A person’s credit file is a list of all types of credit that he or she has been given and the history of repayments made. The list includes bank overdrafts, loans, credit cards, mortgages and HP borrowings. If the person has been issued with a County Court Judgment, or has been made bankrupt, or has been in an IVA, or has had property repossessed, or has been subject to debt collection activities or has been involved in fraud, the credit file will record it.

If you overspent at Christmas, don’t worry – you are not alone. Millions of people in the UK and Ireland have done exactly the same with most of them depending on credit cards and store cards to see them through the festive season. January is the month of reckoning and the bills are beginning to come in. Here are a few ideas to deal with payment, if you are struggling with your finances.

A County Court Judgment, otherwise known as a CCJ, is an order by the Court requiring the debtor to pay what they owe to a single specific creditor. If a debtor is unwilling or unable to pay a debt, the creditor can make an application to the Court to make a CCJ order.

What is a Statutory Demand?

A Statutory Demand is a formal notice demanding the payment of a debt within a period of twenty one days. A creditor may issue such a notice against any person or company owing at least £750 to it. If the debt is not paid within the twenty one days, the creditor may commence bankruptcy proceedings or (in the case of a company liquidation proceedings) against the debtor (or company). A Statutory Demand should never be ignored, even if there is no debt whatsoever, as a person could find that they have inadvertently been made bankrupt. If the demand is incorrect, you may apply at your local court to have it set aside. Grounds for such an application include e.g.

• The debt is less than £750
• You dispute the amount of the debt
• You believe that the demand has been issued in error
• You have a counterclaim of more than the amount owed

If you accept that you do owe the amount claimed in the Statutory Demand, you should seek to discharge the debt within the twenty one days allowed in either a lump sum or in instalments.

Ever wondered how much other people worry about their personal debt? Ever wondered if others worry more or less than you do? Is there a level of debt which should prompt you to press the panic button? Is worrying about debt normal? Do you ever think: ‘it’s just me – nobody else seems too concerned’! Or do you think: ‘I should be worried’.

Debt is everywhere

Given that debt is everywhere, why are people so secretive about their own personal debt? Perceived embarrassment, shame and stigma are part of the answer. People have their pride and admitting to financial difficulty is like owning up to failure as a person, regardless of whether any blame attaches to the person.  

What is a Charging Order?

A creditor may seek to have the Court issue a Charging Order against a debtor’s house, land or other property so that an unsecured debt may be turned into a secured debt via a charge on the debtor’s property. In doing so the creditor is looking to protect its interests by securing the debt against the property in case the debtor should subsequently decide to enter an individual voluntary arrangement or declare bankruptcy.

Oscar Wilde claimed that he who pays his bills on time is soon forgotten. He also claimed that it was only by not paying one’s bills that one could hope to live in the memory of the commercial classes. These two statements are probably as valid today as they were in his time although thankfully we do not have a debtor’s prison as such today.

The idea that Love Conquers All has been the theme of poems, songs, plays, films and even great paintings such as Caravaggio’s Amor Vincit Omnia. In the bible we are not surprised to find many references to the power of love. St Paul wrote: ‘Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellow man has fulfilled the law’. 

Parents who buy a puppy or another pet for their children at Christmas quickly realize that a cuddly animal comes at a cost. For a start, it begins to grow up. It has to be fed, watered, exercised, sheltered, groomed, get veterinary attention including shots, be house trained and walked on a daily basis. As time goes on, pet maintenance costs increase and children can not be relied upon to even look after the caring and exercising duties.

The familiar cliché that ‘Time is Money’ is usually applied to business scenarios. For example, delays in completing a major construction project usually increase costs and penalties apply for missing deadlines. 

For most of us it’s hard to imagine life without credit cards. We have become so used to our flexible friends that to give up using them is like a smoker giving up cigarettes. And yet, that’s precisely what you must do if you enter into an Individual Voluntary Arrangement (IVA) or if you petition for your own bankruptcy or if one of your creditors successfully petitions for your bankruptcy.

If you consistently earn more than you spend the difference is joy. If you usually spend more than you earn the difference is misery. These differences are frequently described as disposable income.

When confronted with serious debt problems it’s easy for the individual debtor to forget the effect of non-payment or late payment on creditors. The creditor is often seen as the big bad wolf and unworthy of any sympathy from the beleaguered debtor. The truth is that creditors have a vested interest in the critical decisions that the debtor takes to resolve debt issues. Creditors can be helpful and amenable particularly when the debtor identifies and confronts financial problems at an early stage with a view to resolving them to everybody’s satisfaction. What are the choices for the debtor?

R3 – the insolvency trade body – has published its quarterly ‘snapshot’ on personal debt in the UK and it makes fascinating if scary reading. There is currently a growing sense of pessimism among individuals in respect of their personal debt with almost 40% of people worried about their current level of debt.

The Law Reform Commission (LRC) of Ireland has just published its final report on personal debt in Ireland and in the dying days of the Fianna Fail – Greens coalition government, it includes a Draft Personal Insolvency Bill 2010 which truly lives up to the promise of earlier publications from the LRC. The proposals contained in the draft bill are quite radical. They say, for example, that debtors should not be jailed for non-payment of debt even in instances where the debtor can afford to pay but refuses to do so. The proposed sanction is community service and not jail time.

If we cannot pay our bills as they fall due there is often a price to pay in terms of creditor hassle, hounding and harassment. Credit card providers in particular seem to be the most aggressive in pursuing debtors by letter, phone calls and other means. Can we do anything about it?

In the current recession many of us are faced with the dilemma of what bills to pay when we have insufficient income to pay everything. We tend to pay the creditors who send us the most threatening letters or phone us most frequently or aggressively or who call to our home or who shout the loudest. We make pressurised decisions but are they the right ones?

To become qualified as an Insolvency Practitioner (IP) in the UK, one needs to have a certain minimum number of hours of experience of working in an insolvency practice, currently about 600 and to have passed the Joint Insolvency Examination Board (JIEB) examinations.

There are some advantages to consolidating your debts into one consolidation loan. For many people it is enticing to have to make just one monthly payment instead of many. Making multiple payments to a variety of creditors in respect of a number of different accounts is time consuming, particularly when funds are tight and there is not enough money to go around. You have to decide which debts are ‘priority’ ones. These you must pay. For the rest you simply have to make do with whatever you can afford to pay, even if in some cases it is less than the contractual amount that you should be paying.