Interviewing clients who are in debt You should read through this section carefully, some will be very

familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Again, you should take appropriate time to absorb its contents and to undertake your own further reading to reinforce your learning. The interview with the client, whether by phone or face to face remains the key foundation to dealing with legal advice cases. As it is something which becomes second nature for advisers it is easy to over look ways to improve. The process of developing and managing interviews successfully involves a series and combination of activities which might in practice flow into each other and be difficult to identify as separate stages. Experienced caseworkers will develop interview styles which help them to achieve their objectives efficiently and effectively. In basic terms successful interviewing will include some common elements. The aims of an interview In general, the purpose of the interview is to; gather information from the client give out information to the client for example to communicate the professional standards of your organisation make a decision about how to use the information you have gathered obtain instruction from the client give instructions to the client

Is this your understanding of an interview? Achieving these aims While meeting the general aims of the interview you will also inevitably be trying to: assist your client to identify exactly what they expect from the situation gather together the necessary information in order to help achieve your clients' expectations assist your client to come to a decision about how best they can achieve the result they want establish a certain rapport with your client which will establish your professional competence The structure of an interview An interview could be described as a conversation with a purpose but in order to manage the interview effectively it is important that you apply a clear structure; it is not simply an interesting way to pass the time. Money Advisers often have busy schedules and limited time and will need to ensure that they consider the interview structure in order to deal with the issues raised in a professional and organised way. The structure of interviews will vary but should include the following: The client should have the opportunity to say what he or she feels the need to say You need to identify the key problems or issues You need to provide advice

 You will need to provide the client with information concerning any implications for your client of the advice. In order to enable clients to explore their problems and concerns advisers must create an atmosphere and environment in which clients feel comfortable. This will involve ensuring that the client knows that they will not be judged or face any negative attitudes towards the clients situation. It might be the clients first opportunity to fully explore their own issues. Offering reassurance and enabling the client to be open in this way will help the adviser to gain a bigger picture and by summarising the clients issues the adviser will check their own understanding with the client. From this information exchange the adviser will be able to identify and recognise clients circumstances, responsibilities and priorities and establish the nature and scope of the problem. Crucially they will identify any situations where immediate action is required to assist clients to take the appropriate action. As the interview progresses the adviser will continue to reassure and encourage clients to provide additional information on their situation or needs which the adviser will respond to at each stage during the interview. The adviser will need to be able to balance the resources available, such as time and space, with the needs of the clients and bring the interview to a close. The end of the interview is preceded by a summary the discussions and the outcomes achieved or agreed and check clients understanding. Obtaining the Whole Picture When faced with a debt client (or any other client for that matter) for the first time it is important to try to establish their current situation. Without a systematic approach it will be very difficult to gain an overview of the situation. It is essential that you obtain a clear and detailed picture of your client's financial situation, their income, expenditure, debts, details of their health and personal circumstances. This will enable you to identify ways to maximise a person's income and to identify which bills and debts need to be targeted for your initial attention (in other words which are the priorities and which are the non priorities). When doing this, it is essential that you try to establish a trusting and safe environment in which to discuss the situation with the client. It is essential that you are both empathetic to the client's problems and are non-judgmental of them or their situation. It is also important that the interview is conducted, where possible in a confidential environment. Ideally this should be in a separate and private room. You also need to be aware that clients will not always discuss their entire situation the first time that they see you. They may in fact initially only be willing to discuss a specific debt, see how you approach this and then perhaps discuss the situation more fully. This initial disclosure is known as the 'presenting problem'. This notion of a 'presenting problem' is common to many forms of interviewing. Try to conduct your own reading to discover what additional information you can find about this issue. You may of course have resources available to you in your own workplace. Often experienced advisers have already encountered this difficulty and have developed techniques/approaches to try to deal with it; you might like to talk to them also in order to develop your own. The 'Presenting' Problem

Unravelling the client's presenting problem is one of the adviser's initial tasks. The client's way of presenting the problem can be the first line of defence against a deeper enquiry. More often than not, the client seeking help presents the problem in the extreme, either as a simple single debt problem or as a multiple 'out of control' debt problem. The reality may indeed be somewhere in between. They may state that they have always been like this and that they have never really been in control e.g. "I have always been in debt". While the client may be convinced of the truth of this statement, the adviser should suspend judgement, remain sceptical and persist with investigating the crucial questions, in order to build up a picture of the 'debt problem'. Going beyond and deeper than the presenting problems does not imply that you are brushing these aside. On the contrary, the adviser too wants to understand the nature of the problems and to help to resolve the difficulties. When examining the presenting problem, the adviser must always investigate the clients problems in detail, currently and in the past. No matter how the client presents the problems, whether the client is blaming other people or he is talking only about the current problem there is nearly always some currently important details linked with the presenting problem. Overcoming this is an important skill for advisers to acquire over time. Interview Styles Clients experiencing debt problems can often be tense and emotional during interviews and part of the management of successful interviews depends on the advisers ability to recognise and respond to this appropriately usually by being supportive and empathetic. A key skill is to manage difficult or challenging clients in a way that sustains the interaction and minimises difficult behaviour, or where an interview becomes unmanageable to be able to end the interview safely using organisational procedures. Over a period of time you will develop and fine tune your own interview style hopefully incorporating all of considerations in this section and other good practice material. Even experienced advisers can improve. In fact it could be argued that it is the experienced adviser that needs to take some time to reflect upon their own practice in order to develop and 'grow' as an advice practitioner. There is a separate short section which looks at reflective practice which will encourage you to do this. Workplace Task: When interviewing your next debt clients you might like to monitor your own ability to do the following: a) Enable the client(s) to get across their own views. These views can then be challenged if they are incorrect or misplaced. For example, many clients believe that bailiffs can simply enter your property and recover goods. This may well not be the case and therefore this misconception can be addressed at an early stage. b) Ensure that the client(s) understands that they are not being judged or condemned by the adviser during the debt process. c) Adopt yourself, and develop in others, a positive attitude so that this attitude can influence the client(s), who may be feeling unable to cope with the debt situation.

d) Consider whether it is a good idea to involve the clients partner or person who may be able to support the client. This might lead to more robust arrangements and a clearer understanding and greater appreciation of the difficulties. e) Develop a clear action plan with the client(s). This should usually be written down and a copy kept and one given to the client. f) Explore the extent to which a client is able and willing to undertake tasks of their own, helping to involve them in resolving their own debt problem. g) Ensure that all decisions are jointly arrived at and understood.

Establish and provide appropriate levels of support to clients Whilst clients often need advice and support it is important that the adviser attempts to empower them to take control of her/his own financial affairs by ensuring that they are able to make informed decisions about which solution is appropriate for them. Where possible this will encourage clients to regain control and be better able to cope with their affairs in the future. In addition empowering clients will be particularly relevant where the adviser is unable to take a particular course of action for the client, and the client will need to take action for themselves (e.g. attend court). In order to be able to do this, advisers should: Create a setting in which clients feel comfortable enough to identify and explore their needs and their ideas for achieving them Confirm clients needs and review them as the cases progress Identify and provide information on a relevant range of options for achieving their needs and encourage their involvement in the process; where possible Agree how the clients needs can be met by the Company, by the client or by other means Provide continuing support to clients Identify any unrealistic expectations the client may have about their case and agree a way forward Agree with clients when no further support is required and the process for ending the provision of support

Where necessary the adviser will :

Plan action with clients It is important that the client and adviser have a clear agreement and understanding of what action is being taken and by whom. In order to do this the adviser should develop with the client a feasible action plan that clearly specifies; the key objectives, methods to be applied, key dates and responsibilities for action. They will need to ensure the client understands what they have to do to take the action plan forward.

Enable the client to act on their own behalf Where the action plan involves acting on their own behalf, the adviser should work with clients to help them access and present information relevant to their case in the best possible way. This might be for example helping clients to prepare for a court hearing where the adviser is unable to attend or does not offer this service. Review progress and revise plans with clients There are likely to be various developments between the clients first contact with you and the progression of their case. As the case develops the clients needs may change and progress will need to be reviewed against the objectives which were originally agreed. The adviser should confirm the course of action that was taken and ascertain how things have developed. They should review the key objectives and stages of the plan with the client and identify potential revisions to action plans that will achieve the clients objectives.

Signposting and Referral The clients debt problems may have resulted from other non-debt related problems for example a relationship breakdown or loss of employment. In addition to your own work for the client appropriate signposting/referrals to other relevant agencies at this point might help to reduce their debt problems. It may also be that your service is not appropriate for the client, and that another service would best suit the clients needs (where for example there is insufficient income from which to pay for the Debt Management Service and free money advice would be more appropriate or the client has additional needs which mean a telephone based service is not appropriate). Again in these circumstances signposting or referral to an alternative service is needed. Signposting/referral: whats the difference? Signposting is where an adviser provides general information to the client on alternative sources of assistance (such as details of solicitors who may be able to assist with an employment problem for example). Signposting is appropriate for empowered and confident clients with the skills to follow through and make contact with services independently. Referral is where the adviser makes contact with an appropriate agency and arranges for the referral agency to provide their service for the client (for example by making an appointment on behalf of the client with that service). Referral may involve sharing client details to ensure the referral is as effective as possible. Referral is appropriate where you are unable to provide the appropriate service; for example where your company does not offer that service, has no expertise in that area or for clients lacking in confidence or who have additional needs or circumstances which are likely to prevent them following through and making contact with services independently. Signposting and referring clients There are a wide range of agencies offering different types of support and services to the public many of which are limited by client criteria or resource. It is important that each client has access to the available services which best suit their needs. It is therefore vital that advisers are able to signpost/refer clients to the most appropriate services available to them.

Researching other services Advisers can research the other services available to clients by using a variety of sources. Work place training Discussions with colleagues and sharing information within the workplace; notice boards or filing systems Press new projects are often reported in the local media; newspapers, newsletters, radio or Television Internet search options:

Community Legal Advice Directory contains details of free, legal advice centres including National Telephone Advice Organisation Useful links pages from relevant websites; National Debt Line, IMA, Advice Guide, Advisernet, Direct Gov etc

Phone Directories

Referral Networks In order to establish a sound referral network, organisations should establish ongoing exchanges of clear service information and referral protocols with other agencies. Not all services available will be suitable for making referrals to for example National Telephone Services and may be better to provide signposting information to clients instead. Making Referrals In order to make referrals advisers should: Be aware of which services, level of advocacy and support you can provide and which would be better provided by another adviser or service. Be able to identify where issues fall beyond the boundaries of the advisers agency or organisations service. For example where clients require representation at the County Court but where resources or the nature of the service does not allow such services to be provided. Provide information about alternative services that are available to the client and enable them to make an informed decision Explain the referral process to the client, including procedures for exchange of information/cost implications and check their understanding Within your own organisational procedures implement referral of clients to other services Agree any referral follow-up procedures with client

Likewise advisers need to be able to accept referrals from other agencies using the same method of matching clients needs against your own service provision and decide if the two match. Remember to evaluate the quality and effectiveness of these referrals on an ongoing basis to continue to provide the best service to clients. Allow continued monitoring of the service received from external services referred to

Ensure that communication with other companies and advisers is good enough to allow the new service or organisation to continue where the other adviser has finished, or to proceed with the relevant part of the case

What do we mean by Priority Debts? You should read through this section carefully, it is a large section and some will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Priority debts are those which must be dealt with first, because of the sanctions available to priority creditors in the event of non-payment. Generally speaking therefore, all other types of debt are non-priority. It should be remembered however that some clients will attach their own priority to a debt, for instance money owed to a relative may be prioritised by the client, this will have to be discussed and resolved with the client before any personal budget/financial statement can be produced. If the final sanction could result in eviction, disconnection, imprisonment or loss of essential goods, then that debt, will, in money advice terms, have priority and will need to be paid first to avoid that sanction. You will find below some examples of priority debts. By the side of each you will also find a note of the ultimate legal sanction associated with each debt. Priority Debts showing the ultimate sanction Mortgage Arrears Repossession - sanction = Eviction Secured Loan Arrears Repossession - sanction = Eviction Rent Arrears - sanction = Eviction Poll Tax / Council Tax Arrears* - sanction = Imprisonment Fine Default - sanction = Imprisonment Gas/Electricity Arrears - sanction = Disconnection Maintenance (Child Support) Arrears - sanction = Imprisonment Income Tax Arrears Imprisonment - sanction = Bankruptcy VAT Arrears Distraint - sanction = Bankruptcy Hire Purchase Arrears - sanction = Repossession Telephone Arrears** - sanction = Disconnection * In Northern Ireland Council tax is replaced with Rates, for Rates Arrears sanction = bankruptcy ** where the service is essentail to the client e.g.they are disabled and need a landline for emergencies

Mortgages and Secured loans

Mortgages and Secured loans First of all, this is the general recovery procedure for mortgages and secured loan debts. A Reminder Letter is sent by the creditor A Contact Letter is sent to the client A Solicitors letter or a Default Notice (if it is a CCA 1974 Loan) is sent to the client A Possession Summons and a Notice to Occupiers is sent to the client A Possession Hearing in the County Court is scheduled* A Possession Order (28 days) is made by the District Judge in the County Court** A Warrant of Possession is issued by the Court Eviction occurs

* In Northern Ireland the hearing is scheduled in the Chancery Division of the High Court. ** In Northern Ireland a Possession Order (28 days) is made by the Chancery Master in the High Court. It is very useful to understand the Pre-action protocol. These are the basic types of mortgage (they are considered again in the next part). Capital Repayment - The borrower repays the capital and the interest at the same time. In the early stage of the mortgage the monthly instalment consists mostly of interest. This gradually reduces over the term of the mortgage until the instalment represents mostly capital repayment. In addition the borrower will also pay a mortgage protection life policy which basically pays off the loan if the borrower dies. Endowment - The borrower repays interest only and in addition takes out an endowment policy which pays back the capital at the end of the term of the mortgage or on the death of the borrower whichever comes first. The monthly instalment consists of interest only paid to the lender. The endowment life assurance premium is paid to an insurance company. Sometimes these payments are paid to the same company, sometimes two separate companies. Secured Loans - (Consumer Credit Act 1974) Loans under 15,000 - (25,000 from 1st May 1998 ) taken out for purposes other than the purchase of a property, e.g. pay off debts, buy a car, home improvements etc. are regulated by the Consumer Credit Act 1974. These loans are repaid on a capital repayment basis. Low Start deferred Interest - Reduced interest is charged in the initial years of the mortgage Fixed Rate Mortgage - The interest is fixed for a term, this can be beneficial in times of rising interest rates Tracker Mortgage - These mortgages follow [usually] the Bank of England base rate, sometimes it is another rate that they follow. The adviser should always check the following:

Mortgage Payment Protection Policy -The borrower may have taken out some insurance against illness or unemployment. It is worth checking as there might be cover for a limited period Support for Mortgage Interest Payments from DWP -The borrower may not be in receipt of the correct amount and backdating may be possible. Mortgage Rescue Schemes - Some lenders may still offer such a scheme, although they are very rare now. Mortgage to rent scheme (Scotland) - Introduced by the Scottish Executive. Eligible homeowners have the option of selling their home to a social landlord. This scheme is administered by the Scottish Government. The Shelter Scotland website will you give you more details about the scheme. Possible payment arrangements and options for dealing with mortgage arrears This chart produced by the National Debtline / Money Advice Trust illustrates options when there is not enough money to pay the mortgage and is a good place to start as it provides a concise overview. See the next section on mortgages. The type of payment arrangement available will often depend upon the level of the arrears, the reasons for the arrears, the conduct of the account, the stage of recovery, the amount of equity and, crucially, the financial circumstances of borrowers and their ability to pay. Most lenders will want the arrears to be cleared within a couple of years. This is often not possible due to the client's circumstances. The lender may agree to capitalise (add them to the outstanding balance) the arrears if there is sufficient equity, the positive difference between the value of the property and the amount of loans secured upon it, and/or extend the term of the mortgage. The lender may agree to change the mortgage from an endowment to a capital repayment type. The endowment can be cashed in or sold to reduce the arrears. A client who is considering this should seek independent financial advice. If the borrower is on a low income the lender may accept interest only payments, or even a temporary reduction or suspension of payments, if the circumstances of borrower are likely to improve in the near future. Borrowers on Income Support/Income related Employment and Support Allowance/Income based Jobseekers Allowance, or Pension credit. Borrowers on these benefits are entitled to help from DWP with the payment of the interest on mortgages to buy their homes and interest on some loans for repairs and home improvements. Help with eligible loans is known as 'help with housing costs'.

You will note that it is only the interest that is paid, this will still leave the borrower responsible for the payments towards the capital element or the endowment element. The amount of assistance that they receive from DWP will depend on when the loan was taken out and the circumstances of the borrower. The legislation divides borrowers into 'existing' loans and 'new' loans. Existing Loans are those taken out before 2.10.95, in this case; the borrower will receive no help with the interest for the first 8 weeks, they will be entitled to half interest for next 13 weeks, and to full interest thereafter. New Loans are those taken out on or after 2.10.95 [up to 200,000] , in this case; the borrower will receive full interest after 13 weeks Exceptions There are some exceptions to the above: - If the claimant or his/her partner is aged 60 or over, they will receive full interest assistance immediately. The following claimants will be treated as having an existing loan, irrespective of when they took out the loan: - lone parents who claim because their partners have left or died, - carers of sick or disabled people - those in prison awaiting trial or sentence, - those refused payments under a mortgage protection policy due to a pre-existing medical condition or because they are HIV+. Linking Periods - Some borrowers can get help with their housing costs from an earlier date, if their claims can be linked or pre-dated, depending upon their type of income and circumstances. Standard Interest Rate - All eligible loan interest is worked out using a standard rate of interest. This rate changes from time to time and should therefore always be verified. Monthly Shortfall - There will usually be a negative shortfall between the borrowers normal monthly instalment and the amount paid by the Benefits Agency. Most lenders will insist upon the shortfall plus an amount for the arrears being paid by the borrower. Whether or not the borrower can pay will depend upon the amount of the shortfall and their income and circumstances. Other options for dealing with arrears Handing back the keys This might be considered as an option. Where the client simply hands back the keys to the house to the lender. The client must remember that they will still be liable for the mortgage payments even after the keys have been handed back and that if the instalments are not paid then they will

be simply added to the outstanding balance. It is only when the house is sold that instalments will stop. Selling the home Again this is a bold move and not one to be considered lightly. Clients should be encouraged to consider perhaps 'trading down' buying a smaller home. Clients will need to be aware that they may fall foul of their local authority if they are approached for re-housing as they may be considered to have made themselves 'intentionally homeless' and thereby refuse to offer them a place. One aspect of this which should be considered is that of mortgage indemnity. When the client first entered into the mortgage they may have paid a one off fee to the lender for such mortgage indemnity. If the house is repossessed and the lender fails to recover enough to clear the total debts then they will claim on this policy to make good the difference. The difficulty here is that the insurance company may ask the client to pay them what they have had to pay to the lender. Secured Loans and Time orders With some secured loans it is possible to apply to the court for something called a 'time order'. This gives the court the power to reduce the monthly payments, extend the term of the loan, and change the interest rate. They are however quite rare. A court can make a time order if: - the amount originally borrowed was less than 15,000. On agreements taken out after 01/05/98 the limit is 25,000, this financial limit was removed on agreements taken out after the 6th of April 2008 and - the lender has 'called in' the loan (sent a default notice) Possession Action [see pre-action protocols above] If the client and/or the adviser are unable to come to an agreement with regard to payment then it is likely that court action will commence. The lender will send out initially a 'Default Notice (if regulated by CCA74) a claim form (N5) and the Particulars of claim (N120). If the lender takes possession proceedings the court can suspend possession if the arrears can be cleared within a 'reasonable period'. The 'reasonable period' can vary from as little as, a couple of years, to as long as, the remaining term of the mortgage (Cheltenham & Gloucester Building Society v Norgan (1995) 28 HLR 443, CA. In Northern Ireland, the decision of Norgan has not been followed by the courts. However: In the case of National & Provincila BS V Lynd, Girvan J stated that the court must have before it the best realistic proposal to clear the mortgage debt or arrears in Instalments. In N.I. there should be no assumptions to what constitutes a reasonable period: it depends on all the circumstances of the case. It would be wrong to assume at the outset that the court will not consider a period longer than a number of years or the term of the mortgage Also it is not necessary for the borrower to commit all surplus income to the proposal In Northern Bank V McTaggart (2000) the available surplus income was 165 per month and the court suspended the possession order on the grounds the borrower paid 75 per month towards the arrears , in addition to the normal monthly contractual payment. It would appear therefore

that a proposal to pay of the arrears based on 40-70% of the surplus income could be accepted by the Master If the lender obtains a possession order or the borrower is threatened with eviction they can apply on a Form N244 to suspend the possession order/warrant of possession. A fee is currently payable, however, clients in receipt of Income Support, irESA, or IBJSA, and some of those in receipt of Tax Credits, are entitled to exemption from the fee. The District Judge will also take into account such points as: - the extent of the arrears - the reason for getting into the arrears Scotland differs - due to the Mortgage Rights (Scotland) Act 2001 The client might be sent: - a 'calling up notice' and if the total arrears are not cleared within two months then the total sum owed becomes due, whereupon the lender will issue an 'initial writ' - a 'default notice' issued at any point after a missed instalment and it gives the borrower one month to clear the arrears. - an application under section 24 of the Conveyancing and Feudal Reform (Scotland) Act 1974. In this case the borrower has until the end of court proceedings to apply for a suspension order. If an initial writ is served then the borrower has 21 days to respond by lodging a 'notice of intention to defend' referred to as a NID. Borrowers should always seek advice about lodging a NID as there is a fee payable. The borrower can then apply (using the summary application or minute procedure, whichever is applicable) for a suspension order which if agreed will suspend the enforcement rights and prevent repossession. If the court feels its 'reasonable in all the circumstances' it will make such an order. When making this reasonableness decision, the Sheriff takes into account the same reasons as above. Section 2(1) of the Mortgage Rights (Scotland) Act 2001 (in force from 3 December 2001) enables the court to suspend the rights of creditors in mortgage possession proceedings to such extent, for such period, and subject to such conditions, as the court thinks fit. Section 2(2) of the Act provides that the court can only make an order of suspension, where it considers it reasonable in all the circumstances to do so, having regard to: (a) the nature of and reasons for the default, (b) the applicants ability to fulfil within a reasonable period the obligations under the standard security in respect of which the debtor is in default, (c) any action taken by the creditor to assist the debtor to fulfil those obligations, and (d) the ability of the applicant and any other person residing at the security subjects to secure reasonable alternative accommodation.

The position in English law on this subject is not identical, however, similarities can be made - in particular, both Scotland and England make provision for a reasonableness test. Section 36 of the Administration of Justice Act 1970 and section 8 of the Administration of Justice Act 1973 enable the English courts to adjourn, stay, suspend or postpone the date for repossession if it is likely that mortgage arrears can be repaid within a reasonable period. Until case law is established in Scotland, it may be that practitioners will find assistance from decisions of the English courts; such case law being of persuasive authority in Scotland on comparative statutory provisions. English housing case summaries can be found in Nic Madges Housing Law Casebook (published by the Legal Action Group, 2nd edn 1998). What if repossession is granted? If a suspension is not applied for, is rejected or is broken once made, then the court can apply for a 'warrant of possession' also known as a warrant of eviction. The client can make an application to suspend the warrant and postpone the date of eviction. In Scotland it is only possible to apply to the lender for more time to find suitable accommodation. Typically this will allow a further 14-28 days. For those interested in the situation regarding mortgage problems in Scotland you might like to read this Report by Scottish Executive

Rent Arrears
Please note: the law in Northern Ireland and Scotland varies in some aspects from the law in England and Wales.. For debts relating to rent arrears it is vital to check the clients tenancy before advising the client because it will affect the kind of action the landlord can take and the kind of rights and protection the tenant has. For some tenants water is paid as part of the rent and in these cases they could be evicted for non-payment of water arrears. In these circumstances a water debt must be treated as a priority debt. N. Ireland: Currently there are no water charges for domestic premises

A) Social Tenancies
Housing Associations Also known as Registered Providers of Social Housing (previously Registered Social Landlords), they make up a large proportion of the social rented housing market. Housing Associations do not make a profit but return any surpluses back into the provision for improvement of housing. If a client is renting from a Housing Association they are likely to have an assured, assured shorthold or 'starter tenancy' (older tenants may have a secure tenancy). To check out these types of tenancies see Housing Association Tenancies. Housing Associations also have various schemes where tenants can purchase their home or apply for joint ownership. Council / Local Authority Tenancies

Most Councils give new tenants introductory tenancies for their first year. Tenants are basically renting on a trial basis and do not have much protection from eviction. After the first year the tenancy is likely to change to a Secure Tenancy which has much more protection. For more information about this see Council Tenancies. Remember for council tenants, Housing Benefit overpayments cannot be treated as rent arrears and should be kept on a separate account. It is not possible to be evicted therefore for a housing benefit overpayment. Northern Ireland Housing Executive The NIHE are the largest provider of social housing in Northern Ireland. The NIHE was set up under the Housing Executive Act (NI) 1971. It has 2 types of tenancy: Secure Tenancies: Anyone allocated a tenancy prior to April 2004 is a secure tenant and cannot be evicted without a court order. Introductory Tenancies: Since April 2004 all new tenancies with NIHE have been introductory. This tenancy scheme was introduced following the implementation of Article 6 of the Housing (NI) order 2003. Introductory tenants are not afforded the same rights as secure tenants for the first year of their tenancy. Once 12 months are up tenancy becomes secure.

B) Private Tenancies
Private tenants usually have assured shorthold tenancies but this will depend on when the tenancy started and what sort of accommodation the client is in. These types of tenancy do not offer much protection for the tenant. If the client is renting a property from a private landlord the tenancy can be checked using the Tenancy Checker on Shelter's website (see Resources below).

Types of tenancy
1. Rent Act (Protected) Tenancies Created by the Rent Act 1977, these are usually characterised by very low rents. They have largely been replaced with assured or assured shorthold tenancies. Specialist housing advice should be sought when advising on possession of this type of tenancy. The tenancy may also have a value, which is a consideration in bankruptcy, as it may vest in the trustee. Protected tenancies in N. Ireland are subject to provisions of Rent (NI) order 1978 as amended by the Private Tenancies (NI) order 2006. They mainly cover properties built or converted before 1956, having a rateable value or Net Annual Value (NAV) of 140 or less. They can be split into 2 categories Restricted: Usually small dwellings with NAV below 60 in October 1978. The max rent recoverable is limited to the amount of rent charged in 1978 around 1 per week. Regulated: These are usually a better standard of property and have NAV of between 60 and 140. A restricted rent certificate must not have been issued. If the rent is registered then it can be higher than restricted tenancy. 2. Secure Tenancies Only a Local Authority can create a secure tenancy, in many cases this will be after the tenant has successfully completed the introductory period of 12 months. After the initial 12 month

period, housing officers will decide whether to allow the tenant to proceed to a secure tenancy. If the tenant does not agree to the decision he or she should write to the local authority within 14 days of the original decision to ask for a review. After this, the only way to have the decision looked at again is by a Judicial Review, which will require a referral to a solicitor. If the landlord takes possession action in relation to a secure tenancy, the court has discretion to decide whether it is reasonable to make a possession order, and a representative can often provide good reasons to a judge to demonstrate that it is not reasonable to make an order. The reasons may include the circumstances of the tenant and family (children, disabilities etc) and the reasons for the arrears (problems claiming housing benefit, fluctuating income etc). Another reason may be that the landlord has not complied with the pre-action protocol for rent arrears. 3. Assured Tenancies These will often be offered by Housing Associations and in some cases private landlords. Local Authorities do not offer this type of tenancy. If the tenant has been in the property since before 28 Feb 1997 the tenancy will be an assured tenancy unless there is an assured shorthold tenancy agreement in writing in the form of a s20 notice served before the commencement of the tenancy. Many Housing Associations operate an introductory scheme similar to Local Authorities, but as they are unable to offer introductory tenancies this is done by offering the tenancy an assured shorthold tenancy for a period (usually 12 months). The tenant should then be offered a fully assured tenancy. If the landlord wants to take possession of an assured tenancy, a number of options are available. The notice must state the ground for possession. For rent arrears, the grounds available are as follows: Ground 8 This is a mandatory ground. If the tenant owes more than 8 weeks (if paid weekly) or 2 months (if paid monthly) on the date that the notice is served AND on the day of the hearing. If the ground is made out, the judge must make an order for possession. Any defence to the claim (such as a counter-claim for disrepair) should be filed before the hearing. In some cases, the judge may be willing to make a short adjournment to allow a defence and counterclaim to be filed. The only other defences tend to be technical ones based on a defective notice or particulars of claim. The paperwork should always be checked in a mandatory grounds claim as it may be the only way to keep the tenant in the property. Ground 10 This is the general rent arrears ground, and is basically the same as a claim for possession of a secure tenancy based on rent arrears. It is a discretionary ground, so the judge can decide whether it is reasonable to make a possession order. Ground 11 Persistent delay in paying rent. If the arrears are paid off at the time of the hearing there is a risk that the judge will make a possession order on this ground, although it is discretionary. A landlord can use all three of these grounds in the notice, but must decide which ground to proceed on at the hearing. 4. Assured Shorthold Tenancies

All private tenancies created after 28 Feb 1997 are assured shorthold unless there is a written agreement to the contrary. They are similar to assured tenancies, the main difference being that the landlord can use the accelerated procedure to evict the tenant after the initial 6 month period. The landlord can serve a s21 notice giving 2 months notice to expire on the last day of the period of the tenancy. After this, if the notice is valid, they can apply for a possession order without pleading any grounds for possession. The landlord can only obtain a possession order if the landlord has complied with the statutory tenancy deposit scheme. It is very important to check the paperwork if the landlord issues a s21 claim. Specialist housing advice should be sought if there is any doubt about the validity of the s21 notice. If the landlord cannot use the accelerated procedure for some reason, e.g. because the tenancy deposit has not been protected or the tenancy is still within its initial fixed period, the landlord can issue a claim on grounds - the grounds are the same as for an assured tenancy. Useful resources Visit the Shelter website for much more information about Housing Shelter website. Go to the Downloads and Tools section where you will find a variety of useful tools
Tenancy Checker for checking the type of a tenancy your client has Emergency housing rights checker Eviction Checker Deposit Checker A to Z of Housing jargon Variety of checklists and leaflets about Assessing rental properties Accessibility Checklist for disabled tenants Moving to a new home Preparing to leave home Moving in together Applying for benefits Homeless Applications

Housing Benefit and Local Housing Allowance See section 1.1.2 Income maximisation for information on these benefits. Recovery of Rent This is the general recovery procedure for rent arrears. A number of reminder letters will be sent to the client A contact letter will be sent to the client A Notice of Seeking Possession (NSP) or in Scotland a Notice of Proceedings for the recovery of possession (Council Tenant) / Notice to Quit (Private Tenant) will be sent to the client A Possession Claim will be issued by the Court

 A Possession Hearing in the Court will be arranged 4-8 weeks after the date of issue of the claim A Possession Order (28 days) will be made A Warrant of Possession will be issued if the above order has not been kept Eviction will be arranged Pre - action Protocol for Possession Claims based on rent arrears Possible payment arrangements Most social landlords will usually accept the benefit direct deduction per week for arrears, if the tenant is on a low income. Income Support/irESA/IBJSA and PC claimants can usuall y have the amount deducted from their benefit and paid direct to the landlord. A claim for backdated housing benefit can reduce or clear arrears. Assured tenants may have to clear arrears very quickly because if at the time of the hearing, they are 8 weeks or more in arrears, then this is a mandatory ground for repossession. County Court Action [see pre-action protocols above] If the landlord takes possession proceedings, the court can upon the request of the tenant make a variety of decisions. a) Suspend possession if the arrears can be cleared by an amount that the tenant can afford, e.g. the benefit direct deduction (In Scotland this may be referred to as 'continuing the case' or a continuation.) b) Adjourn to give the tenant more time to provide more information, c) They may 'Sist' the case in Scotland - this means to put the case on hold to allow payment or to allow a legal aid submission. d) Grant outright possession e) Dismiss the landlords action f) Fix a date for a full hearing if the client has a defence to the claim, (fixing a date for trial can happen in England and Wales as well as Scotland) In England and Wales - If the landlord obtains a possession order and the tenant is threatened with eviction s/he can apply on Form N244 to suspend the possession order/warrant of possession. A fee is payable, but clients in receipt of Income Support /irESA/ IBJSA/PC and some in receipt of Tax Credits, are entitled to exemption. Others may apply for exemption on the grounds of low income. In both cases an application for exemption must be made on form Ex 160 and should be taken to the court at the same time as the N244. In Scotland - if the client has not kept to the payments and the case has been 'continued' or 'sisted' then the landlord might subsequently apply for a warrant of ejection. This gives the date and the time of the eviction. It may be possible to stop this, but it depends upon what action has been previously taken.

If a possession order was made on mandatory grounds, the tenant can only apply for a short stay of execution. The judge can only give the tenant 42 days from the making of the original possession order - so if the original order was for possession in 14 days, the warrant is issued and application to suspend made after a further 7 days, the judge can then only stay the warrant for a maximum of 21 days. The tenant will have to demonstrate hardship in order to obtain a stay.

Council Tax
Please note: in Northern Ireland this is known as Rates, and, for Local Authority, you should read Land and Property Services (LPS). The Enforcement of Judgements Office (EJO) carries out the function of bailiffs. Imprisonment is not used. Outline of the recovery procedure for council tax [rates] arrears. A Council Tax [NI: Rates] Bill is issued and sent to the client A Red Reminder is sent to the client A Final Notice is sent to the client A Magistrates Court Summons is issued and sent to the client A Hearing is arranged in the Magistrates Court A Liability Order states that the client is liable for the outstanding Council Tax [NI: Rates] and will be usually be issued by the Local Authority [LPS] Enforcement will include consideration of such things as deductions from IS /irESA/IBJSA/PC /Attachment of Earnings /or the use of bailiffs [NI: the Enforcement of Judgments Office (EJO)] Where Council Tax [NI: Rates] remains unpaid, the process continues as follows: A Committal Summons/Warrant will be issued [NI: a summons to court - imprisonment is not an option] A Hearing will be arranged known as a means enquiry hearing; heard in the Magistrates Court to consider the clients financial means Imprisonment [not in NI] may be considered where wilful refusal or culpable neglect is found, which can be suspended upon certain repayment terms, or part or all of the debt can be written off (remittance) Northern Ireland only: If the client pays by monthly instalments and misses a payment, LPS will issue a reminder for the amount due. If this is paid within seven days, the instalment payment option remains in place. If the client cannot pay the arrears within seven days, you can help the client to make different payment arrangements. If there is no contact with the LPS or payment of arrears a final notice for payment will be issued 40 days after the original bill was issued. These are the possible payment arrangements 1. The taxpayer can pay the bill by 10 monthly instalments usually commencing in April. 2. The local authority finance department [LPS in NI] will usually want the outstanding bill cleared by the end of the financial year.

3. If the client is on Income Support/irESA/IBJSA/PC they can pay an amount equivalent to the IS direct deduction rate per week for arrears only (in addition to any current ongoing liability). 4. If the client is on a low income they can pay a weekly amount for the ongoing charges, plus an amount to clear the debt in perhaps 12-24 months. 5. If the client has a number of accounts outstanding, they should be able to pay them off one at a time, while the finance department holds action on the other accounts. Magistrates Court Action Northern Ireland only: If the client still has not paid or made contact they will receive a Process in Debt Proceedings to attend court. At this point the client can still pay the full amount and any extra costs before the court date, LPS will not take any further action. If the client does not pay the full amount plus costs, the case will go to the Magistrate's Court on the day stated. The client will receive a summons to appear at the Magistrates Court for unpaid council tax [rates]. If the taxpayer has no defence, i.e. owes the council tax [rates], then they do not need to attend the court; the court will make a liability order, which allows the finance section of the local authority [LPS] to enforce payment by means of deductions from benefits, attachment of earnings or pass to bailiffs [EJO, The Enforcement of Judgements Office]. At this stage the client can still negotiate one of the above payment arrangements. In Northern Ireland - The court will usually award a decree and unless the client attended court they would receive this 2-3 weeks after the hearing. When the decree has been issued, the client can still contact LPS to make an arrangement to pay the outstanding amount otherwise one of the following is likely to result. Deductions from Benefit If the client is on Income Support /irESA/ IBJSA/PC, a weekly amount can be deducted from their benefit and paid directly to the authority [LPS]. If the client is on contributory JSA, the amount deducted could be one-third of their benefit. Attachment of Earnings If the client is in employment, then the local authority [LPS] can arrange for the employer to deduct an amount from their earnings. The amount is set by legislation and is deducted as a percentage of net earnings.

Further Enforcement
Northern Ireland only If client fails to make any arrangement with LPS then they can request the court to refer to the Enforcement of Judgements Office who will summon the client to a hearing of their 'means' and place a judgement of attachment of earnings, or charge on land. If the client does not clear the outstanding amount or make an arrangement to pay, the LPS will ask the Enforcement of Judgements Office to issue a Notice of Intention on its behalf. If the client does not pay the outstanding balance with additional costs within ten days, LPS will lodge the debt for enforcement with the Enforcement of Judgements Office. Lodgement of the debt with the Enforcement of Judgements Office could result in the following:

The clients name appearing in Stubb's Gazette, which may affect their credit rating Costs depending on the amount outstanding will be added Attachment of Earning Order - where regular payments will be deducted from the clients salary / wages Order Charging Land - the debt will be recovered if the property is sold Attachment of Debt Order (also known as a Garnishee Order) - which can be served on a bank or building society to make it pay out money from the clients account to clear the debt Seizure Order - which enables the Enforcement of Judgements Office to seize personal property and / or valuables to cover all or part of the debt Statutory Demand - if the debt exceeds 750, the Enforcement of Judgements Office can issue a Statutory Demand. If the client does not comply with this, LPS will initiate bankruptcy proceedings which will add additional substantial costs

The rest of this item concerns England and Wales only

Bailiffs If the finance department has no contact from a client or s/he defaults on a payment arrangement, then the debt can be passed to a firm of private bailiffs for collection. The bailiffs will usually want the debt to be cleared within 13 weeks, although this does fluctuate. If there are special circumstances the debt can be cleared over a longer period with the permission of the finance department. If the client is on Income Support/irESA/IBJSA/PC the debt must be returned to the finance department for collection. If there are special circumstances such as disability, old age, mental health problems, etc the debt can be returned to the finance department. This is often a local arrangement and therefore you should verify the circumstances with your own local authority. Bailiffs powers of entry The bailiff cannot force entry. However, if they do enter peaceably, the bailiff will usually make a payment arrangement subject to a 'walking possession' agreement, this allows the bailiff to return and force entry and seize goods if the client defaults on the payment. Seizure of goods The bailiff can only take certain goods, e.g. those which belong to the taxpayer. The bailiff cannot take fixtures and fittings, goods which are rented or on hire-purchase, or which are owned by another person. The client's tools of employment and normal domestic goods cannot be seized by the bailiff. This is often a difficult area as bailiffs may take goods and it is the responsibility of the client to verify ownership. Complaints If the client is aggrieved by the way a bailiff has seized or tried to seize goods, complaint can be made to the Magistrates' Court. Legal advice will be necessary in order to do this. For more detailed information see the Bailiffs section in part 1.2. Committal proceedings

If the Bailiffs cannot enforce payment then the client may receive a committal summons to appear at the Magistrates' court for a means enquiry. If the client does not attend, a warrant for his/her arrest may be issued. If the magistrates finds that non-payment is due to 'wilful refusal' or 'culpable neglect' during the 'relevant period' they will usually make a suspended committal order. The relevant period' for council tax is the period from the date of the first instalment to the date of the committal hearing. For non-domestic rates the relevant period is from the date of the first instalment to the date of the liability order. The magistrates must conduct a means enquiry to asses whether the client is guilty of 'wilful refusal' or 'culpable neglect' and asses ability to pay. Where 'wilful refusal' or 'culpable neglect' is found, the suspended order will usually be suspended on payment of the debt by instalments. The court cannot make an order unless it finds the client guilty. If it does not do so it is up to local authority to agree a payment arrangement or take further enforcement action, e.g. attachment of earnings. The client cannot, however, be taken back to court. Whether or not the court finds the client guilty of wilful refusal or culpable neglect it has the power to remit all or part of the debt.

Plug the Debt Campaign

To support your understanding of the range of options and assistance available to clients who get into arrears with fuel bills we recommend that you visit the Plug the Debt Campaign pages of the Consumer Focus website. Launched by Consumer Focus and Citizens Advice following the UK Energy Summit in October 2011, the campaign aims to raise consumers awareness of what to do and what their rights are when they fall behind on their energy bills. The pages contain useful advice for clients about where to get help if they fall behind with their energy bills and quick links to a number of resources for advisers.

Magistrates Court Fines

Currently, this is the recovery procedure for fines (financial penalties). ~ A Magistrates Court Summons will be issued ~ A Hearing will be arranged ~ A Notice of Fine will be issued ~ A Final Notice will be sent ~ Bailiffs may become involved ~ A Committal Summons/Warrant will be issued ~ A Hearing (known as a means enquiry) will be arranged ~ Imprisonment may occur Magistrates have the following standard powers and you should be able to expand the following by reference to the Debt Advice Handbook.

a) Distress warrants b) Summons/arrest warrant c) Remission d) Searching e) Money Payments Supervision Orders f) Attachment of Earnings Order g) Deduction from benefits h) Transfer to the High Court i) One day's detention j) Attendance Centre Order (if aged 18-21) k) Committal to prison (if aged over 21) Possible payment arrangements The court will issue a summons together with a reply form. If the defendant pleads guilty s/he may not have to attend a hearing. In these cases the client can fill in the Reply Form with details of mitigating circumstances and make an offer of payment. The court will conduct a Means Enquiry to take into account the defendants ability to pay before it sets the level of the fine and the rate of repayment. If the defendant cannot pay or defaults s/he can write to the court explaining his/her circumstances and the reasons for any default together with a Personal Budget and an offer of payment. Where appropriate, an application to vary the rate of payment or for remission of the fine can be made at any time. When Bailiffs may become involved If the defendant cannot pay or defaults on an arrangement, the fine will be passed to a firm of private bailiffs for collection. The bailiff will want payment in full within 28 days. Bailiffs will not accept payment by instalments and the court will not accept any payments while the matter is with the bailiffs. If there are special circumstances such as physical disability, mental health problems, old age etc. it may be possible to negotiate the return of the fine to the court for collection. If the bailiff cannot gain entry or seize goods and the defendant does not pay the fine it will be passed back to the court for collection. Where this happens the client will not be liable for the bailiffs costs. Committal Proceedings If the bailiff cannot collect the fine the defendant will be subject to committal proceedings. The defendant will receive a Summons to appear before an arrest warrant may be issued. The magistrates will usually order payment by instalments based upon the defendant's ability to pay. The payment arrangement may be subject to a suspended prison sentence. If the magistrates find that non-payment is due to wilful refusal or culpable neglect, and they have considered all other options, they can order an immediate committal or a suspended committal on payment terms.

The magistrates can remit all or part of the fine if there has been a change of circumstances since the fine was set. Where defendants are on Income Support /irESA/ IBJSA/PC the court can order deductions of a certain amount from their benefits If the defendant is working the court can make an Attachment of Earnings Order. The court may also consider allowing the defendant to discharge the fine through an Unpaid Work Order where the defendant meets the criteria for this and agrees. You may find National Debtline's Magistrates' Court Fines Factsheet (Fact sheet 13) particularly helpful resource to use with clients. In Scotland - An overview of the Court Fine process. In Scotland when the Court imposes a fine, it may order the defendant to pay by instalments; the first instalment to be paid in 7 or more days. The Court may, however, ask the defendant to pay the fine by a one off lump sum, payable in 7 or more days. If the defendant has been ordered to pay the fine in a lump sum, but would find it easier to pay by instalments, they should write to the court giving the reasons. Any papers which show the financial circumstances should be enclosed. The Court will usually agree to allow instalments unless they think the defendant can afford to pay a lump sum. Compensation Orders If someone else has been affected by the offence, e.g. the defendant has damaged their property, then the Court may order the defendant to pay them money. This is called a Compensation Order and is collected by the Clerk of Court who then pays it to the person. This is in addition to the fine. The fine and the Compensation Order are added together to consider how much the defendant should pay in each instalment. Varying the Instalments If the defendant is already paying by instalments they can write to the Court asking to have these varied, e.g. smaller amounts over more time. Failure to pay If the defendant does not apply for more time to pay and fails to pay either a lump sum fine or an instalment, the Clerk of Court may send a reminder, usually after 7 days. The Clerk of Court can issue a warrant for imprisonment or for the defendant to be taken back to Court as soon as they fall behind with payments. Whether you are to be sent to prison or taken back to Court depends on what was said at the Court Hearing when the fine was imposed. If the Court ordered imprisonment on non-payment, then a warrant for imprisonment may be issued without you having to go back to Court. The police will be able to arrest and unless the defendant pays the whole fine immediately they will be imprisoned. If the Court did not order imprisonment on non-payment when it set the fine the defendant had to pay, it still may do so if the defendant falls behind with payments. Before ordering imprisonment on non-payment, it will arrange a Court Hearing called a Means Inquiry to find out why the fine has not been paid. The Clerk of Court will send a letter informing the defendant when the Means Inquiry is taking place and that they must attend.

The Clerk could also issue a warrant for arrest so that the police would bring the defendant to Court. If the defendant does not attend a Means Inquiry, it is very likely that a warrant for their arrest will be issued. They may be arrested and detained until a second Means Inquiry is arranged. At this second Means Inquiry, the defendant will have to explain why they did not attend the first time. If the Court accepts the reasons for not making the payments, it will probably grant more time to pay and may also arrange for the defendant to be supervised by a social worker. If the Court does not accept the explanation, it may order a warrant for imprisonment. The length of prison sentence will depend on the amount of the fine that remains unpaid. If the defendant does serve a prison sentence; they will not have to pay the rest of the fine, if, however they have to pay a Compensation Order, this cannot be cancelled by a prison sentence and therefore they will still have to be paid. Supervised Attendance Orders The Court can also decide to impose a supervised attendance order as an alternative to prison, if the defendant has fallen behind with paying the fine. This involves attending a course run by the Social Work Department and can also involve some unpaid work. If the defendant fails to attend the classes or fails to do the work then the defendant can be taken back to Court and sent to prison for up to 60 days for a district court case and up to 3 months for a sheriff court case. Other Powers of the Court The Court can also order the fine to be recovered by Civil Diligence. This involves the Court ordering that certain possessions belonging to the defendant, such as a television or video, are seized and sold to pay off the fine, or that the fine is deducted from the defendants wages or bank account. From February 2011 an order for unpaid work can also be made allowing the defendant to discharge the debt by unpaid work.

Hire Purchase, Credit Sale and Conditional Sale Agreements

It is important that the adviser checks what type of agreement the client has in order to establish the sanctions available to the creditor and how to deal with the debt. CCA Regulation: All of the agreements in this section are regulated by the Consumer Credit Act 1974 providing that where the agreement is made before April 2008 the credit is for less than 25,000 or below 15,000 if made before May 1998. Unless the agreement is exempt and the agreement was made after 6th April 2008 the agreement is regulated regardless of the amount. Hire Purchase Agreements

These agreements were previously most commonly seen in relation to motor cars but more recently household white goods, furniture and even carpets can be subject to Hire purchase. With Hire Purchase (HP) the goods belong to the seller until the final payment under the agreement. Therefore the client must not sell the goods during the period of the agreement without the approval of the seller. The client agrees to hire the goods for an agreed period of time. At the end of that time they have the option to purchase the goods, for a fixed amount. You will almost exclusively find this type of agreement associated with the purchase of cars. The contract exists between the client and the hirer of the goods (the finance company) as opposed to the supplier who may be for example be a garage. So if something goes wrong with the goods it is the hirer or finance company that is responsible for compensating for faulty goods. Conditional Sale Agreements A Conditional Sale Agreement is a sale made on credit subject to conditions that give the client possession of the goods during the re-payment period; but they do not own the goods until the last payment is made. These are very similar to Hire Purchase Agreements for example the contract is between the client and the hirer as above. These two types of agreement are treated the same for the purposes of the Consumer Credit Act. Ending a Hire Purchase Agreement The creditor can terminate the agreement The creditor can terminate the agreement where the client has not paid as required. The creditor will follow the steps according to the CCA including the issue of a Default Notice. The expiry of the Default Notice usually indicates the termination of the agreement by the creditor. The hirer can repossess the goods but will need a court order to do so, unless the client gives permission for repossession to take place or less than a third of the total purchase price has been paid and the goods are on public land. The client can surrender the goods Although the client should not sell the goods without the hirers permission; they can choose to surrender or return the goods during the period of hire. You and the client must not confuse surrendering the goods with terminating the agreement. The client can terminate the agreement If it is the clients intention to end the agreement then they should make this clear. Their right to terminate an agreement is contained in s99 Consumer Credit Act 1974. This limits the liability to half the total amount payable under the agreement less payments made by them plus any arrears. This calculation is contained in s100 of the Act. The client should give notice in writing to the creditor of their intention to terminate, and in practice it is better to send the letter by recorded post to avoid disputes. The client must exercise the right to terminate before the creditor. It is probably wise to avoid discussing termination over the telephone with the creditor, as this gives them the opportunity to send a Default Notice and/or terminate the agreement before the client can give notice in writing. Often, the expiration of a Default Notice will automatically end their right to terminate.

Agreements for insurance products taken out at the same time as the HP may not be covered by the calculation in s100. Payment protection insurance and GAP insurance are often contained in a separate part of the agreement which s99 does not cover. The total outstanding insurance balance should be treated as a non priority debt. Advisers may wish to investigate whether the insurance was appropriate for the client and assist them with reclaiming payments and/or making a complaint to the Financial Ombudsman Service where appropriate. Upon termination, the client should make arrangements to return the goods and treat any remaining balance as a non priority debt. Attempts to prevent the client from exercising a voluntary termination by the creditor can be reported to the Financial Ombudsman Service. If the client exercises his/her rights to terminate the agreement, the value of the goods will not be deducted from the outstanding balance. If the client agrees to surrender the goods, or the creditor terminates the agreement, the sale price of the goods will be deducted from the outstanding balance under the agreement. In the majority of cases it is better for the client to terminate voluntarily, but in some cases the value of the goods means that a surrender of the goods may be more appropriate. The adviser should discuss the options with their client and help them to look at the financial implications of both options. Working out what is left to pay: If the creditor terminates the agreement, repossesses the goods or if the client voluntarily surrenders the goods then the client is liable for the outstanding balance due under the agreement, less the sale of the goods. If the client terminates the agreement then the liability is limited to half the total amount payable under the agreement, less payments made by them, plus any arrears. Credit Sale Agreements Credit Sale Agreements are fundamentally different to Hire Purchase or Conditional Sale agreements as the goods which are purchased by Credit Sale belong to the client straight away. Payments are due in accordance with the agreement, for example as in a regulated Consumer Credit Act 1974 agreement. The Creditor is often the supplier of the goods, however where payments are in arrears or the arrangement is broken; with Credit Sale Agreements the creditor does not have the right of repossessing the goods. You might well find that interest free credit is given as a Credit Sale agreement.

Water Charges (England and Wales Only)

Clients living in Scotland and Northern Ireland do not currently pay for water charges directly to the supplier but the cost for water is included in council tax or rates. The water companies make a charge for the supply of water and other associated items. This is charged on the basis of the meter or rating system, which was abolished in April 1990. However many people are still charged on the basis of this rating system. The meter system will be eventually the sole charging system and under this system a consumer is simply charged for their use. In addition a standing charge is payable. Are water charges a priority or non-priority debt?

The charges are payable under the Water Industries Act 1991. This act states that Water companies will initially use county court action to recover arrears. The recovery procedure is therefore the same as for non priority debts. Since June 1989 water companies no longer have the power to disconnect for arrears of domestic water charges so this is a non priority debt. What distinguishes this debt from most other non-priority debts is that the debt will always continues to accrue because it is an ongoing service which cannot be withdrawn. An exception to this is that water supply can be withdrawn from solely business premises, where arrears remain unpaid. Liability for water charges The occupier of the property is the person liable to pay the bill. It is important therefore to check that the bill refers to a property in which the client actually lives/lived and that the dates of occupation are correct. Metered water charges will obviously vary according to usage. Clients struggling to meet the costs If the client thinks that their charges are excessive they should monitor the meter compared to their usage. The client should report this to the water supplier to discuss the possibility of a leak the water supplier should be able to work out their expected usage and explain to them how they can measure and reduce their usage. If the client is paying for their water based on the rateable value of the home they could consider transferring to a water meter. This should be considered carefully as they may not be able to revert back to rateable value system. For more information about Water Meters they have produced a leaflet useful to advisers or customers called Water Meters Explained Many water suppliers have different tariffs for customers who are considered vulnerable.

Some clients may not pay water charges There may be a legitimate reason for this such as: It is included in the rent so it is not obvious that they are paying for this Clients live in Scotland or Northern Ireland The supplier may not be aware that the property is occupied. It is important that the client contacts the relevant water authority to notify of their occupancy.

When can water arrears be a priority debt? Sometimes water charges are included in rent, if these are not paid then this could lead to loss of the home and therefore should be treated as a priority. Dealing with water arrears Payments for current water charges are usually made in eight to ten instalments. When offering payments for arrears you can make an agreement for the client to pay these weekly or monthly.

Although the debt is recognisable as a non priority one, in that the only recovery action is via the county court, a realistic monthly/weekly amount of money should be included in the financial statement. Many suppliers have access to grants and / or schemes which can write off amounts of the debt if the client makes regular payments on arrears

What are the debt emergencies?

You should read through this section carefully, some parts will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Again, you should take appropriate time to absorb its contents and to undertake your own further reading to reinforce your learning. Some of the most common debt related emergencies that you are likely to encounter as an adviser are listed below. The client is threatened with homelessness The client is encountering some form of bailiff action to recover goods etc (Enforcement of Judgments Office (EJO) action for those in NI) The client is threatened with disconnection of their utility supplies The client is threatened with arrest / imprisonment There is a threat of repossession of Hire Purchase goods this especially relates to cars which may of course be necessary for the clients work or family needs.

It is important when dealing with emergencies to ensure you have adequate time to be able to advise your client about all of their options. How to obtain time to deal with emergencies Preventing Fuel Disconnection Gas and electricity companies have Codes of Practice which state that disconnection will be delayed for 14-21 days if the customer seeks assistance. Also, fuel suppliers should not disconnect a supply where there is a genuine dispute about the amount that is owed or where an affordable offer of repayment has been made. Organisations which can assist consumers are The Energy Ombudsman, Consumer Focus or Ofgem Preventing Water Disconnection Water suppliers can no longer disconnect and instead would have to take action to recover the unpaid amount through the County Court. The Consumer Council for Water (covering England and Wales) will also assist clients with problems with water charges. For those who are is Scotland the consumer based organisation called Waterwatch closed in August 2011. The Public Services Reform (Scotland) Act 2010 transferred the complaints handling function to the Scottish Public Services Ombudsman (SPSO) and the customer representation function to Consumer Focus Scotland .

In N. Ireland Utility Regulator NI is the independent non-ministerial government department set up to ensure the effective regulation of the Electricity, Gas and Water and Sewerage industries. Consumers in NI or Scotland do not pay directly for water Preventing Eviction (this is dealt with in greater depth later on in the module) A Warrant of Possession gives a client a time and date when they will be evicted. The warrant (and therefore the eviction) can be suspended by completing an appropriate application to the County Court. A County Court form N244 - A general form used to suspend court action must be completed and taken the court. Most courts like this to be done at least 4 days before the eviction. However larger County Courts like, Birmingham, will usually hear applications 'on the spot' on the date of the eviction. Currently a fee is payable, but clients in receipt of Income Support or IBJSA, and some in receipt of Working Tax Credit and Disabled Person's Tax Credit, are entitled to financial exemption. Others may apply for such exemption on the grounds of financial hardship. In both cases application for exemption must be made on form Ex 160 (A form to request exemption from a fee on the basis of exemption or financial hardship) and this should be taken to the court at the same time as the N244 The Court Welfare Officer (if there is one) in the County Court may be able to assist with representation. Stopping Bailiff Action [NB be aware of anticipated changes to bailiffs powers not yet implemented under the Courts, Tribunal and Enforcement Act 2007] Most bailiffs are not able to force entry into a property unless they are making a return visit to remove goods that they have already seized (this involves a bailiff selecting certain goods with a view to taking and selling them later) if they have not already obtained 'peaceable' entry. 'Peaceable' entry means obtaining entry by being allowed access by the client or gaining entry through an open door or window. Clients do not, therefore, have to allow a bailiff entry to their homes. A well informed client refusing a bailiff entry will therefore gain some valuable time to deal with the situation (e.g. negotiate payment of the debt or apply to the court for the warrant of execution to be suspended). NB: A bailiff executing a warrant of possession can force entry to evict the occupier. Citizens Advice has conducted a piece of research entitled Undue distress; highlighting CAB clients experience of bailiffs. Take some time to read through it and see if you can find other related information. Undue Distress Dealing with Arrest Warrants This will usually relate to a fine default or committal action for Council Tax arrears. If a client fails to attend a hearing at the Magistrates Court a warrant for their arrest will usually be issued. This may be with or without bail. It is necessary in either case to surrender themselves to the Court or a local police station. If the warrant is with bail the client will be given a date to attend a Court Hearing.

If the warrant is without bail the client will be arrested and held in the cells until a hearing is set (usually the same day). It may be possible to ring the Warrant Officer to ask for more time to complete a personal budget. It is important for any client to take a personal budget along to the hearing showing their financial situation in order to support any offer made. Repossession of Hire Purchase/Conditional Sale Goods Goods cannot be repossessed from a clients premises without a court order. Also, where a client has paid a third of the total HP price (this figure must be shown on an HP agreement) the goods cannot be repossessed without a court order regardless of where they are located. If a HP creditor has obtained a warrant of delivery (a document that allows the county court bailiff to seize goods which are the subject of a HP or Conditional Sale Agreement) the client can apply to the county court for it to be suspended. They would apply using form N244.

What are non priority debts?

You should read through this section carefully, some will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Non priority debts are those debts whose only course of recovery action is to sue the client in the County Court. They do not involve the legal sanctions which are available to the priority debts, such as eviction, disconnection discussed in an earlier section. Most of the non priority debts which you will encounter will be from credit debts and will include: Credit cards Personal Loans Charge cards Catalogues Personal debts to family and friends Doorstep collected loans Credit sale agreements Trading cheques and vouchers Payday loans Non-priority creditors should only be considered for repayment after negotiations with priority creditors have been completed and agreed. Offers to non-priority creditors will generally be lower and are based on what (if any) income is available after allowing for essential expenditure and payments to priority creditors. Below is a summary of the full debt collection process including court action. This is the general recovery procedure for non priority debts. Obviously, not all of this recovery process will apply to any one client.

A Reminder letter will be sent. A Default Notice ('This is a form which must be issued for all debts regulated by the Consumer Credit Act 1974 before the creditor can commence action for early payment of the monies due under the agreement. It is a legal requirement of the Consumer Credit Act 1974) will be sent. A variety of letters from solicitors /legal departments/debt collection agencies may be sent. A County Court Claim form will be sent to the client. A County Court Judgment will be entered. Bailiffs could be used to recover the debt. An Attachment of Earnings Order (Deductions from wages) could be issued. A Charging Order may be applied for (This is a method of securing a previously unsecured debt against a clients home. This makes the debt subject to the similar enforcement action as a secured loan or a mortgage). A Third Party Debt Order may be applied for. This is an instruction to someone (the "third party") who owes money to the client (for example a bank holding the clients savings or wages) to pay the debt. These enforcement procedures will be dealt with throughout the remainder of the module. Interest Debts have interest added in different ways. For example: Fixed term loans - interest is calculated at the beginning and included in the monthly payments. It may be possible for the creditor to charge default interest if payments are missed. Revolving credit agreements - (e.g. credit cards) interest is worked out on the amount owed at the end of each month and added to the balance. For a more detailed discussion of issues in relation to interest Pre and Post- judgment see The ABC of Money Advice: Interest Part 1, Quarterly Account 14 (2009) p26 and The ABC of Money Advice: Interest Part 2 Quarterly Account 15 (2009)]

Non priority debts and the County Court

As a debt adviser you will most often encounter the County Court because of non payment of credit debts (non priority debts) as this is the only way such creditors can legally recover their money. If no arrangement to pay is made or accepted, the creditor (known as the Claimant) may sue the client (known as the defendant) in the County Court and obtain a County Court Judgment (CCJ)

to repay the debt. The charging of interest usually stops once judgment is obtained (unless the contract permits post-judgment accrual). The court will, at the request of the creditor issue a Claim Form (previously known as a Summons) N1 together with Particulars of Claim (a statement of facts), an admission and statement of means form and instructions to the defendant about what s/he should do. If the person admits the debt they can fill in the Reply Form N9A with details of their income, spending, other debts and an offer of repayment, and send it to the creditor. It is acceptable to attach a personal budget to the form. More details concerning the actual completion of the N9A you will take place the next level debt module. If the person ignores the Claim, judgment may be entered 'in default' and an order may be made for payment in full (known as a 'forthwith' order) or by very high instalments to clear the debt over a very short period. Where default judgment has been entered, the defendant can apply to the court on form N245 to pay by instalments if they cannot afford the amount they are being told to pay. A fee is payable to submit an N245, but clients in receipt of Income Support or IBJSA, and some in receipt of Tax Credits, are entitled to an exemption from the fee. It is also possible to apply for exemption on the grounds of low income. In both cases application for exemption must be made on form EX160 and should be taken to the court at the same time as the N245. The form EX160 is accompanied by a brief set of guidance notes. If a defendant defaults on a CCJ payment order, the creditor can enforce the judgment by a variety of methods including an attachment of earnings order, a charging order, a garnishee order or by far the more common, the use of bailiffs to seize goods; this is known as a warrant of execution. All of these methods will be considered more fully in a subsequent debt module. A person can apply on form N245 to suspend a warrant of execution and make a new offer of payment. Again a fee is payable unless the client is exempt or can obtain waiver of payment (see above). The process for completing an N245 is similar to that of completing an N9A. Where clients have other unsecured debts they may be able to apply to their local county court for an Administration Order (N92). It is a method by which a client applies to the County Court for an order, which simply groups all their non priority debts together. The client then makes one monthly payment, which covers all the creditors on the order. This payment is made to the Court and is distributed to the creditors, after the deduction of a 10% administration fee. In order to obtain an Administration Order there are a number of qualifying requirements and these are that the client doesn't owe more than 5000, has more than one debt, and has a county court judgment. Whilst Administration Orders are seen as a very useful debt relief option, these qualifying requirements seriously limit the number of applications which can be made. The forms and leaflets which accompany them are available from the Justice website.

Payment arrangements for non priority debts

Most non priority creditors will usually accept a weekly or monthly amount that a person can

afford to pay. If they sue in the County Court they are unlikely to get anymore because the court will take into account the clients ability to pay. A letter to the creditor to explain the client's personal and financial circumstances, together with a Personal Budget which details their income, expenditure, debts and offers of payment, will usually be sufficient to make an arrangement to pay, although some creditors routinely pass debts to collection agencies for collection. Offers of payment on non-priority debts are based on a pro rata distribution of clients' available income between their creditors. How to work out offers to Non-Priority Creditors Offers for the non-priority debts are based upon the pro-rata distribution of the available income between the various creditors. The calculation for Pro rata is as follows: Individual Debt multiplied by Available Income (income minus expenditure) divided by Total Debt = the Weekly/Monthly Offer to the non priority creditor. Example : Mrs Currigan owes 1200 for a personal loan, 500 to a catalogue, and 90 for Late Tenancy Arrears (arrears at a previous property). Her total non-priority debts are 1,790. You have calculated her available income (her disposable income after all expenditure and priority debts have been arranged) as 20 per month. The offer for the personal loan is therefore: 1200 --------- x 20 = 13.00 per month the offer to the Catalogue = 6.00 per month 1790 the offer for the Late Tenancy Arrears = 1.00 per month In edition 115 of The Adviser magazine John Kruse discusses the apparent death of pro rata payments. Most often he suggests, the reality of the situation is that token offers (see later) of payment rather than pro rata offers of payment are more common, due to the very low income of the clients he sees. He suggests that the credit industry has changed and perhaps debt advisers need to as well. He argues that by adopting the pro rata route, that debt advisers are chaining their clients to often long term repayment periods (over 10 years to clear a debt) often with the additional problems of yearly reviews by the creditor seeking improved offers. This is draining for the client and for the organisation. You will find more about pro rata in the actual article. Suspension of Interest Where interest is being charged it is essential that creditors are requested to freeze/suspended interest. In some circumstances a refusal to pay if interest is not frozen may be appropriate, for example if there is a deficit financial statement and only token payments of a rate lower than the interest accruing per week or per month is greater than the repayment amount offered. Making the weekly or monthly offer The offer letter to the creditors should contain the following:

A letter of authorisation which gives the adviser permission to act on behalf of the client (if not previously sent) A brief explanation of the clients personal and financial circumstances, why they are in debt, details of the family situation, i.e. numbers, ages, and health etc. Reference to an attached Personal Budget which includes details of income, expenditure, debts and offers of repayment. Together with: An explanation of any unusually high expenditure, e.g. travel, fuel, clothing etc An offer of pro rata payment/nominal payment/nil payment/request for a write-off How and when payment should be made and when it will commence A request to suspend any interest that is accruing A request to stop any further recovery action A request to review the case within 6-12 months time (or at a more appropriate time, depending on expected changes in circumstances). A request for a copy of the client's credit agreement (if appropriate) In Scotland there is a debt arrangement scheme (DAS). This is basically a debt payment programme which allows the client to make an offer to pay off multiple debts by one single payment which is then distributed amongst the creditors. Provided the client sticks to the payment proposals then the creditors can take no further enforcement action. For more information about the operation of DAS vists the DAS website. Other options for dealing with non priority debts that should be considered There are a number of alternative options for dealing with non priority debt repayments other than pro rata payments. What follows is a brief overview of some of the more common options. Individual Voluntary Arrangement This is a court order which, if agreed, allows the client to repay a percentage [to be agreed by the client, an IP and their creditors] of what is owed in full and final settlement of the debt. (IVA's are also covered in more detail later in the module; see Part 1.2: Insolvency) Debt Relief Order These were introduced by the Tribunals Courts and Enforcement Act 2007 and came into force in April 2009.

DROs provide debt relief, subject to some restrictions. They are suitable for people who do not own their own home, have little surplus income and assets and less than 15,000 of debt. An order lasts for 12 months. In that time creditors named on the order cannot take any action to recover their money without permission from the court. At the end of the period, if the client's circumstances have not changed they will be freed from the debts that were included in their order. DROs do not involve the courts (unless a dispute is raised that requires arbitration). They are run by the Insolvency Service in partnership with skilled debt advisers, called Approved Intermediaries, who will help the client apply to the Insolvency Service for a DRO. (Debt Relief Orders are covered in more detail later in the module; in Part 1.2: Insolvency) Offer a full and final settlement payment This may be available if the client has some saleable assets either now or in the near future or has access to a lump sum of money. The creditor may on this basis accept a reduced lump sum payment in full and final settlement of the account. It might be possible as an alternative, to offer a lump sum together with an instalment offer or to offer a few large instalments over an agreed period. Some creditors might not respond to your request to write off the debt, however they may decide not to pursue the debt at this point but may wait to see if the clients situation improves in the future. Although this may provide some respite to the client; it is important to remember the debt remains due and may be called for at a future time, potentially leaving the client in a limbo period. Interest and/or charges may also be accruing on the debt; increasing the balance by a greater amount than if repayments had been made. Offer token payments Where there is no real available income with which to make an offer, no assets or capital, the only option might be small token payments; these may be as low as 50p per month. It might be better however to try to try to stick out for a nil repayment or if an improvement in circumstances is unlikely; to consider a more realistic method of dealing with the clients debts (such as bankruptcy). Ask for a full or partial write-off Where a clients personal and/or financial circumstances are particularly difficult and/or are unlikely to improve, creditors can be requested to write-off the debts partially or in full. This is much more likely to be considered where ill-health or vulnerability is a key factor. Administration Order Briefly, this is a method by which a client who already has a CCJ and his/her total debts do not exceed 5000, can apply to the County Court to 'administer' their payments. They do this by completing a form N92. All the debts are lumped together and one monthly payment is divided amongst the creditors who appear on the order. It might be possible, if the debts do exceed the 5000 limit to write to the creditors and ask them to write off some of the debt in order to get the total below the limit. The court may also be prepared to award composition allowing for a reduced repayment period and debt forgiveness.

(Administration Orders are covered in more detail later in the module; see Part 1.2: Insolvency) Make a nil repayment offer or moratorium

If there is no available income with which to make an offer to the non-priority debts, the creditor could be asked to accept no repayments, suspend further recovery action and review the situation in 6-12 months time (where it is likely that an improvement in circumstances will happen). Often when faced with this, creditors will demand nominal / token payments (see below) even where clients are on very low incomes. This is often because their policies make it difficult for them to accept nil payment. It is important to ensure therefore that you have fully explained to the creditor why you are requesting a moratorium for what period of time and what you envisage happening in the future. Future developments The Government continue to consult on reform to insolvency, consumer credit and debt relief options; to keep up to date with these developments and to see how they might impact on the options our clients currently have; visit the BIS website.

Consumer Credit Act and Licensing The Consumer Credit Act 1974 [as amended by the Consumer Credit Act 2006] is the primary piece of consumer credit legislation. It requires most businesses that lend money to consumers; or offer goods or services on credit; or engage in certain ancillary credit activities (including Debt Management Companies)

to be licensed by the OFT. Trading without a licence in such cases is a criminal offence and can result in a fine and/or imprisonment. See Licensing section of the OFT website consumer credit licensing The Consumer Credit Act regulates the way in which licensees carry on business. So there are rules on credit advertising , irresponsible lending , pre-contract disclosure, credit agreements, brokerage fees, post-contractual information and debt collection practices . The Consumer Credit Act confers also rights on consumers, for example in relation to withdrawal from a credit agreement, early settlement, and joint and several liability. A summary of the key provisions, together with reference to relevant legislation and guidance, is set out on the OFT website Legislation and Guidance What is covered by the Consumer Credit Act 1974? The Consumer Credit Act 1974 regulates most consumer credit agreements, consumer hire agreements and secured loans (see also Second charge lending) There are some exceptions as follows: Agreements outside the financial limits (more than 25,000 before the limit was abolished on 6.4.08, more than 15,000 before 1.5.98) Loans of more than 25,000 primarily for business purposes Loans to a limited company or a partnership of 4 or more Buy to let loans Loans for a house purchase (first mortgages)

Secured loans taken out for the purpose of improving or repairing the home where the lender is the same as the lender which granted the first mortgage Any first mortgage made on or after 31st October 2004 (regardless of the amount) provided the loan is to an individual and at least 40% of the property is occupied by the borrower or a member of their family Some very low interest loans Debtor-creditor-supplier (D-C-S) loans where the whole amount is repayable in less than 4 instalments . The loan has to have no charges for credit and the running account must have insignificant charges Loans to High Net Worth individuals if they agree at the outset to forgo protection

* NB This is not an exhaustive list, see also exempt agreements Requirements of the CCA For more information also see these sections of the OFT Website; credit and hire agreements, changes introduced by CCA 2006, pre-contract information, post-contract information and the Consumer Credit Directive See Rosenberg, R The Consumer Credit Act 2006, Quarterly Account 2 (2006) p10, for a helpful outline of key aspects of the Consumer Credit Act 2006. The Consumer Credit Act provides key protections for debtors. Before April 2007, failure by a creditor to ensure an agreement containing the prescribed terms was signed by the parties led to the entire agreement being irredeemably unenforceable under s127(3) i.e. the defect(s) in the agreement could not be cured (redeemed) by the lender. In the case of a secured loan, the lender would not be able to take possession action in the courts, and would have to remove the mortgage from the charges register at the Land Registry. In April 2007, s127(3) was repealed as a result of the amendments in the Consumer Credit Act 2006. Now, where an agreement does not comply with the prescribed form, it will be enforceable with leave of the court only. Where an application for leave to enforce is made by a creditor, the court should consider the detriment to the debtor and the culpability of the creditor, as well as the severity of the breach. The court should also take account of its powers to make a Time Order, suspend any other order and amend the terms of the agreement. If the court gives the creditor leave to enforce the agreement, it can compensate the debtor for any detriment by reducing or discharging any amount payable under the agreement. The following elements should be present in an agreement which complies with the requirements of the Consumer Credit Act: A statement of the Amount of Credit (or credit limit for running account credit). This is the amount borrowed, not the total amount payable under the agreement, and should not include any charges for credit. Acceptance and document fees, broker charges and compulsory payment protection insurance should not be included in the amount of credit. In the Court of Appeal case of London North Securities v Meadows [2005] EWCA Civ 956, the amount of credit of 5750 included a 750 payment protection insurance premium, described on the agreement as optional. The judge found that the insurance was not optional at all and was a charge for credit making the agreement irredeemably unenforceable.

The Rate of Interest and whether it is variable. For some loans, the amount of interest is calculated at the beginning and added to the total balance. For others, the interest is calculated based on the outstanding capital balance at any given time. These agreements are less transparent as the debtor cannot see how much they will pay at the outset. Details of the rate, frequency and amount of repayments. For secured loans, there may be charges added at the beginning that are not part of the loan itself, such as broker fees and legal fees. These often attract interest, but there are no details on the agreement of how they are to be paid off. This can constitute a breach of the discharge of obligations requirements, and mean an agreement is unenforceable. In addition, the following should be on the face of the agreement: A Consumer Credit heading Names and addresses of the parties Details of any security provided The total charge for credit The annual percentage rate Information about early payment rebates, including examples if after 31.5.05. A signature box A separate form of consent and signature box for optional payment protection insurance if after 31.5.05.

Requests for information The Consumer Credit Act requires a creditor to provide certain information to a debtor if a formal request is made under sections 77 (for fixed sum credit) or 78 (for running account credit) of the Act. Both section 77 and 78 requires the creditor to provide a true copy of the agreement, related documents, and a statement of account upon request. A true copy agreement does not have to contain the debtors signature in order to comply with a request for information; however this should not be confused with the requirement that the creditor has obtained a signature on the executed agreement. The request should be made in writing, enclosing 1 to cover the fee for the provision of information. If the creditor has not complied within 12 working days of the request, the agreement becomes unenforceable until the information is provided but the creditors right to add on interest and default charges remains and so, unless the debtor is confident that the creditor will be unable to comply with the request, the debtor might be well advised to continue payment. Also see Unenforceable credit agreements (information requests under section 77/78/79) See also Q&A, Quarterly Account 15 (2009) p22 , which focuses on requests for information under sections 77 and 78 CCA The pre contract cooling off period Some unsecured CCA regulated debts have cooling off periods once the agreement has been entered into. This is not possible for a secured loan, as the property will be charged immediately. To get around this, there are strict rules for creditors about the provision of information prior to entering into the agreement. A copy of the agreement should be sent to the borrower, who is then

left alone for 7 days. Then, a further copy is provided for signing, and the borrower is left for another 7 days. The borrower is not to be contacted by the creditor in this time unless asked to. For further information see the OFT leaflet Do you know your consumer rights? Time Orders Time Orders are frequently made in response to claims for possession by lenders. The normal rules about suspending possession do not apply to CCA regulated agreements, Time Orders are the way by which the defendant is given time to pay. The Time Order can be for the defendant to pay the contractual instalment plus an amount towards the arrears, either as a monthly payment or a lump sum. This is the most common type of order, courts are used to making CMI plus arrears orders for first mortgages, and this is no different. Alternatively, if the defendant cannot afford to pay the CMI plus the arrears, the court can make an order that the defendants pay less than the contractual instalments this makes the orders very different from those made for first mortgages. The agreement can be amended by the courts in consequence of the order e.g. to freeze or reduce interest on the arrears. The court will consider whether it is just to make a Time Order. This will involve considering the effect on the debtor and the creditor, taking into account the behaviour of both parties. An application is more likely to be considered favourably if the loan was affordable at the outset, the debtor has attempted to resolve their difficulties, and ideally that the difficulties are temporary. The court will also consider the cost of the loan, the conduct of the creditor and the terms of the agreement. Time orders can be made in response to a claim for possession, or at any time after an Arrears Notice has been sent to the debtor. If the account is in arrears but no action has been taken by the lender, the court may only be able to deal with rescheduling the arrears. If the debtor wants the court to deal with the whole amount outstanding under the agreement, the application will have to be made after the service of a Default Notice, which terminates the agreement. For practical guidance on making an application see 'Time Orders, whats all the fuss? Quarterly Account 11 (2008) p14. Unfair Relationships The Unfair Relationship provisions in section 140 of the Consumer Credit Act, first implemented in 2007 and now covering all agreements which are not specifically exempt (first mortgages), allow the courts to reopen any credit agreement or related agreement where there has been an unfair relationship. The court can make an order that the relationship is unfair to the debtor because of any of the terms of the agreement or related agreement, the way in which the creditor has enforced his rights under the agreement, or any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement). Interest charges may make an agreement unfair to the debtor if they are not transparent, and/or if compound interest results in the debt spiralling, particularly where the creditor has not maintained proper contact with the debtor regarding the account. Once the court has made a finding that the agreement is unfair to the debtor for one of the reasons given, there are a number of options available for remedying the situation. The court can order that the creditor reduce or discharge the debtors obligations, and can even order the creditor to repay monies paid by the debtor. For further reading on unfair relationships see 'Unfair relationships under the Consumer Credit Act', Quarterly Account, 10 (2008) p4 The Future of the CCA

Consumer Credit regulation is currently the subject of review and consultation by the Consumer Panel. The Consumer Panel is a statutory body under the Financial Services and Markets Act 2000 and was initially established by the Financial Services Authority in December 1998. The Panel advises the FSA on the interests and concerns of consumers and reports on the FSA's performance in meeting its objectives. The emphasis of the Panel's work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA's remit. The Consumer Panels research on Consumer Credit can found on their website: http://www.fscp.org.uk/publications/research_documents.shtml The Consumer Panel position paper on Consumer Credit Regulation can be found on http://www.fs-cp.org.uk/publications/pdf/position_paper.pdf

The Personal Budget / Financial Statement

Some Basics
A Personal Budget Sheet is used to gather vital financial information about the clients income and expenditure. The process of compiling the budget sheet can help to identify the cause of the financial problem, ways of maximising income and reducing outgoings, where possible. It might also be used to demonstrate to the client that they can or cannot afford to meet their existing expenditures. Information from the personal budget sheet is used to populate the Financial Statement. The finished Financial Statement is used to show what the clients financial situation is and is crucial in any negotiations with creditors or the Courts. The Financial Statement should include:
Adviser contact details Clients name and address The number of people in the household and how many are dependents Summarised information of the clients income and expenditure Details of the clients debts Which are priority and non-priority Who the creditors are The amount owed The amount offered

Whether the client has any assets or savings (where it is appropriate to share this information) Whether they have considered the sale of any assets in order to pay off debt or make lump sum payments Reasons for indebtedness Comments about any unusual or unusually high expenditures Any other necessary explanations

The Financial Statement should be realistic rather than restrictive; otherwise any unexpected expenditure may cause the client to default on payment arrangements already in place (however it is also important to show the client is making concessions to help maximise their offer to creditors, as spending on luxury items may well be challenged or a repayment offer declined). The Financial Statement should list the households total income and expenditure, and should be completed on a monthly basis. For clients who prefer to budget weekly, advisers should convert the weekly Financial Statement which they have compiled by working with the client to a monthly one for distributing to the creditor/s. A word of warning: even for experienced advisers, one of the most common errors when compiling a Financial Statement is to allocate the wrong payment period to an expenditure figure. Before you start to complete a personal budget sheet you will need to know how to convert weekly payments to monthly and vice versa. Conversion Information To convert weekly payment to monthly payments: Weekly sum x 52 weeks = annual amount divide 12 months To convert monthly payments to weekly payments: Monthly sum x 12 months = annual amount divide 52 weeks

Income
It is vital that you include all household incomes on the personal budget sheet. This should reflect what money actually comes into the household. This may be relatively straight forward for a single person, but will be considerably more complex if you are dealing with a family, who perhaps has non-dependants, who are working or who are claiming benefits. You should however at all times try to reflect the actual current income situation. Where income is complex, unusual, fluctuating or expected to change the adviser should add a comment to the Financial Statement or the accompanying letter. Benefits including Housing Benefit, DLA etc should all be included as income and the relevant expenditure associated with these benefits should be recorded in the expenditure. The only items which might not be included are those which go directly from one third party to another on the clients behalf, for example help with mortgage interest payments.

Expenditure
Essential expenditure can be classified into two broad categories, A) fixed and B) variable expenditure A. Fixed expenditure items Rent The weekly/monthly rent figure should be included in the spending which may be reduced depending upon any Housing Benefit entitlement. Mortgage /Secured Loan

The amounts for these are usually paid on a calendar monthly basis, so you should put the contractual monthly payments in spending. If the lender receives some of the monthly payment direct from DWP, because the client receives assistance via Income Support, irESA or IBJSA, you should only put into the budget, the amount the client is paying to cover any shortfall. Again, as above, any payments to clear arrears should not be included under expenditure, but listed under priority debts repayments. Council Tax Enter the weekly or monthly figure in the expenditure section. This should be just the current ongoing liability only. If there are any arrears included, these should be included under priority debt repayments. The County Court Determination of Means Guidelines [Dec 1998], says that where Council Tax is paid over 10 months this monthly figure should be entered as the monthly expenditure figure. This will give the client 2 months without payment which will allow some breathing space. Water Rates As above, enter current on-going weekly/monthly liability only under spending. If there are any arrears include these under non priority debt repayments. The water supply can no longer be disconnected for non payment of water bills, so it is possible to classify this as a non priority debt, however, if the client is able to pay it is better to treat it as a priority debt, as new bills arrive every year and therefore the problem will simply compound year on year. Gas / Electricity Enter the current on-going weekly/monthly consumption/use only (averaged over the last 12 months) in expenditure. If there are any arrears include these under priority debt repayments Hire Purchase /Conditional Sale Examples of goods brought under a Hire Purchase Agreement could include a car, or goods bought from such companies as 'Crazy George's' or 'Brighthouse'. Include the contractual weekly/monthly payments under essential expenditure. If there are any arrears include these under priority debt repayments (unusually high HP payments or for items deemed non-essential may well be challenged or repayment offers may be rejected and it is good practice to discuss this with the client and to explore their options prior to sending out the Financial Statement). Other goods bought on credit sale other than Hire Purchase/ Conditional Sale should not be included under essential expenditure, but under non priority debt repayments. TV Rental / Licence You should enter the weekly/monthly contractual instalment for the rental of the TV or video in the expenditure section. You should also include the weekly/monthly amount for the licence, unless the client is paying a different amount by monthly Direct Debit or the Cash Easy Entry Scheme. Payments made by a third party Where payments for the client's liabilities are being made by a third party these details should be included on the Financial Statement as both income and corresponding expenditure. For example

where a family member is paying rent or if a mortgage is paid partly by benefits via income support or IBJSA on behalf of the client. It helps to include notes if necessary to explain these circumstances and give a clear picture of the client's financial situation. B. Variable Expenditure This sort of expenditure unlike the above, which is fixed, is much harder for the adviser and client to assess. It is important however not to underestimate this spending, as this may result in the client making unaffordable offers to creditors and then being unable to keep up payments. Housekeeping/food It is important that the client is left with sufficient money to meet their basic housekeeping costs. Detailed research has been done by A Minimum Income Standard for Britain Funded by the Joseph Rowntree Foundation, it is a collaboration between the Centre for Research in Social Policy (CRSP) at Loughborough University and the Family Budget Unit at York University, where you will find a extensive list of publications most of which relate to family finances. Housekeeping/food - It is difficult to estimate figures for these however the Minimum Income Standard research [link above] does give average figures. You can also refer to the CFS Trigger figures or the CCCS expenditure guidance. Clothing - As with housekeeping it is important that an allowance is made for clothing needs. Travel - You should include any costs associated with a car e.g. tax, insurance, mot / service, petrol and /or any bus fares, etc. Health costs - Dentist / optician / prescriptions Telephone - Land line and mobiles, don't forget inclusive packages that include broadband and TV packages.

Sundry/Miscellaneous expenses
It is important to consider sundry or miscellaneous items when compiling the budget sheet. These might include such things as; Essential household repairs (primarily - owner occupiers) Replacement of household goods Shoe repairs / Dry Cleaning School trips / pocket money Entertainment / alcohol / cigarettes Postage / stationery Newspapers / magazines Birthdays / Christmas Haircuts Pets Emergencies Remember - it is important to be as realistic as possible!

A budget that is too tight is unlikely to be sustainable and will usually result in further default and increasing pressure from creditors. It is nevertheless vital that clients live within their incomes, otherwise their debts will escalate and recovery action will be taken by priority and non-priority creditors. It will often be necessary to talk with clients about how they may be able to reduce or cut out expenditure, if there is little or no money left to repay debts. However, advisers should expect that those on means tested benefits will have very little, if any, money available to pay to nonpriority creditors and you will therefore often be able to make no more than token offers to nonpriority creditors. Accepting Offers In return for the work advisers are doing for clients, creditors should not set minimum repayment levels or demand that debts are repaid within a set time period. Instead we believe all creditors should use the same objective method of working out how much a person can pay. This ethos has already been adopted in association with the Common Financial Statement. Offers made using the Financial Statement might be small, but they will be sustainable. Creditors should value sustainability, and set up systems to accommodate long term repayment plans. Common Financial Statement (CFS) The Common Financial Statement is used by most advice agencies. It has introduced standardisation across the agencies and helps in negotiations with creditors who have [mostly] agreed to accept this as a true and accurate reflection of your client's circumstances. It is sponsored by the Money Advice Trust, the British Bankers Association and the Finance & Leasing Association. Creditors who are signed up to the use of the CFS are happy that when reduced debt repayments are offered based on the CFS they will be fair and reasonable (as a result most of the Case Management Systems used by the NfP sector incorporate the CFS into the financial statement tool). Many debt management companies will have individual agreements in place with creditors that determine the method by which clients information is communicated and the format in which it is presented. However many money advisers work from individual offices, where often practices that might be suitable for a larger organisation are unsuitable or impractical. Whilst your Company may only adopt the principles of the CFS, or the CCCS guidelines (as required through the IVA Protocol) for example by utilising just the trigger figures but using your preferred method of communication; it is still important to have an awareness of the CFS and the expectations, should you choose to adopt it. Student Activity If you dont already use a software programme incorporating the CFS then we recommend that you try using the CFS for yourself . You can access the CFS by downloading a free Excel version from the CFS website. Follow the link above and if you have never used the CFS this way before you will need to register to obtain a license key. Simply go to the Apply for a Licence tab and follow the instructions. The Common Financial Statement (CFS) is not just a tool for recording financial information but has been specifically designed to help advisers to assist clients with the money advice process. The CFS is split into sections to prompt money advice activities.

The Income and Assets section allows the adviser to investigate income maximisation and options for using assets to discharge debts. The Expenditure section assists in helping the clients to budget effectively. One of the advisers essential jobs is to highlight and discuss areas of excessive expenditure with their clients. Helping the client to budget effectively will help to stabilise their situation no matter how low their actual income. Producing a balanced budget sheet for the client to follow should enable them to cover essential expenditure and prevent future debt problems. All debt details are recorded and allocated a status in the Priority and Non-priority debts section; a reminder for the client and creditors that some of the debts have been allocated preference according to potential impact on the clients essential services. The Financial Statement section shows a summary of the relevant information submitted in to the other sections. It does not identify all individual items of expenditure but distributes them into boarder categories. This is the section which is seen by creditors. Trigger Figures Once the information about a persons income, assets, liabilities and expenditure has been gathered on the CFS budget sheet, the persons discretionary expenditure is then compared against objectively agreed guideline figures known as trigger figures. The Financial Statement section highlights which expenditures have exceeded the trigger figures. These trigger figures are determined using government research on average household expenditure for people in the lowest 20 per cent of income brackets. As such, the trigger figures which are regularly reviewed and updated reflect modest expenditure for people living on a limited budget. The trigger figures provided with the CFS are an important impartial measure of reasonable spending in certain areas and should be used to educate the client about spending reasonably. If a persons expenditure falls within these trigger figures, or justifiably exceeds them and an appropriate explanation is provided on the statement, creditors signed up to the CFS should not ask clients to pay more. Expenditures which do not fall within the trigger figures need to be discussed with the client and those which cannot be reduced should be explained using the comments space within the CFS. Trigger figures should not simply be used as a short cut to completing a Financial Statement; doing this will not help the client to maintain stable finances or to maintain payments to creditors. Deficit Budgets on Financial Statements Occasionally the Financial Statement might reflect a deficit budget showing that people are spending more than their income. This might happen for example following an unexpected occurrence such as redundancy, reduction of working hours or illness where the liability of essential expenditure exceeds the level of income. If the persons financial situation is genuinely in a deficit then the Financial Statement should reflect this, however this can only reasonably be expected to continue in the short term. Early on in the Money Advice procedure, advisers should address maximising income for example to ensure that people are in receipt of all relevant benefits. Where budgets are in deficit and it is not possible to reduce essential expenditure the adviser will need to discuss other options to stabilise the clients situation; this might include finding cheaper housing or travel options.

It is important for advisers to explain to the creditor the reasons for any deficit and what has been discussed with the client in terms of future prospects and the likelihood of it becoming a reality. If advisers explain how things are likely to improve and when this would support the request they are making. If no explanation is present, it will appear to the creditor that the person is continuing to borrow or that the Financial Statement is not accurate. Despite having a deficit Financial Statement people are sometimes determined to find a payment from somewhere (often the housekeeping) to show goodwill and maintain some kind of payment even if it is against the advice they have received. In these instances, a short explanation to the creditor setting out the clients intentions will go a long way to reassuring the creditor and will be less confusing to them. Assets It is important to establish the existence and value of any assets which the client might have, as this may influence the appropriateness of the debt solution or the likelihood of further recovery action being taken by creditors. If the client has assets of any value
It will have implications for insolvency debt relief options; for example they may lead to Exclusion from a DRO The loss of assets in bankruptcy The necessity to release equity in an IVA

They may choose to sell these in order to raise a lump sum to clear debts or assist in a debt relief strategy The adviser will need to know about them so that they can help the client to protect these from creditor enforcement measures

If the client has negative value assets this information can be used to help negotiate with creditors Details of these should be recorded on the case record but not on the Financial Statement. The needs and powers of other creditors Priority creditors such as local authority council tax departments, landlords, mortgage/secured lenders, the Child Support Agency, fuel companies and Magistrate Courts have significantly greater powers than others, such as eviction, repossession, disconnection and imprisonment. But all too often the creditor who shouts the loudest is paid first often these will be the unsecured creditor or collector that calls almost every day demanding payment in full. It only takes one creditor to push too hard for a repayment plan to completely fail. Instead, the adviser should be asking creditors to co-operate so the person in debt can sustain repayment and protect their home, liberty and essential goods and services. Advisers can emphasise to creditors the importance of paying off essential arrears first, and ask them for forbearance in their communications while these payments are being made. This might mean asking them to accept token payments or payment holidays in the meantime. Additional Resources

See the CFS Adviser Good Practice Checklist at 1.1.6. There is also a Creditor Good Practice Checklist. The checklists have been created by the Money Advice Trust and you will be able to access it, and other useful resources, from the CFS section of their website.

Negotiating on behalf of clients You will have already read the section on Personal Budgets and Financial Statements. The Financial Statement plays a central role in negotiations with creditors. Appropriate levels of support By the time clients make contact with an adviser for the first time they will undoubtedly have had considerable contact from creditors and advisers should be aware that this will often lead the client to feel stressed about their situation. One reason why clients might approach a Debt Management Company is if they are not confident in dealing with their debts themselves. Keeping the client involved However, whilst clients often need your advice and support it is important that the adviser attempts to empower the client. Providing the client with as much relevant information as possible in order to understand their situation and their options Allowing the client to make the decision about which is the best option for dealing with their debt Keeping the client involved with the chosen option or process. Encourage the client to take or retain control of her/his own financial affairs and to work within their agreed budget

Negotiation If negotiation is identified with the client as the appropriate strategy to pursue, the adviser will need to consider what they know about the client and using their own companys policies and procedures to determine to what extent the client can contribute to this process. Most Debt Management Companies will take on the whole process of negotiation but will keep the client regularly informed about progress. Keeping customers informed on the progress of negotiations with their creditors will allow them to feel fully involved in the process, which will encourage the client to regain control and be better able to cope with their affairs in the future. Its important to prepare your client for contact that they will receive from their creditors and what they need to do in order to deal with it. The client will need to understand that when a creditor attempts to contact them, they inform the creditor that they have instructed a Debt Management Company to deal on their behalf and to contact the DMC for all queries. Advisers can help clients to engage with creditors in this way by encouraging them to be involved with the process where possible. This might include: Reviewing progress with clients so that they can see how negotiations are developing, highlight positives and negatives

Sharing correspondence with clients so they can see the best way to communicate with creditors (clear, positive, polite, respectful and informative) Sharing information about negotiation best practice and relevant legislation. Once an adviser has made an agreement he or she should confirm this with clients at appropriate points during the negotiation process.

The Negotiation Process The adviser prepares and exchanges suitable offers for clients that encompass their needs as far as possible. The adviser will consult with clients on the offers that have been received and ensure that negotiations comply with relevant legislation, guidelines, codes of practice and ethical requirements. Negotiation is generally a process of communication between the adviser and the clients creditors. This communication should use simple, clear, courteous language. The aim is to reach a satisfactory agreement between the two parties. However, there are many variables affecting the likelihood of a successful arrangement so even if the proposal is fair, you may not be able to get the result you were hoping for. When this happens you will need to go back to the client to discuss the next actions and their options. You may decide to increase the offer if it is appropriate; but its important that this increase is sustainable and will not put unnecessary or unreasonable pressure on the client. If and increased offer is not appropriate you will need to explain to the client what the consequences will be and possibly even consider an alternative debt solution. Inevitably for priority debts the consequences for not reaching an agreement are more serious. These are covered in more detail in a later section. In relation to non-priority debts the adviser will usually make pro-rata offers because this is a fair way to divide the clients available income amongst their unsecured creditors and is all they can afford. If the creditor is not able to accept this offer because of their business policy, for example the adviser may need to explain to the client: What actions the creditor may take next; pass to collector, court action etc The implications of these actions; increased costs, Charging Order, possibility of applying for an Administration Order, responding to a Court Form That the client should make the payments they can afford even though the offer has not been agreed That the client can increase their offer if more funds become available or that they can consider alternative debt solutions if these are now potentially more appropriate

Advisers also need to be aware of the obligations of creditors when dealing with clients in financial difficulties. All creditors are obligated to follow the OFT Debt Collection Guidance: http://www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/OFT664Rev.pdf In addition some creditors subscribe to voluntary standards of good practice such as the Lending Code http://www.lendingstandardsboard.org.uk/docs/lendingcode.pdf Section 9 relates to clients in financial difficulties and details for example that a subscriber to the Lending Code should

accept the CFS as the basis for negotiations. Providing Information The process of negotiation will essentially require imparting information to the other parties. The more information which is provided the less the negotiations will have to rely on persuasion or good will. The kind of information which should usually be included: The clients financial position; which is demonstrated by the use of a Financial Statement The background details of the clients circumstances / reason for debt Details of how the clients circumstance may change in the future Consideration of assets An explanation of any unusual expenses or ones which exceed trigger figures

You will need to refer to your companys policy but you might also find it useful to see the CFS Adviser Good Practice Checklist at 1.1.6. This document has been created by the Money Advice Trust and you will be able to access it from the CFS section of their website. Occasionally advisers will need to make a nil offer to creditors or propose a non-payment moratorium. This situation is more likely to arise in the free advice sector and in circumstances which are extreme. It might be that the client is temporarily without funds; perhaps because they are extremely ill, homeless, in hospital or in prison. The adviser should be prepared to provide additional information or material particularly if a nil offer is being made. This might include: Any special reasons Mental Health Evidence Form Details of any vulnerability Proof of the clients circumstance

Gathering Evidence Part 2.28 of the OFT Debt Management Guidance states: A realistic assessment of the financial circumstances of the consumer, including both income and outgoings, must be made before advice is given. It is the advisers responsibility to gather reasonable information or, where appropriate, evidence to support requests made on their behalf. This will also assist you to maximise the clients income and get a true picture of the person seeking help. In addition evidence will support specific / exceptional requests for example to support a Mental Health and Debt Evidence Form. (see OFT News section for updates to the guidance ) Mental Health and Debt Evidence Form Additional evidence will be needed to support specific / exceptional requests for example to support a Mental Health and Debt Evidence Form, see the Money Advice Liaison Group website . Clear and positive communications Using clear and positive communication will make the negotiation process easier and will generally produce better results. If people in debt cant see any benefit of engaging with their creditors, then communication will break down.

Letters to creditors It is important that all advisers maintain good creditor relationships; this will help the negotiation process which will ultimately benefit your clients. All letters should use simple, clear, courteous language. It is often useful to address a letter to a named person particularly if the matter involves complex negotiation and/or specific requests. You may therefore need to telephone in advance and find out who you should write to. Reviews It is only reasonable that a person in debt should be willing to review their offer. However, asking people in debt to review their offer every one, two or three months can be a waste of advisers and/or creditors time, unless there is an expected change in circumstance. It is however unlikely that the persons situation will have improved in such a short time period; and carrying out a review could involve the adviser re-interviewing the person and sending even more letters to their creditors all of which costs money and takes time. Instead creditors should only reasonably expect reviews to be carried out six monthly or ideally annually, or when a persons situation changes. Creditors should not insist that a Debt Management Company carries out a review at unreasonably frequent periods. Furthermore, creditors should not expect the persons offer to increase just because time has passed. Instead creditors should approach reviews in a pragmatic way: if the person needs extra help, they should be given time to seek it; when a revised offer is submitted, creditors should still use an objective way of assessing how much the person can pay like the CFS as discussed previously. Adviser input Debt advisers are extremely well placed to comment on creditors collections practices. Advisers regularly deal with collections staff and they see the impact collections practices have on their clients on a daily basis. Creditors can engage with and learn from advisers in a number of ways: By opening dialogue and regular engagement with Trade bodies, such as DEMSA. Larger companies will already have regular meetings in place with creditors which look at negotiation systems and address ways of improving working together By joining a regional discussion forum of the Money Advice Liaison Group (MALG) which was set up in 1987 to promote better understanding between creditors and advisers. Advisers can attend and participate in regional money advice groups which are organised by the advice sector and take place across England and Wales. This might be useful for smaller debt management companies.

Many Debt Management Companies already have systems in place to identify poor creditor negotiation practices and address them at a management level. Advisers can discuss these with their management to find out what procedures are in place. Most creditors already work very closely with the advice sector to understand and improve their debt collections practices. Some have changed the wording of their letters; some set up dedicated help lines and some set up whole new teams specifically to help advice providers resolve their clients problems more quickly and efficiently. Cant Pay or Wont Pay?

As a debt management professional, part of your role is to help people exercise their rights and understand their responsibilities. Sometimes advisers might challenge a creditors ability to recover a debt, for example, when a benefit or tax credit overpayment is caused by official error and the person could not have reasonably known they had been over paid, or if a consumer credit agreement was not completed correctly. But advisers should not help people avoid their responsibilities when they can and should pay. We are aware, however, that creditors will encounter people who simply will not pay. But it can be difficult to tell these people apart from people who have problems managing their money. For example, there are people who dont pay because they cant pay what their creditors are asking. There are people whose circumstances make it hard for them to deal with creditors, for example, because of a mental or physical health problem or a previous bad experience. When people are contacted, by phone or letter, they may well not be able to cope. As a result they may not respond or simply put the phone down. How can these people be distinguished from those who could pay but wont? There is no easy answer. However, if creditors take a flexible and pragmatic approach, one that rewards engagement, gives incentives to repayment and addresses the persons needs over time, those who could pay but wont pay should be easier to identify and deal with. Negotiating using Self Help Where it is not appropriate for a client to use the companys service the adviser should signpost the client towards self help resources or provide details of alternative appropriate service providers. Self-help resources which should be considered are: Turn 2 Us Welfare benefits information and calculator Direct Gov for information about debt and help available My Money Steps self help debt management National Debtline information and factsheets Internal self help material Alternative appropriate services which should be considered might be: Free local or national advice services Direct Gov website provides a means of locating a free appropriate legal services A specialist legal adviser or solicitor

Basic Bank Accounts: Basic bank accounts offer a place to keep money for everyday use. Customers can arrange to have wages, State Pension and benefits or tax credits paid into one and also can pay in cheques (for the time being) or cash free of charge, and set up 'direct debits' which pay regular bills automatically from the account.

With a basic bank account customers get a cash card which can be used at a bank machine to withdraw cash. Some accounts also offer a 'debit card' that can be used to pay for items with, and get 'cashback'; but with a basic account these will only work if there's enough money in an account. Customers do not get a cheque book, guarantee card or an overdraft facility with a basic bank account and for this reason are useful for anyone worried about overspending and they are often the only kind of accounts accessible to customers who are or have been subject to insolvency measures. As of 17th November 2011 the Insolvency Service has launched a consultation to gather evidence on the effect of bankruptcy on the ability to access a basic bank account and to explore possible solutions. You can look at, follow and contribute to the consultation by going to the Insolvency Service website or follow the link below Basic Bank Account Consultation . The consultation is due to close in February 2012 after which the response will be published. See the Money Advice Service website for information about How to find a basic bank account Information about all different kinds of bank accounts can be found on the Direct Gov Website

Rules, Regulations, Codes of Practice and Money Advice

There are a whole range of credit industry codes of practice that can be used by money advisers in the course of their work. The Office of Fair Trading (OFT) have published guidelines on: Non-status Lending, Debt Management and Debt Collection. The OFT cannot intervene in specific cases, but where evidence can be provided of ongoing malpractice they can issue warning notices, and as a final sanction revoke a licence. Advisers can submit evidence of non-compliance with reference to the relevant guidelines including descriptions of what breaches of the guidelines have occurred. Whilst this is not likely to have an immediate impact, it will help the OFT to effectively police the credit industry. When complaining to the OFT, be clear about whether the client authorises the OFT to disclose their details to the offender. Ideally, the complaint should be in the form of a witness statement which can help to reinforce the seriousness of the complaint and show an adjudicator at the OFT that action to revoke a credit licence is merited. The Financial Services Authority (FSA) are an independent organisation responsible for regulating financial services in the UK. The organisation was set up by government as a statutory body under the Financial Services and Markets Act 2000 (FSMA). The government is responsible for the overall scope the FSAs regulatory activities and powers. Most financial services markets, exchanges and firms are regulated by the FSA who set the standards that they must meet and can take action against these firms if they fail to meet the required standards.

Rules The County Court has a set of rules (CPR) that must be complied with if a creditor decides to take court action to recover a debt. For more information visit the Ministry of Justice website Civil Procedure Rules Part 1 the overriding objective can be used to challenge gratuitous use of litigation. 1. These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly. 2. Dealing with a case justly includes, so far as is practicable a) ensuring that the parties are on an equal footing b) saving expense c) dealing with the case in ways which are proportionate i) to the amount of money involved ii) to the importance of the case iii) to the complexity of the issues and iv) to the financial position of each party d) ensuring that it is dealt with expeditiously and fairly; and e) allotting to it an appropriate share of the courts resources, while taking into account the need to allot resources to other cases. These rules were developed specifically to avoid creditors taking unnecessary and disproportionate legal action. Harassment Some debt recovery activities and behaviours may constitute harassment of the debtor and it is important that advisers report or challenge this as and when necessary. It is important to understand what legislative and regulatory protection consumers have. Prior to May 2008 harassment was considered to be a criminal act under section 40 of the Administration of Justice Act but in May 2008 protection was covered by the introduction of the Unfair Trading Regulations 2008. These regulations are specifically designed to stop traders acting unfairly including the use of what the rules call aggressive commercial practices. T he OFTs Debt Collection Guidance explains what might be considered harassment under this legislation for example; pressurising a debtor to repay a debt by contacting them at unreasonable times or at unreasonable locations or threatening a debtor with action, to recover money for unenforceable debts. The OFT and Trading Standards now have the power to take enforcement action against creditors. This can lead to fines or even imprisonment if the creditor is found guilty of an offence. C omplaints about harassment under these rules should be directed to Consumer Direct, OFT or Trading Standards normally after it has been drawn to the attention of the offender. Alternatively individuals can pursue prosecution in the Magistrates Court by referring to other relevant legislation but should be cautious as costs are involved:

Protection from Harassment Act 1997 makes it a criminal offence to harass people and put people in fear of violence. The harassment must happen on at least two separate occasions and the police would have to agree to prosecute for this offence. Malicious Communications Act 1988 ; the sending of letters or articles for the purpose of causing distress or anxiety
Criminal Justice Act & Public Order Act 1994 Section (4)(a) makes it a criminal offence to cause harassment, alarm or distress with intent by using threatening, abusive or insulting words or behaviour in a public place.

Regulation Office of Fair Trading The Office of Fair Trading (OFT) is a central government department which has a responsibility for regulating those companies which require a licence under the CCA 1974. Trading Standards organisations operate under the OFT locally to help pursue individual cases. If issues are not resolved at this level a report can be made directly to the OFT. Although the OFT cannot intervene in specific cases, they can investigate claims of continued malpractice, impose a number of sanctions, issue warning notices and finally revoke a licence. Ultimately, both Trading Standards and the OFT can rely on consumer protection legislation (Part 8 of the Enterprise Act) to bring a company who has harmed the interests of consumers, to court punishable finally by imprisonment or fine. The OFT superintends the working of the Consumer Credit Act (1974 ) and regulations made under it. The CCA is covered under a separate in section 1.1.5. As well as taking action the OFT has also published guidelines for licence holders in order to shape good practice and avoid having to take regulatory action. Guidance documents have been written for Irresponsible Lending, Debt Management and Debt Collection. We have outlined with examples OFT guidance documents but you should obtain the full Guidance Documents for reference use in your agency. The Debt Collection Guidance qualifies good and bad practices for creditors, debt collectors, law firms and other businesses engaged in the recovery of consumer credit debts. The guidance says that putting pressure on debtors or third parties is considered to be oppressive. Examples of unfair practices might be contacting debtors at unreasonable times and at unreasonable intervals or pressurising debtors to sell property, to raise funds by further borrowing or to extend their borrowing actions can constitute physical or psychological harassment. The Debt Management Guidance all debt management services, advice agencies, law firms who are engaged in consumer credit and debt advice are required to be licence by the Consumer Credit Act 1974 (unless as a statutory body are exempt). The guidance qualifies good and bad practices and a sample of its direction is a realistic assessment of the financial circumstances of the consumer, including both income and outgoings, must be made before advice is given, consumer income must be verified by appropriate means, such as pay slips. The Irresponsible Lending Guidance all consumer credit businesses (creditors) are required to hold an appropriate standard consumer credit licence issued by the Office of Fair Trading (OFT). The OFT has a duty under section 25 of the Act to take steps to ensure that licences are only given to and retained by those who are fit to hold them (the 'section 25 test'). The guidance

specifically says that banks should treat borrowers fairly and with forbearance if they are experiencing difficulties Advisers can submit evidence of non-compliance with reference to the relevant guidelines including descriptions of what breaches of the guidelines have occurred. Whilst this is not likely to have an immediate impact, it will help the OFT to effectively police the credit industry. When complaining to the OFT, be clear about whether the client authorises the OFT to disclose their details to the offender. Ideally, the complaint should be in the form of a witness statement which can help to reinforce the seriousness of the complaint and show an adjudicator at the OFT that action to revoke a credit licence is merited. The Financial Services Authority (FSA) The Office of Fair Trading (OFT) and the Financial Services Authority (FSA) have different, but complementary, powers and statutory objectives. Given their overlapping interests and jointly regulated businesses, they try to work closely. The FSA is an independent organisation responsible for regulating financial services in the UK. The organisation was set up by government as a statutory body under the Financial Services and Markets Act 2000 (FSMA). The government is responsible for the overall scope the FSAs regulatory activities and powers. Most financial services including banks, building societies, investment firms, insurance companies, mortgage and insurance brokers and financial advisers are regulated by the FSA. The FSA set the standards that they must meet and can take action against these firms if they fail to meet the required standards. The FSA use a process of Supervision' to monitor and regulate firms to ensure they are complying with the regulatory requirements. FSA Mortgage Conduct of Business Over 150 lenders and around 12,000 intermediaries providing mortgages are now regulated by the FSA. From 31st October 2004, all mortgage lenders and firms involved in mortgage business are required to be authorised by the FSA otherwise they will be committing a criminal offence. The Banking Conduct of Business is a set of regulations enforced by the FSA, (replacing the Banking Code). The Banking Conduct of Business Handbook states that a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading. There are different regulatory guides for different areas of business which can all be accessed from the FSA website. These include the following: Payment Services Regulations 2009 - The Government appointed the FSA as the competent authority for most aspects of the Payment Services Directive (PSD). On 01 November 2009, the UK implemented this directive through the Payment Services Regulations 2009 (PSRs). All firms providing payment services as part of their business must be FSA authorised (unless they are exempt) and meet the PSR conduct of business requirements. The Financial Services Authority (FSA) has powers under the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) to challenge unfair terms in standard form consumer contracts. The FSA is also responsible for the Treating Customers Fairly initiative with its focus on consumer outcomes, is central to their aim to ensure a fair deal for consumers. This regime underpins the delivery of their statutory consumer protection objective and accepts that times of market turbulence are when consumers need protection the most.

Codes of Practice Most codes of practice are established and subscribed to voluntarily and cover the range of activities that their subscribers undertake. They often give general or key commitments, for example, to act fairly and reasonably, as well as more specific commitments. There are three distinct levels at which money advisers can use codes of practice: 1. Helping the Client At the most straightforward level, codes of practice can be used to achieve desired outcomes and, sometimes, compensation for individual clients. Often, simply reminding a subscriber of their commitments under a particular code of practice may achieve the desired outcome. Sometimes just the threat of submitting a formal complaint may lead to an offender improving their conduct. On other occasions, it may be necessary to pursue formal complaints procedures; starting with the business itself, if unsuccessful to a trade association, governing or regulating body and on to an Independent Ombudsman if necessary. 2. Influencing Subscriber Practice Generally Where subscribers practice is found to fall short of commitments under a code of practice and there is evidence to suggest the practice is standard or routine, follow up work can be undertaken generally. This might involve gathering evidence over a period of time and submitting this with a general complaint, to help ensure that the defective practice is amended. It is likely that the trade association or other body sponsoring the code will be willing to assist in this process to ensure continuing standards of their members which in turn reflect on their own reputation. 3. Influencing Consumer Protection Generally Sometimes, codes of practice do not adequately protect the consumer. For example, a trade association may refuse to find against one of its members, even where the facts of a case appear to clearly substantiate the complaint. Codes of practice can sometimes be seen to offer sham protection they give the impression to Government and the outside world that subscribers maintain high standards but, in reality, serve to protect subscribers to the code, not consumers. It is important that sham protection is exposed and work undertaken to develop effective consumer protection where this is absent. Such work might be more effective when carried out in liaison with the IMA who have good partnership structures and dedicated social policy departments with knowledge about the most effective ways of influencing practice. The Lending Standards Board The Lending Code is a voluntary code of practice which sets standards for financial institutions to follow when they are dealing with their personal and small business customers in the United Kingdom. It provides valuable protection for customers and explains how firms are expected to deal with them day-to-day and in times of financial difficulties. The Lending Code says that once a bank is aware that a client is financial difficulties it should deal with their case sympathetically and positively. Advisers can encourage the bank to take steps to avoid the situation getting worse. These steps might include not offering a consolidation loan, allowing the client to keep sufficient funds for day to day living, stopping automatic internal payments from going out to service other financial products the client is associated with. Professional / Trade Associations

Most business are also member of a trade association which requires its members to adhere to the rules of that Association and not follow a course of conduct likely to bring the financial services industry or the Association into disrepute. Failure to do so shall entitle the Council to deprive the Member of membership. Members of the British Cheque Cashers Association also subscribe to a code. BCCA members operate from around 1500 outlets, around 1000 of which are franchise operations. These are frequently outlets whose main business is, for example, as a jeweller, pharmacy or pawnbroker. Members include the Money Shop, Shopacheck and London and Scottish. Members should display the BCCA sign in a prominent position in their premises. The main code addresses cheque cashing and discounting of third party cheques. The more recently introduced Best Practice for Delayed Presentation of Cheques addresses this emergent activity. Members of the Consumer Credit Trade Association (CCTA) subscribe to a code. The CCTA has around 500 members drawn from the consumer and motor finance sectors and ancillary and support businesses. It represents the widest range of businesses of any of the credit industry trade associations. Consumer Credit Association The CCA is the trade association for home credit (door step lending) industry in the UK, adherence to their Code of Practice is essential it sets out the expected standard of business practice and fair treatment of customers.
Credit Services Association Members of the CSA subscribe to their code. It is updated from time to time and has recently been updated. Almost all reputable debt collection agencies belong to the CSA.

About Mortgages, Secured Loans and Legal Charges

This section provides a summary of mortgages, secured loans and charges. Mortgages A mortgage is a loan secured on a property by way of a legal charge, registered at the Land Registry for the value of the amount borrowed. The loan is usually to purchase the property but can be extended to be used for other uses. Consumer information relating to mortgages can be found on the Money Advice Service website including finding a mortgage and interest and payment calculators. Capital Repayment Mortgage : The borrower repays the capital and the interest at the same time. In the early stage of the mortgage the monthly instalment consists mostly of interest. This gradually reduces over the term of the mortgage until the instalment represents mostly capital repayment. In addition the borrower may also pay a mortgage protection life policy which basically pays off the loan if the borrower dies. Endowment Mortgage: The borrower repays interest only and in addition takes out an endowment policy which pays back the capital at the end of the term of the mortgage or on the death of the borrower whichever comes first. The monthly instalment consists of interest only paid to the lender. An endowment policy repays the capital. The endowment life assurance

premium is paid to an insurance company. Sometimes these payments are paid to the same company, sometimes two separate companies. Secured Loans Loans can be secured against a property and by doing this the borrower might be able to get a better rate of interest or a larger loan. The negative impact of securing a loan on a property is that the property is at risk of repossession if payments are not maintained. Secured loans might be taken out where someone already has a mortgage and the borrower may have taken out additional funds as a secured loan. This could be with the same lender as the first mortgage, or another lender. They work in much the same way as a first mortgage, but the law relating to them can differ. Secured CCA Loans: Just a reminder that Consumer Credit Act Loans are for sums under 15,000 - (25,000 from 1st May 1998) taken out for purposes other than the purchase of a property, e.g. pay off debts, buy a car, home improvements etc. Also see Cert MAP section 1.1 Consumer Credit Act. Secured CCA loans are repaid on a capital repayment basis. If the loan was made on or after 6th April 2008, then the agreement is regulated, regardless of the amount unless it is exempt, e.g. for purchase of a property. Before April 2007 [prior to the effect of the changes brought in by the Consumer Credit Act 2006], failure by a creditor to ensure an agreement in the prescribed form was signed by the parties led to the entire agreement being irredeemably unenforceable under s127(3) i.e. the defect(s) in the agreement could not be cured (redeemed) by the lender. In the case of a secured loan, the lender would not be able to take possession action in the courts, and would have to remove the mortgage from the charges register at the Land Registry. Now, where an agreement does not comply with the prescribed form, it will be enforceable only with leave of the court. Details of the rate, frequency and amount of repayments must be included. For secured loans, there may be charges added at the beginning that are not part of the loan itself, such as broker fees and legal fees. These often attract interest, but there are no details on the agreement of how they are to be paid off. This can constitute a breach of the discharge of obligations requirements, and mean an agreement is unenforceable. Interest Rates and Options There are a number of different interest rate options available for mortgages and secured loans. Standard Variable: This is the lenders basic interest rate. It is variable and tends to move up and down in line with the interest rates in the economy. Often not the best option, but may be attached to an all in one or off set mortgage (see below). Discounted: Payments are variable, but they are set at less than the lenders standard variable rate for a period of time. These offers are usually offered to entice new customers. At the end of the discounted period, the lender usually charges its standard variable rate. The mortgage is usually set up in such as away as the discounted rate is clawed back over the lifetime of the loan. Fixed : A fixed rate will stay the same for a set period of time, 2 years, 5 years, 10 years or even longer. Unless the fixed rate is set for the whole term of the mortgage, when the fixed-rate period comes to an end the lenders standard variable rate is payable. Low Start deferred Interest: Reduced interest is charged in the initial years of the mortgage

Tracker: These rates are variable; the interest rate is a set amount above the Bank of England base rate or a Banks own base rate so always tracks changes in that rate. The term of this type of loan can vary and if the lender offers this deal for a set period, they will revert to the lenders standard variable rate once this period expires. Capped: Variable rate but is guaranteed not to go above a certain level. Often has a lower cap as well as a higher cap. This has the advantage of being variable but has protection from extreme high or low interest rates Legal Charges There are other ways in which legal charges may be placed on a property. Charging Orders: If a creditor has obtained a County Court Judgment and no instalment order was set or the order has been breached by the defendant, or the creditor has obtained a High Court Judgment the judgment creditor can apply to court for enforcement of the judgment by way of a Charging Order. This secures the debt, so the owner/occupier cannot sell the property without paying the amount secured. The creditor also has the power to apply to enforce the Charging Order with an Order for Sale. If this happens, specialist advice should be sought. Right to Buy: Where a property has been purchased through a Local Authority Right to Buy scheme, the property will have a charge for up to 3 years from the date of the purchase. This secures the discount, and is placed on the property to prevent tenants buying properties and selling them on immediately at a profit. Registered Trust: Sometimes, a property will be the subject of a family dispute or settlement. In these cases, there may be a registered trustsecured on the property. This could be for a child or divorced partner, and can be registered by agreement or by order of the court. Other restrictions: There may be other restrictions on the property which have not been agreed or formalised by order of the court. These can be imposed by judgment creditors awaiting a hearing for a final Charging Order (called Interim Charging Orders), or by ex partners or other people claiming a beneficial interest in the property. They will usually have to be agreed by the owner occupier or determined by the court before a property can be sold. Proceeds of a Sale Any proceeds of sale will be distributed in the order that the charges were registered. So, the first mortgage lender will usually be paid in full, but second mortgage lenders or charging order creditors are often faced with a shortfall. The first mortgage always takes priority, even if it is a recent remortgage taken out after other charges were registered on the property. Equity The remaining amount not secured by any charges is the equityin the property. Upon sale, this amount will be returned to an owner-occupier by their solicitor, who will pay off all outstanding charges first, and assist with the settling of any disputes. Where the value of the outstanding charges is greater than the property value, the property is said to be in negative equity. Lenders will often prevent a sale from proceeding in these circumstances. Any amount still owed after a property is sold by a borrower, or repossessed and sold by a lender, is a non priority debt. Mortgage Shortfalls If the proceeds of a sale are less than the outstanding mortgage on the property there will be a shortfall, the mortgagee is still liable for this after the sale. The adviser should check whether

the client may have paid a one off fee to the lender for such mortgage indemnity when they first entered into the mortgage. If the lender fails to recover enough to clear the total debts then they will claim on this policy to make good the difference. However if the house is repossessed then insurance company may ask the client to pay them what they have had to pay to the lender.

Legislation, Regulation, Rules and Protocols

The Money Advice Service website now contains information for customers about getting help with mortgages The Financial Services Authority and Mortgage Conduct of Business Rules The Financial Services Authority regulates first mortgage lending and brokerage, financial advice and insurance. The FSA handbook is a guide to all individuals and companies carrying on regulated activities. The FSA website has a list of companies who have not registered with them and are therefore not regulated by them. Once firms are regulated by the FSA, they are required to meet the standards set out in the Handbook of Rules and Guidance and to supply the FSA with information, so that their business can be monitored . The Mortgage Conduct of Business Rules, MCOB are included in the handbook as a guide for mortgage lenders. The Mortgage Conduct of Business Rules are drafted and implemented by the Financial Services Authority, whose powers were granted under the Financial Services and Markets Act 2000. MCOB is not binding on the court like an Act of Parliament, but it is a statutory scheme and the court can consider breaches of its provisions in light of a claim for possession. There are 13 sections covering all aspects of mortgages from advertising to selling and recovering. As you will see Part 13 relates to mortgage arrears and repossession. FSA rules require firms to treat customers fairly and they have developed material based on findings of good and poor practice to help firms understand what this requirement may mean for them. You can read more about Treating Customers Fairly The Financial Ombudsman Service (FOS) If a borrower has a complaint this should first be made to the lender or broker , ideally in writing and including some information about what the complainant would like them to do to make things right. The company then has 8 weeks to provide a satisfactory response. Once a final response is received, or 8 weeks have passed (whichever is sooner), a FOS complaint form can be completed by hand or online and submitted for consideration. See FOS How to Complain The Financial Ombudsman is an effective alternative to the courts, and carries far less risk than litigation. The service is free and impartial, and looks at what is fair and reasonable rather than the letter of the law. Complaints are considered by Adjudicators who will take into account relevant codes of practice which are often overlooked by the courts. FOS have powers to consider complaints about insurance, first mortgages, all consumer banking and - for complaints about things occurring after April 2007 - Consumer Credit Act regulated activities (such as lending money, debt advice, debt management etc). FOS can consider the actions of a mortgage lender, whether a first mortgage or a CCA regulated agreement, in the light of whether it is fair and reasonable.

Trade Bodies The Council of Mortgage Lenders is probably the largest trade association for the mortgage lending industry, members account for over 90% of UK residential mortgage lending. http://www.cml.org.uk/cml/home The CMLdo not deal with complaints. Pre Action Protocol for Mortgage Possession Claims The protocol describes the behaviour the court expects of the parties prior to the start of a possession claim. This was amended It recognises that it is in the interests of the parties that mortgage payments are made promptly and that difficulties are resolved wherever possible without court proceedings. However in some cases an order for possession may be in the interest of both the lender and the borrower. The pre-action protocol for mortgage possession claims relates to: First charge residential mortgages and home purchase plans regulated by the Financial Services Authority under the Financial Services and Markets Act 2000; Second charge mortgages over residential property Other secured loans regulated under the Consumer Credit Act 1974 on residential property; and Unregulated residential mortgages. Obligations to make contact and to provide information Consideration to timing of court action whilst taking into account actions of borrowers to establish financial solutions to resolve the arrears Discussions between parties and consideration of alternative resolutions prior to starting a possession claim Accommodation of complaints to the Financial Ombudsman Service Prepared to explain how the protocol has been complied with.

The specific aims, scope and definitions are set out within the protocol which covers:

You should be familiar with the protocol Mortgage Pre-Action Protocol (if not you should read it now); and can check whether a lender and / or borrower have complied with them prior to the commencement of court action. Both parties may be required by the court to explain how they have complied with the protocol. If the pre-action protocol has not been followed then it may be possible to askthe courts for an adjournment and/or for the court costs incurred to be met by the offending party. Legislation The Administration of Justice Acts 1970 and 1973 This legislation give the courts the power to suspend possession on a first mortgage as long as the defendant can satisfy the judge that they can make the contractual payments, and clear the arrears within a reasonable period. The relevant sections are s36 of the 1970 Act and s8 of the 1973 Act. CCA agreements are covered by the provisions of the Consumer Credit Act as described below. Before proceeding it is important that you read the relevant sections of the legislation:

s36 Administration of Justice Act 1970 :Additional powers of court in action by mortgagee for possession of dwelling-house; and s8 Administration of Justice Act 1973 : Extension of powers of court in action by mortgagee of dwelling-house Effect of s36 AJA 1970 and s8 AJA 1973 The s36 provisions therefore allow the court to exercise discretion to suspend, adjourn, stay or postpone possession if the mortgagor can repay any sums due within a reasonable period. Unfortunately, most mortgages were called in before possession proceedings had begun, meaning that the borrower had to convince the court they could repay the full balance of the mortgage within a reasonable period, not just the arrears. To remedy this, the AJA 1973 included s8 to vary the powers of the court.: Section 8 enables the court to regard 'sums due' as only the normal instalments in arrears, and not the total capital. The court can suspend possession on payment of the normal instalment plus an amount for the arrears even if the mortgage, in the event of default, provides for repayment of the total debt. Reasonable Period In the past most District Judges regarded a reasonable period to clear the arrears as two to five years, although some would allow much longer periods, e.g. 8 years. However, case law suggests that the 'reasonable period' should be the remaining term of the mortgage. Cheltenham & Gloucester v Norgan [1996] 1 All ER 449, Court of Appeal was the first case to properly define a reasonable period. The Court of Appeal stated "the logic and spirit of the legislation required that the court should take as its starting point the full term of the mortgage and pose at the outset the question - 'would it be possible for the mortgagor to maintain payment of the arrears by instalments over that period'. The court went on to say that by taking at the outset the full term of the mortgage, if the mortgagor defaults on the term of a suspended order, then s/he would have had his / her chance and the powers of Section 8 should not be repeatedly exercised. When advising clients and making proposals for repayment of arrears, advisers should bear in mind that a court would be reluctant to extend the payments of arrears beyond the term of the mortgage, although this can happen in exceptional circumstances (e.g. where the mortgage is nearing the end of the term). Lenders often tell borrowers in arrears that they must pay the arrears within a set time, e.g. 2 years; however this is just a matter of policy. The court has discretion to spread the payments over as many years at it deems reasonable. Northern Ireland In Northern Ireland, the decision of Norgan has not been followed by the courts. However: In the case of National & Provincial BS V Lynd, Girvan J stated that the court must have before it the best realistic proposal to clear the mortgage debt or arrears in Instalments. In N.I. there should be no assumptions to what constitutes a reasonable period: it depends on all the circumstances of the case. It would be wrong to assume at the outset that the court will not consider a period longer than a number of years or the term of the mortgage.

