There are many myths associated with debt which might make you think twice about entering into a debt solution. Some offer the hope of the debt disappearing without you having to pay a penny, others cause worry that it will affect those that you live with.
But, until you separate the fact from the fiction you will never be in a position to make an educated decision on how best to tackle your debt.
If I dodge the bill for 6 years I will not have to pay a penny
This is known as statute barred. Debts like these are covered by the Limitations Act 1980, which is a statute of limitations that provides time scales as to how long a creditor can chase you for an unpaid debt.
The Limitations act 1980 only comes into effect when no acknowledgement of the debt have been made between you and the creditor for six years for unsecured debts or 12 years for secured loans or mortgage arrears. This only applies to residents in England and Scotland.
How long is it before they can no longer chase me?
If the creditor hasn’t made any attempt to contact you for six years or more then you may be able to claim the debt is statute barred. This would stop the creditor from being able to use the legal system to enforce payment from you. The time starts from the last time you acknowledged that you owed the debt or made a payment on the account.
However, if the creditor has made one single attempt to contact you in that six year period then the debt stays outstanding. This includes letters, phone calls, emails etc. Just because you threw away the letter, moved house, stopped answering calls and emails or changed your phone number and email address, it doesn’t mean they haven’t tried to contact you for payment.
You will never be able to obtain credit again in the future
An IVA or bankruptcy will stay on your credit file for 6 years. After that it comes off your credit file and by managing your money sensibly after it has finished you can start to restore your credit rating and obtain credit again in the future.
Bailiffs can come knocking fairly easily
First of all you must be issued with an enforcement notice before a bailiff can come to your premises to collect certain types of debts such as maintenance, Council Tax or County Court Judgements (CCJs).
Remember the three simple rules when dealing with bailiffs:
- DO NOT let them in your home
- DO NOT BE INTIMIDATED
- DO NOT sign anything
Regardless of what they may tell you, a bailiff is not permitted to enter your own home without your permission so don’t let them over your doorstep and seek help.
You will lose your home if you miss a mortgage repayment
Believe it or not, repossession is a last resort for mortgage lenders. All mortgage lenders are regulated and bound to abide to a code of conducting meaning they must treat you fairly and investigate every possible avenue before repossession.
Please be aware that repossession is a very real thing and if you’re struggling to pay your mortgage you should seek help as quickly as possible.
Your poor credit will affect others in the property
Unless you share a joint account , your poor credit will not have an affect on anyone else’s credit file in the property. Lenders are no longer allowed to search the credit files of others you live with unless you are applying for credit together.
Please bear this in mind when taking a joint account with somebody who has poor credit. The credit check performed to open the account can have a negative impact on your score if their credit score is poor and the check will show up on future searches on your credit file.
Only half or the debt is mine
It is important to understand that just because you took out a joint credit account, it doesn’t mean you only owe half of it. If the other person defaults on their payments your lender can still chase you for the full amount. This is known as joint liability.
Get debt advice
These are just a few of the many debt myths I have heard over the years. If you are ever unsure seek impartial advice from a fully qualified advisor at M1 Debt Advice or another trusted, recommended debt specialist. By acting fast you can stop the bailiff knocking and gain control over your finances again.