What is Debt management?

1. Debt Management for clients who lack capacity or require assistance to manage their finances due to their ill health

2. What is Debt management? • Debt Management is a means to managing the income vs. expenditure of a client in order to maintain a reasonable standard of living whilst ensuring that all necessary and legal expenses are met and maintained. e.g. Debt management plans Bankruptcy, IVA Debt Relief Order Administration order, Write off, etc

3. The role of a deputy / appointee in managing debt Our role as deputy/corporate appointee is to manage income and expenditure in the best interests of the client. With debt therefore we must: • Ensure the validity of all income and expenditure including debt. This means that we must assume that nothing is valid until it is verified. • For clients with mental health issues we must ensure that they were in receipt of the full advice and understood the terms of any credit agreement entered into. Ask the question “Would they have had the capacity to understand the terms and conditions”. • We must ensure that the debt is managed in the best interests of the client and not that of the creditor.

4. Gaining permission to act • Check to ensure that your Order from Court gives you authority to negotiate with creditors. If at the time the application is made, you are aware that you will be negotiating debt, ensure that this is included in the order. • For corporate appointee we must gain the clients permission to act on their behalf. A letter of consent should suffice on most occasions. • MALG (Money Advice Liaison Group)

5. Validating the alleged debt • All debt should be validated/verified. A copy of any credit agreement should be sought from the creditor. • If this cannot be produced then we would question the validity of the debt and until it is produced refuse to make any further payments. Without the agreement they cannot obtain payment for an alleged debt. • It should be noted that any credit agreement should be signed and dated by both the agent i.e. the bank and the client.

6. Priority Debt The law gives different creditors different ways of getting their money back i.e. send you to prison, take away your home, cut off your supply i.e. electricity or take furniture from your home. These are therefore PRIORITY DEBTS and must be dealt with and managed first. They include the following: • TV Licence • Mortgage arrears • Second mortgage or secured loan • Rent Arrears • Council Tax and community charge • Gas or Electricity • Maintenance • Hire Purchase or conditional sale • Income tax, National Insurance and VAT arrears

7. Initial Contact with creditors • Contact all creditors immediately advising them of your role as deputy/appointee including the order or letter of authority and confirm you are investigating the financial position of the client. • Be mindful of the data protection act and only include relevant information. Provide a letter of consent or copy of your Deputy Order • Obtain an up to date statement on the alleged debt together with a copy of the financial agreement at all times. • Request that all interest and charges are frozen until your investigations are complete.

8. Evaluation financial status • Depending on the level of debt, you may wish to gain further advice from another agency. • Citizens advice bureau and Consumer Credit Counselling Service and Money advice Trust all offer advice for free. • Consumer Credit Counselling Service offer a debt evaluation service

9. Completing a common financial statement Most creditors will request a copy of a financial statement to show the “disposable income” of the client with a view to negotiating a payment plan. Remember to include all items, such as laundry, maintenance charges, clothing allowance, emergency allowance, money for food etc based on the clients needs. Remember to ensure that all Disability Living Allowance or Attendance Allowance can be disregarded as this is income that should be utilised to pay for mobility and care costs only, even if the client is not currently using it as such. Where possible complete and return this within 30 days, where this is not possible advise the creditor and give another review date.

10. Agreements with creditors • Ensure all your agreements are in writing prior to making any payments to a creditor. • If possible, ensure the agreement is for a full and final settlement to negate the need to renegotiate at a later date. • Where agreements are reviewable on a pre defined timescale, ensure that this is diarised and contact is made in a timely manner to renegotiate.

11. Don’ts • Never pay interest or charges on a debt for a client who is in financial difficulties and has no disposable income. A creditor should not be seen to increasing the debt of a client who is in financial difficulty . • Never pay a debt without verifying it • Never make an agreement with an old debt without referral to the Limitation Act 1980

12. Do’s • Always verify the debt before beginning negotiations. • Always establish if the lender was responsible when making the agreement with the client. If not then complain • If the lender does not agree with your complaint, refer it to the financial ombudsman • Always act in the best interest of the client and where possible and their capacity allows, involve them in the decision making process • Where applicable, put a note on the credit file of the client to stop any future debt accruing and or/ reduce vulnerability

13. Debt collection agencies • Debt collection agencies can work in two ways. • They may be part of the organisation who originated the credit agreement or appointed to act on their behalf i.e. a solicitor. In this area they usually will try to recover the whole debt. • They may have purchased the debt from the company who originated the credit i.e. Credit Card. They will have purchased the debt for anything between 5-40% of its value and will seek to gain a profit on their purchase. • The lending code stipulates that a creditor must advice the customer prior to passing on the debt to a third part

14. Examples of our successes Ms S entered into a life insurance policy in 2003 with a reputable company. On her behalf Wiltshire County Council questioned her ability to understand the terms and conditions of the policy. After Negotiation, the company agreed to refund all payments made with interest. Mr A came to us with debt in the form of a personal loan, credit cards and overdraft. After successful negotiation with the bank they agreed to write off all the debt due to his lack of capacity at the time of taking out the agreements. Mr D came to us with a large overdraft and credit card bill. After successful negotiation with the bank they agreed to write off all the debt due to his lack of capacity at the time of taking out the Agreements. .

15. Examples of our successes Mr J came to us with a large loan from a leading bank. The bank had taken into account his DLA as part of his disposable income. The Bank agreed to write off the debt in full. Ms C came to us with numerous debts. All were successfully negotiated for write off or full and final settlement. One debt was with a personal credit agency that charged interest at a rate of150% of the amount borrowed. We highlighted our Clients position and that she had already paid off the amount borrowed plus a little interest. They agreed to write off the remainder of the debt. Mr H came to us with severe debt including arrears on his mortgage with the threat of repossession. We successfully negotiated with the lender on a minimum payment plan until Mortgage interest support was available through Income support. All the arrears have now been cleared and Mr H is contributing over and above his required monthly payments needed.

16. Agencies who can help National Debtline is a national telephone helpline for people with debt problems in England, Wales and Scotland. The service is free, confidential and independent. Call 0808 808 4000 or log on to: www.nationaldebtline.co.uk • Consumer Credit Counselling service www.cccs.org.uk • Money advice trust