPULSORY LIQUIDATION GUIDE

Tuesday, October 6th, 2009 at 0  

The most common descriptions of insolvency are that the company cannot pay its debts when they become due, or that its liabilities exceed the value of its assets, or both. "Insolvency" is also used to describe the various formal procedures that may apply to an individual or business.

The Act of Parliament under which most formal procedures are administered is the Insolvency Act 1986. Insolvency law provides a system for dealing fairly with the assets of the insolvent individual or company and the claims of creditors. The law also deals with what happens to the individual or company following the insolvency.

What is The Insolvency Service?

The Insolvency Service is an executive agency within the Department for Business, Enterprise and Regulatory Reform (BERR). The Insolvency Service, through its official receivers:

1. About this guide

This guide is for directors of any company involved in compulsory liquidation (winding up petition by the court) in England and Wales. It includes some information about the disqualification of company directors and criminal offences in relation to a company. It also summarises the other insolvency procedures that can apply to companies and explains some common insolvency terms.

The insolvency procedures apply to companies and partnerships in England and Wales only. Under the law, the term "director" applies to anyone occupying the position of a director of a company, whether they are called a director or not. The law applies equally to, for example, "executive" and "non-executive" directors.

 

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

CCJ: County Court Judgements

Monday, October 5th, 2009 at 0  

If you get a letter telling you someone is making a County Court Claim saying you owe them money, don't be alarmed. The Court will decide whether you have a debt to pay – and if so, how you should repay it – in a way that's fair to everyone. 

The purpose of a County Court Claim

Someone you owe money to (a 'creditor') can take a County Court action against you to claim the money. If you pay the amount outstanding, you can avoid a hearing or judgment. If not, there'll be a simple court hearing in private. You can attend if you wish, or just send the information the court asks for by post.

The court doesn't find anyone 'guilty' or 'innocent'. It looks at the facts and decides whether you owe any money, and if so, how you should repay it.

Under Scottish law claims are dealt with differently, by the Sheriff Court.

County Court Claim Form

The court will send you a 'Claim Form', showing how much the creditor says you owe them, and the details of the claim (though these details can be sent separately up to 14 days later). This form gives you the opportunity to explain your situation to the court.

Replying to a Claim Form

You'll receive an Admission Form with the Claim Form, asking you about your income and outgoings. On the form you can make an offer to repay the debt (or a lower amount if you think you owe less than the creditor claims).

If you don't make an offer and the court decides against you, it may say you must pay either the full amount or monthly payments.

You have 16 days from the date of the postmark to send the form back to the court. Or you can submit an 'Acknowledgement of Service' or a 'Defence Form', depending on how you want to proceed - follow the link below to find out more about these forms.

County Court Judgments (CCJs)

After the court hearing, the court may issue an order saying you must repay the debt. This order is called a CCJ and will either be for the amount agreed between you and your creditor or, if you can't agree, a payment set by the court.

If you have judgments from more than one creditor, the court can combine your debts and make an 'administration order' – saying you must make a single payment every month to be shared by all your creditors. 

Who do I pay?

You pay the creditor who made the claim against you, or their solicitor or representative who will accept your payments on their behalf.

What to do if you can't pay

If you pay nothing, or don't keep up with the payments, the creditor can ask the court to take steps to make you pay, in which case you may have to pay more costs. If you genuinely can't pay, even in stages, you can ask the court to:

·           change the amount of the regular payments

·           suspend the order until you can afford to pay

County Court Judgment (CCJ) records

Unless you pay the full amount of the judgment within one month, your CCJ will be recorded on the Register of County Court Judgments for six years.

Organisations such as banks, building societies and loan companies use the registered information to help decide whether to give you credit or loans, like a mortgage. 

What to do if you disagree with a CCJ

If you have a genuine reason to disagree with a CCJ you can ask the court not to apply it straight away ('set it aside'). You may have to pay a fee for this. If you don't have a genuine reason, your application could be treated as wasting court time or even perjury – serious offences that can incur fines and prison sentences.

If the judgment is set aside, things go back to the start of the claim. You have another chance to reply to the Claim Form, and explain your situation. The CCJ is taken off the County Court Register until a new judgment is made. 

Changing your credit record

Some companies charge for 'credit repair' services that claim to help you get CCJs taken off the register – get free, independent advice first before using one of these companies.

You can get incorrect information removed yourself by paying £2 to see your credit file and asking for mistakes to be corrected. Remember though, a judgment is only taken off the register if:

·           you paid it in full within one month

·           it's set aside by the court (see 'If you disagree with a CCJ' above)

You can search the record for any CCJ registered against you and have it marked 'satisfied' if you've paid off the debt. 

Where to get advice

Many organisations, such as the ones listed here, don't charge for guidance – always get free, independent advice before using a commercial service. 

Citizens Advice Bureau (CAB)

Your local CAB provides free information and advice on legal, money and other problems: you can find your local CAB in the phone book or on their website.

National Debtline

National Debtline offers free, confidential and independent help over the phone for people in England, Scotland and Wales. You can call their helpline and also download publications from their website. 

Consumer Credit Counselling Service (CCCS)

The CCCS also has a helpline, providing free, independent and impartial advice to people who have debt problems: call their helpline, or see the CCCS website. 

Other organisations

If you're being threatened with legal action, you can check the Community Legal Service website to see what your legal rights are. You may also be entitled to free and independent advice from your local Law Centre.

Our Insolvency Helpline Is Only For Businesses

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach