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  Select Month November 2008 October 2008 August 2008 May 2008 April 2008 December 2007 October 2007 February 2007 September 2006 November 2005 October 2005 September 2005 August 2005 March 2005 January 2005 December 2004 March 2004 November 2003 October 2003 June 2002 May 2002 February 2002 December 2001 May 2001

A growing number of bankrupts are being targeted for Bankruptcy Restrictions Orders (BROs) as Official Receivers pursue those bankrupts who are believed to have acted in bad faith and contributed to their bankruptcy, according to figures released today.

Anyone thinking they can rack up loads of debt and use bankruptcy as an easy way to walk away form their responsibilities needs to think again. “The screw is tightening on those who have been guilty of misconduct”, said Desmond Flynn, Inspector General and Agency Chief Executive of the Insolvency Service.

In the six months to September 2005, 165 people have been made subject to BROs or Bankruptcy Restrictions Undertakings (BRUs) for periods ranging from 2 to 11 years. In addition, the Secretary of State has issued directions to take proceedings against another 313 bankrupts and Official Receivers are working on submitting reports on a further 600.

The most common allegations made in support of applications are:

• Contributing to the bankruptcy by gambling or extravagance;
• Incurring debts with no reasonable prospect of being able to meet the liability incurred;
• Entering into transactions to prefer friends or relatives ahead of other creditors or at a value less than the true value.

BROs and BRUs were introduced on 1st April 2004 in England and Wales, the same time the length of bankruptcy as reduced from up to 3 years to a maximum of 12 months, as a way of dealing with those bankrupts who were considered to be blameworthy, dishonest or culpable in their conduct leading up to bankruptcy.

BROs or BRUs subject bankrupts to bankruptcy restrictions for between 2 and 15 years and, as with bankruptcy, all BROs and BRUs are recorded on the Individual Insolvency Register, which can be accessed online and searched by anyone.

But BROs are only one way to ensure that bankruptcy is not an easy way to avoid paying back one’s debts. Income Payments Orders mean that whilst a bankrupt may be discharged from bankruptcy after one year, they can still be liable to make contributions from their income for three years.

Just because you’ve been discharged doesn’t mean you stop paying. “If bankrupts can pay towards their debts, they will pay”, said Mr. Flynn.

Bankruptcy is not a get-out-of-debt-free card. Bad faith bankrupts you have been warned.

Article copyright © Clientsmart Limited. Reproduced with Permission.

19,687 mortgage repossession orders were issued in England and Wales in the three months ending September, a massive 66% increase on the same quarter last year, according to figures released by the Department for Constitutional Affairs.

The figure is the highest since the third quarter of 1993, back in the dark days of the property recession and is far removed from the low of 9,616 experienced in the first quarter of 2003, just 30 months earlier.

The number of possession orders being issued has been increasing since the early part of 2004 and the trend is expected to continue with the expectation that the 25,000-orders-issued mark could be breached by the end of March 2006.

Don’t Panic Just Yet

Things may be getting worse, but it is not necessarily as dire as the figures initially suggest.

The number of possession orders does not reflect the number of properties that will end up being repossessed. It is more common for lenders and borrowers to come to an agreement over the outstanding debt rather than events end in the property being repossessed. It is also not uncommon for a property to have more than one possession order issued against.

There is no denying that it is an escalating problem. Actual repossessions for the first 6 months of 2005 totalled 4,640, according to figures released by the Council of Mortgage Lenders, up from 3,070 in the preceding six months.

Whilst these figures emphasise that the majority of repossession orders do not translate into actual repossessions, it does highlight the growing number of people with repayment problems. The CML anticipates the total number of repossessions for 2005 will be more than 10,000, still far removed from the 70,000 a year witnessed during the height of the property recession of the early 1990s.

Talk to Your Lender

The difference between the number of possession orders issued and actual repossessions also highlights how important it is to talk your lender as soon as you find you can’t make the mortgage payments.

“If you are having problems making your repayments it is imperative your get in touch with your lender immediately”, says Stephen Rose director of the not-for-profit Debt Advice Bureau™. “Don’t bury your head in the sand in the misguided hope that things will sort themselves out. If the lender doesn’t know what is happening, they are more likely to take you to court”.

“The sooner you talk to your lender, the sooner you can come to an arrangement. One which you can afford and which ensures you don’t have to worry about nasty letters arriving in the post”.

Barclaycard is testing a new credit card with a flexible interest rate, Repayment Rewards, designed specifically to encourage customers to repay their debts faster. It does so by lowering the interest rate the more of the debt you repay each month.

The interest rate charged reduces the greater the proportion you pay off, meaning those who are constructively making efforts to get debt free can do so even faster.

In the current trial, those customers repaying at least 10% of their balance are charged a 9.9% interest rate, but paying just the minimum 2.5% payment will mean you receive a 16.9% interest rate. Those paying between 5% and 10% of the balance incur a 12.9% rate.

The key premise to the card is that both borrower and lender are responsible for ensuring that the debt is managed responsibly.

“Credit – used sensibly – can help us manage our finances and live the way we want to”, said Keith Coulter, Managing Director UK Consumer Cards and Loans. “Repayment Rewards is about finding new ways to help customers while encouraging a responsible approach to their borrowing. “

Repayment Rewards is the second card this year from Barclaycard designed with encouraging more sensible borrowing behaviour from consumers. Barclaycard Combinations, launched earlier this year, combines a credit card with a loan facility.

Nice Idea, Shame about the Rate

Reaction to the new concept has been mixed. Some, like Nick White of uSwitch.com, see it as a constructive way to incentivise people to repay more of their debt each month. “Over the past few years we have seen credit card minimum payment requirements get smaller and smaller, and paying off just the minimum amount means that it can take consumers years and years to clear their card debts.

Others see the card as complicated and gimmicky, pointing out there are plenty of credit cards out their offering limited-life 0% rates on balance transfers and purchases and special low-for-life deals on balance transfers.

A valid point in theory, but it misses the fact that not everyone qualifies for every deal. Not everyone has a stunning credit history, all sparkly and clean. Not everyone has a large and impressive credit score. And not everybody manages their finances the way they should or even has the motivation to extricate themselves form debt as quickly as possibly. If they did the nation’s debt would not now total more than £1.1 trillion.

Different cards do different things for different people. And for people, circumstances change, needs change and, often as not, credit worthiness changes.

Sure there are better deals. In deed, Barclaycard’s own Barclaycard Simplicity offers a flat rate of 6.9 per cent on all purchases and balance transfers. At the other end of the scale, the Barclaycard Initial card is for those who need to build up their credit history. But a better deal is only a better deal when you can actually get it.

Since most of the really stellar credit card deals are only available to those with high credit scores and a pristine credit history, it will be seen as something of a positive that Barclaycard Repayment Rewards will be “aimed at a wider target audience”.

Time will Tell

Whatever the opinion on the interest rates, Barclaycard should be given props for even trialing such a card.

After years of credit card companies cutting back the required monthly minimum repayment, Barclaycard have done a 180 on this approach and come up with something that they hope will get those with rolling balances repaying those balances faster.

If the history of financial products is anything to go by, it just needs a small take up and other lenders will be offering similar deals. After all, Barclaycard Combinations, the credit card and loan facility combo, is already being emulated.

More players will mean more competition and better rates. Should that happen, rates could drop by 4 or 5 percentage points, leaving those paying at least 10% off their balances each month perhaps facing an interest rate of just 4.9% on balances and new purchases. Which would appealing to an awful lot of borrowers.

Credit card companies are looking at ways to tackle the “Rate Tarts”. To address the costs of astute customers who flit from deal to deal, staying only long enough to reap the rewards.

Transaction fees for balance transfers to 0% deals are one way card issuers have addressed this. Low lifetime rates, typically 4.9% or 5.9% APR, are another solution to the constant migration. Could the concept behind Barclaycard’s Repayment Rewards card be another? Time will tell.

At midday the Bank of England’s Monetary Policy Committee (MPC) announced the widely anticipated cut in the base rate when it reduced it by 25 basis points to 4.50 percent from 4.75 percent, the rate it has stood at since August 2004. However, the cut is not expected to be the first in a series of aggressive cuts.

Much expected by lenders, savers and economists alike, the cut, which is the first since July 2003 when rates fell to 3.50 percent, has come as concerns over the continuing recession in manufacturing grow and in an attempt to moderate uncertainty over consumer weakness, despite a recent uptick in consumer spending.

But the MPC are not expected to be in any rush to cut rates again. With the headline rate of inflation, on a 12-month basis, at the 2.0 percent target in June, many economists feel that the base rate may only need to fall to 4.00 percent before the rate cuts stop.

The MPC decision came at the 100th meeting of the committee since it became independent. Seen as an insurance cut, designed to assist the weak parts of the economy, it is expected that the MPC will be keeping a close eye on all the key data, including consumer debt and spending.

But borrowers should not see today’s reduction in rates as an opening of the rate-cutting flood gates. In fact, many commentators believe the next cut may not come until 2006.

For those with loans and mortgages at fixed rates, the cut will make no difference. But for those with tracker and other variable rate mortgages the 0.25 percentage point cut means a saving of nearly £21 a month on a £100,000 interest only mortgage.

“If the cut means you have a little bit more money in your pocket because you are paying less interest, that is great news”, said Stephen Rose, director at Debt Advice Bureau™. “Lower rates provide borrowers with the opportunity to pay more off their underlying debt each month and so get debt free faster”.

That is good advice as the MPC waits for more data on the economy. If the economy does deteriorate and money gets tighter, you’ll be glad if you have less debt. If the economy improves and rates stabilise, you’ll be glad you owe less as your interest charges will be less.

Whatever happens with the economy and whatever decisions the MPC make, there is one constant . . . owe less and you’ll pay less interest

There is a variety of information held on your credit report from a variety of sources. If any of it is wrong, it could affect your ability to get credit.

Here’s how to correct the information held on your report.

The Electoral Roll

If you have registered to vote and your credit file does not show this, please contact the credit reference agencies listed at the bottom of this article and they will investigate the matter. If you have not registered to vote, you may want to contact your local authority about filling in an electoral registration form.

If you move home you can tell your local authority who will tell credit reference agencies about your change of registration in the course of the year.

County Court Judgements

If you believe a county court judgement has been recorded incorrectly, you should contact the county court, quoting the case number included on your file. If the judgement was recorded incorrectly the county court will alter their records. Credit reference agencies are told about any such changes within four weeks, but if you give them original court documents, in the form of a Certificate of Satisfaction or Cancellation, they may be able to change their sooner if necessary.

If you have paid a Scottish Decree, you should send Registry Trust (address below) a receipt or a letter from your creditor (known as the pursuer) to confirm your payment.

If you write to Registry Trust Ltd questioning the accuracy of a judgement recorded on your file, asking for an entry to be changed, you should send a cheque for £4.50 to cover their search fee. They will then tell the credit reference agencies about any change to your file.

For judgements made in Northern Ireland, if you provide documents from a plaintiff to confirm a payment, the agencies will change their records. If you have any questions about the accuracy of a judgement recorded on your file, contact the court concerned.

Registry Trust Limited, 173-175 Cleveland Street, London, W1P 5PE

Bankruptcies

If a bankruptcy order against you is annulled (cancelled) or discharged (that is, you have met all terms), you should send a copy of the Annulment Certificate or Order of Discharge to the credit reference agencies. They will then update their records. If your bankruptcy has been annulled they should completely remove any record of it from your file. If your bankruptcy has been discharged a record of it will be kept on your file but it will show that it has been discharged.

Voluntary Arrangements

If you have any questions about a record of a voluntary arrangement you should contact the supervisor who dealt with your case. If you send documents from the supervisor to confirm that the information on your file needs to be changed, the agencies will change their records.

Credit Accounts

After carefully studying the credit account details (credit cards, loans, mortgages, etc.) on your file, if you believe any information needs to be changed you should write to the lender concerned and ask them to give the correct information to the credit reference agencies.

Searches

Credit reference agencies will delete searches only when they are instructed to do so by the company who searched your file. If you are concerned about the accuracy of a record of a search, you should contact the company which carried out that search.

Linked Addresses

Links between your previous addresses, or any addresses you may use for correspondence, may be listed on your credit file. The link will only be broken when the reference agencies are asked to do so by the organisation that created the link.

CIFAS

If you have any questions about a CIFAS record, write to the organisation concerned. If you disagree with that organisation over the information on your file, ask the organisation for details of the scheme for settling disputes.

Financial associations (shared financial responsibility)

If a financial association is shown, and you do not share a financial responsibility with the other person, or if that financial association no longer exists, you should write to the credit reference agencies. They will investigate the matter and make any necessary change to your file.

Aliases

If any names are shown on your credit report that you have never used, you should contact the company listed as providing the other name, or write to the credit reference agency and they will investigate the matter and make any necessary changes to your file.

Information About Other People

If you share no financial responsibility with any other person mentioned on your file you can ask the agencies to ‘create a disassociation’. This breaks any connection between your information and theirs and so makes sure their information is removed from your file, and that your information is removed from theirs. To do this you must give the agencies your, and the other person’s, full name and date of birth, details of your relationship and any shared addresses.

You can view your personal credit information, that lenders are currently basing their credit decisions on, by applying online for a credit report from Experian, the UK’s largest credit reference agency.

If you apply now, you will also receive a 30-day free trial to the CreditExpert Monitoring Service from Experian.

Being declined for a loan, overdraft, credit card or mobile phone can be frustrating, particularly when all the lender will tell you is that you have failed their credit score and nothing else.

Whilst each lender will ultimately score applications based on the services they offer and their own criteria, there are a number of factors which will impact your credit score and could lead to your application being accepted or declined. Knowing what those criteria are can help you improve your ability to get the credit you want.

These are the Six Top Credit Score Killers . . .

1. Not on the Electoral Roll

If you are not on the electoral roll at the address on the application there is a high probability of rejection.

2. Bad Credit History

Past credit history usually counts for 35% of your credit score. It is not just having County Court Judgements (CCJs) or defaults on your credit report that has a negative impact. Missed and late payments will also dent your score. But whilst negative entries will stay on your credit file for 6 years, the impact of missed and late payments diminishes over time. If you have been making payments on time for at least the last 12 months those negative entries will begin to influence your score less.

3. At Current Address Less Than 3 Years

Lenders like continuity. A score will be higher if you have been at the same address for 3 years or more. There may be some impact if you have had two addresses in the last 3 years, but probably less if you are a homeowner.

Multiple addresses in the last 3 years will have the greatest impact. Likewise, your credit score may be effected if you have been at your current address for less than 6 months. This means that tenants are most likely to fall foul of this scoring criterion.

4. New Job

As with residency, when it comes to employment continuity is also paramount. Ideally, lenders are looking for someone who has had the same job for a number of years. Such applicants will benefit from the maximum score for this.

Having had two employers in 3 years need not be that detrimental. Changing jobs so as to get more pay will usually not cause any problems, though you really want to have been in your new job for a few months before applying for new credit. Remember, lenders often ask to see the last couple of months pay slips when applying for a loan.

Since continuous employment is what they like to see, having 3 or more jobs in the last 3 years will adversely effect your credit score. As will having had bouts of unemployment between jobs.

5. No or New Bank Account

Lenders will award maximum points if you have been with your bank for a number of years. Having only recently opened your current account will reduce the score. Not having a bank or current account will be most detrimental to your credit score.

6. Too Many Credit Applications

Every time you submit a credit application a search is made and recorded on your credit file. This is called a hard footprint. Multiple credit applications in a short space of time will negatively impact your credit score. Such applications may be perceived as indicative of someone desperately trying to obtain credit.

It is commonly believed that making one credit application every month or two should not have too much impact on your credit file.

However, if you have recently made a number of applications and been declined, it is advisable not to make any new applications for at least six months so as to give a good breathing space before applying again. It also gives you time to review your credit file and determine if there is anything on there which shouldn’t be.

Colin Robert John Cliff, from Middlesbrough, has become the first person in the North East region to be subjected to tougher bankruptcy restrictions as he was found him guilty of “unreasonable extravagance”, the Insolvency Service reported today. He will now be subject to bankruptcy restrictions for the next three years.

Soon after losing his job last year, Mr. Cliff ran up debts of £4,284 on his new credit card. Over twenty days he used the card to pay for a holiday, clothes, accessories and to make cash withdrawals, even though he had no prospect of being able to repay what he spent. Less than six weeks later he filed his own petition for bankruptcy with his debts now standing at an estimated £13,740.

Changes to the laws under the Enterprise Act 2002,which effect personal bankruptcy, came into force on the 1st April 2004. Under the new rules bankrupts are now automatically discharged after one year. However, if an Official Receiver considers the bankrupt to be dishonest or blameworthy a Bankruptcy Restriction Order (BRO) may be sought, or a Bankruptcy Restriction Undertaking (BRU) may be accepted.

Under both a BRO and a BRU, the same restrictions that apply during bankruptcy can be imposed for a period of between 2 and 15 years on a bankrupt or former bankrupt, as well as some additional ones. Breaching the obligations imposed by a BRO or BRU may lead to criminal prosecution and even imprisonment.

In November last year, a Birkenhead woman became the first person to be subject to a Bankruptcy Restriction Undertaking as she agreed she was guilty of “unfit conduct” in the period leading up to her bankruptcy. In accepting the BRU she became subject to bankruptcy restrictions for six years.

Desmond Flynn, Insolvency Service, Inspector General and Agency Chief Executive said, “The Official Receiver will always seek to establish the reasons for any bankruptcy. During the course of those investigations, dishonest or blameworthy individuals will be identified and restrictions sought to protect potential creditors from losses and act as a deterrent to others”.

The number of BROs and BRUs are expected to escalate as ever-growing numbers of wantonly indebted consumers seek bankruptcy as a way of abdicating responsibility for their debts.

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