Also it is not necessary for the borrower to commit all surplus income to the proposal In Northern Bank V McTaggart (2000) the available surplus income was 165 per month and the court suspended the possession order on the grounds the borrower paid 75 per month towards the arrears , in addition to the normal monthly contractual payment. It would appear therefore that a proposal to pay of the arrears based on 40-70% of the surplus income could be accepted by the Master Consumer Credit Act Where a loan is CCA regulated, the Administration of Justice Acts do not apply. The only method by which the court can suspend possession is a Time Order. This may or may not engage the s136 provisions to reduce the payable instalments. Many judges will make standard suspended possession orders on CCA loans, but where the contractual monthly instalment plus an amount towards the arrears is unaffordable, the judge should be reminded of the s136 powers to amend the agreement. If the judge is willing to consider making a Time Order which affects the contractual payments, he or she will generally adjourn so that the application can be considered fully. S129 (2) A Time Order shall provide for one or both of the following as the Court considers just The payment by the debtor .of any sum owed under a regulated agreement or a security by such instalments, payable at such times as the court, having regard to the means of the debtor considers reasonable. S136 The court may in an order made by it under this Act include such provision as it considers just for amending any agreement or security in consequence of a term of the order. There have been a considerable number of cases about the meaning of the above sections. An important case is Southern & District Finance v Barnes] [1995] CA. The following is a summary of the main findings of the Court: In considering a Time Order application, the court must first decide whether it is just, taking all the circumstances into account When a Time Order is made, it should normally be for a stipulated period on account of temporary financial difficulty 'Any sum owed' means every sum due and owing under the loan agreement. In the case of possession proceedings, this will normally be the total indebtedness The court must fix reasonable instalments, having regard to the debtor's means The court can amend the agreement as a consequence of the Time Order, including reducing the interest rate Any Possession Order should be suspended for as long as the terms of the Time Order are complied with

Limitations Act The length of time a lender has to recover the mortgage shortfall is governed by the Limitation Act 1980. The period that applies depends on whether the shortfall is made up of capital only, or a mix of capital and interest; for any capital element the lender has 12 years to seek recovery whereas the period of recovery of any interest is 6 years. Notwithstanding this, members of the

Council of Mortgage Lenders (CML) have committed to a six year recovery period. This also forms part of the FSAs rules (MCOB 13.6.4). Building Societies, when selling as mortgagees in possession, are obliged to provide the borrower, at his / her last known address, with prescribed information within 28 days of the completion of the sale. This includes the date of completion, the sale price and the name of the purchaser (Building Societies Supplementary Provisions as to Mortgages) Rules 1986 SI No. 2216. Costs The borrower can apply to the court to disallow the lenders costs or to have the lender's costs 'assessed, i.e. checked by the court under rule 48.3 and paragraph 50 of the Civil Procedure Rules Practice Direction Part 48 but this risks further cost and expense.

Action for Recovery of Property

The process for recovery of property secured on a loan or mortgage will depend on the type of agreement. If the secured loan is regulated under the Consumer Credit Act then the borrower has more protection from repossession. CCA Secured Loans Also see section 1.1 Consumer Credit Act and section 1.2 Mortgages, Secured Loans, and Legal Charges. Remember for a loan to be CCA regulated agreement it must be no more than: 15,000, if taken out before 1st May 1998 25,000, if taken out on or after 1st May 1998 and not exempt (loans to purchase property are exempt). There will be no upper limit on borrowing taken out from 6th April 2008 due to the CCA 2006

Default Notice: The lender must serve the borrower with a default notice before any legal action can be taken. The default notice will detail the breach of the agreement, the arrears, how to remedy the breach and a time limit for this (a minimum of seven days) and where to go for advice and assistance. The service of a default notice entitles the borrower to apply for a Time Order. Time Orders and Secured Loans If the secured loan is regulated by the CCA and a default notice has been served under section 129 (CCA 74), it is possible to apply to the court for a 'time order'. This is covered in more detail in section 1.2 Regulation, Rules, Protocols and Legislation. Time Orders are frequently made in response to claims for possession by lenders because the normal rules about suspending possession do not apply to CCA regulated agreements. Time Orders are the way by which the defendant is given time to pay. Most commonly and similar to suspending possession of first mortgages, the Time Order can be for the defendant to pay the contractual instalment plus an amount towards the arrears, either as a monthly payment or a lump sum.

Alternatively, if the defendant cannot afford to pay the CMI plus the arrears, the court has the power to make an order (CCA section 136) that the defendants pay less than the contractual instalments this makes the orders very different from those made for first mortgages. The agreement can be amended by the courts in consequence of the order e.g. to freeze or reduce interest on the arrears. This application allows the court to consider the means of the debtor and gives the court the power to make an order which can reschedule the contractual monthly instalment and set a level at which arrears are to be paid. Time orders can be made in response to a claim for possession, or at any time after an Arrears Notice has been sent to the debtor. If the account is in arrears but no action has been taken by the lender, the court may only be able to deal with rescheduling the arrears. If the debtor wants the court to deal with the whole amount outstanding under the agreement, the application will have to be made after the service of a Default Notice, which terminates the agreement. How to apply : The borrower can apply for a Time Order: Before possession proceedings using form N440. This form requires details of the applicant's income, expenditure and offer of payment. A fee is payable although certain exemptions apply During possession proceedings on either the Reply Form N11 (M) together with a witness statement setting out the proposed terms and the facts in support of the application or on general application form N244 for which there is a fee. Application for exemption or remission from the payment of fees can be made on form EX160

A separate hearing will be necessary where; insufficient time has been allocated by the court or given to the lender to prepare its response. The Hearing : All Time Order applications will be dealt with at a hearing before a District Judge in private chambers. The lender will usually be legally represented and specialist advice should be sought for the borrower. All Time Orders must be considered 'just', taking into account both the borrower's and the lender's position, and will normally only be made for 'stipulated periods on account of temporary financial difficulty'. The court will consider whether it is just to make a Time Order. This will involve considering the effect on the debtor and the creditor, taking into account the behaviour of both parties. An application is more likely to be considered favourably if the loan was affordable at the outset, the debtor has attempted to resolve their difficulties, and ideally that the difficulties are temporary. The court will also consider the cost of the loan, the conduct of the creditor and the terms of the agreement. Consequential Orders: S 136 CCA allows the Court to vary the terms of an original credit agreement, in order to give effect to the time order made under s129. An example: Mrs Campbell borrowed 13,000 to be repaid by monthly instalments of 255.30 at an interest rate of 23.10% the arrears were 7,000. Due to additional interest on the arrears the monthly instalment increased to 395.00 per month. She could only afford 180.00 per month. The District Judge ordered the following: Interest rate reduced to 10.7%

Contractual monthly payment reduced to 180.00 Arrears to be reviewed in 12 months.

For a more detailed analysis on applications for time orders see "Time Orders- whats all the fuss?" Quarterly Account (2009) 11 p14 19. Copies of Quarterly Account are available in the module via the Quarterly Account button in the left hand menu. Unfair Credit Relationship Orders These have replaced the extortionate credit bargain provisions of the CCA. This is available at the Courts discretion either within possession proceedings or as a stand-alone application. But to make such an order the Court must find ALL of the credit relationship unfair. Such orders only apply to borrowing taken out after 6th April 2007. Also see section 1.1 Consumer Credit Act. Possession Proceedings It can take 3 - 6 months from when the borrower falls into arrears to when the lender starts possession proceedings. Most lenders will follow similar recovery procedures, although some finance companies may act more quickly, while some building societies may allow arrears to accrue for longer before taking action. Although practice does vary, in the early stages of recovery the local branch will usually retain control of the account with regional or central recovery teams taking it over later and becoming responsible for negotiating the recovery of the arrears and making decisions on the issue of proceedings etc. The Stages of Recovery Reminder Letter Contact Letter Solicitor's Letter/Default Notice (CCA loan) Possession Claim issued Possession Hearing Possession Order (28 days) Warrant of Possession Eviction

Pre-Court Action Before any mortgage possession claims are bought the court expects that lenders and borrowers will have already taken steps to resolve the situation. These steps are covered by the Mortgage Pre-Action Protocol which is described in more detail in section 1.2 Regulation, Rules, Protocols and Legislation In consideration of the protocol all lenders will attempt to make contact with the borrower in order to negotiate or come to an arrangement to clear arrears before any court action is commenced. The borrower will usually receive the following: The Reminder Letter : After 1 month's default, the lender will automatically issue a letter asking the borrower to bring the account up to date

The Contact Letter : After further default the lender will ask the borrower to discuss the account and come to an arrangement to clear the arrears. The local branch may try to contact the borrower by telephone or even visit the borrower at home The Solicitor's Letter : The Lender will instruct its solicitor to inform the borrower that possession proceedings will commence if the arrears are not repaid. It may be possible to negotiate an arrangement with the solicitor, although the lender will continue to make the decisions regarding the account The Default Notice : If the loan is regulated by the Consumer Credit Act 1974 the lender must issue a Default Notice before any legal action can be taken Notice of Proceedings : The lender must send to the occupiers of the property a letter giving notice of pending possession proceedings The Possession Claim: The local county court will issue a possession claim (N5). Attached to the claim form are particulars of claim and a reply form (N120) The Claim Form : Gives the time and date of the hearing The Particulars of Claim : Give details of the loan agreement, the normal payment, the arrears, and makes a formal claim for possession. They will also state whether the loan is covered by the Consumer Credit Act The Reply Form : Asks the borrower if s/he agrees with the claim for possession, the type of order s/he wants, the amount(s) of any payments made and details of his / her financial circumstances.

Responding to a Claim for Possession The borrower should complete the Reply Form which asks the borrower the following questions Whether s/he agrees with the possession claim About previous payments and arrangements Whether s/he wants to clear the arrears by instalments Whether the terms of the loan are 'fair' (Consumer Credit Act loans only) Details of his / her financial circumstances How the arrears arose Whether s/he has anywhere else to live.

The purpose of the reply form is to enable the District Judge to make an informed decision. The reply form gives the borrower an opportunity to make an offer to clear the arrears. Any offer should clear the arrears within a couple of years where possible, or longer where necessary. If the borrower is on Income Support, the offer should be a minimum amount per week. The form should be filled in and returned to the court within 14 days or as soon as possible. It should be noted that even after proceedings have been issued lenders are commonly willing to negotiate agreements which the court can "approve" at the hearing. Contact with the lender should be made at the earliest opportunity prior to the hearing to seek a negotiated agreement. Where agreement is reached the terms of the agreement should be confirmed in writing. The Possession Hearing

Mortgage possession hearings are usually held in private, are quite informal, and often only last a few minutes. The only people present will be the District Judge, the solicitor for the lender, the borrower and (if able to attend) the adviser. Before the hearing it is common practice for the adviser to ask the solicitor for the instructions of the lender, e.g. possession in 28 days or possession suspended on agreed terms. If at this stage an agreement can be reached with the solicitor then the District Judge will usually make an order for possession suspended on the agreed terms If an agreement cannot be reached then the District Judge will make the decision.

The Solicitor will present evidence by means of a witness statement, which is an up to date statement of the particulars of claim, provide the legal charge for examination by the District Judge and, if necessary, any search certificates. The solicitor will state the arrears, the normal payment, may give a payment history of the account and will formally ask for possession. The Adviser should explain the reasons for the arrears, present a personal budget, usually make an offer to clear the arrears and ask for possession to be suspended or where appropriate that the proceedings are adjourned. The District Judge (DJ) assuming s/he is satisfied that the correct legal procedures have been followed, will make a decision based upon the facts presented. The DJ will have the legal documents, the facts presented by the borrower and the solicitor, and the reply form, if it was returned. The District Judge will usually do one of the following: Strike the order out Adjourn the proceedings Order possession to be postponed or stayed (e.g. to give borrower time to sell property) Order possession in 28 days, but suspended it on terms Order possession in 28 days or longer

What the Judge can do Strike Out A claim can be struck out at the hearing in some circumstances. This could happen if the lender has not complied with court rules of procedure, or has acted contrary to the contract (e.g. they issued the claim on just 1 month arrears when the contract says they wont bring proceedings for less than 2 months arrears). If the lender wanted another possession hearing they would have to start from scratch. Adjournments Either party can ask the District Judge to adjourn the proceedings because there is to be some change of circumstances or facts to be made available that could affect the decision of the court. Sometimes, a borrower will seek advice after a claim for possession has been issued (possibly on the day of the hearing if there is a court duty desk). The adviser may wish to ask for an adjournment in preference to a suspended order. The following ways are possible; Adjourn for a fixed time period: There are a number of reasons why an adjournment to a fixed date would be appropriate: To allow the DWP time to work out the housing costs of the borrower

To resolve a dispute about the amount of arrears For the lender to provide sufficient or up to date information which they have failed to provide previously. To allow one party to comply with the Pre-action Protocol For a mortgage rescue application if applicable. In this scenario the adviser could ask the Local Authority to confirm that they are currently considering a Mortgage Rescue application with an estimated timescale for completion. There is a MRS checklist on the CLG Court Users Forum or on the NHAS website which useful to help advisers to identify potential cases. To allow a complaint to the Financial Ombudsman Service to be dealt with To allow the defendant to effect a sale

Adjourn generally: It is within the courts powers to adjourn a claim generally if appropriate, particularly if the arrears are very low (i.e. below 2 months) and there is a repayment arrangement in place. The claim will usually be struck out after a set period of time unless an application is made by the lender to restore it. Adjourn with liberty to restore: Where arrears are to be paid in full or perhaps where a sale is about to happen and if it does not happen the proceedings are re-commenced When requesting an adjournment, it is worth bearing in mind that the defendant will generally bear the costs of additional hearings, and so consideration should be given to whether another solution would be more appropriate. The court is unlikely to grant an adjournment of more than 56 days. As much evidence as possible should be provided to show that the matter will have progressed by the time of the next hearing. If an adjournment is necessary, due to a fault on the lender's part, the client / adviser should ask the DJ for an order that the costs of the adjournment hearing are borne by the lender. Suspended Possession Orders The District Judge has the power under the Administration of Justice Act 1970 S36 to suspend a possession order if the borrower can pay the normal instalment and clear the arrears within a 'reasonable period'. See section 1.2 Regulation, Rules, Protocols and Legislation for more information, caselaw and examples relating to this. The Terms of a Suspended Order may vary: Payment of the normal instalment plus: An amount for arrears A lump sum and an amount for arrears A low amount for arrears for 12 months followed by a higher amount for 18 months, i.e. a staggered order

Payment to the lender of all monies paid by the Department for Works and Pensions for housing costs plus an amount for any shortfall and arrears.

Example

Mrs Jones has arrears of 4,000 and the normal instalment is 200 per month. The remaining term of the mortgage is 15 years. The District Judge could suspend possession on the following terms: Clear the arrears within 3 years: 4,000 36 months = 111.00 per month Clear the arrears within 15 years: 4,000 180 months = 22.00 per month

Order for possession Where there is no reasonable chance of clearing the arrears the court will make a possession order, often referred to as outright possession usually to take effect within 28 days, but the defendant can ask for this to be extended to 56 days if they need time to move. These are sometimes called longstop possession orders. After the date for possession, the lender can apply for a warrant of possession which will state the time and date for the eviction. Warrant of Possession: If a borrower defaults on any term of the possession order the lender can apply to the court for a warrant of possession to be issued. No court hearing is required for this. Default may be either the borrower not leaving the property by the date on a 28/56 day possession order, or not paying the amount ordered at a previous court hearing under a suspended possession order. If a borrower does not leave voluntarily, the county court bailiff will evict him/her on a set day and will change the locks. The possession order implies vacant possession and, therefore, if goods are left in the property the lender can obtain an order for their removal. Dealing with the Warrant of Possession A borrower will receive notification of the issue of a warrant; this may even be when advice is first sought. Where a borrower has received a warrant of possession it is important to act quickly as there are still options available before execution of the warrant takes place. Setting the Order Aside: If the borrower did not attend the initial hearing because s/he did not receive the possession claim, because s/he was ill, was away when the claim form was served or has other good reason for not attending, an application could be made, together with a supporting evidence or affidavit, to set the order aside. Application to suspend: The borrower may apply to have a possession order suspended (or further suspended) on terms or to have the warrant for possession suspended on terms. Application for such a suspension should be made on form N244, which should contain information about the borrower's circumstances and state the reasons or grounds upon which the suspension is being requested. This will usually take the form of an offer on the part of the borrower to clear the arrears over a "reasonable period". Both borrower and lender will be notified by the court of the hearing date and the application will be heard by a District Judge, usually in private chambers. While applications are made on notice to the lender, in emergencies the court has the power to hear an application immediately without notice of the hearing being served. Request for more time: Where the borrower or his / her adviser are not able to put forward a convincing case in order to save the property, the borrower may ask the court to postpone the date of delivery of possession for such period(s) as it thinks reasonable. Alternatively, the borrower may need more time to complete a mortgage rescue. This allows the District Judge to suspend the warrant on terms of payment, e.g. to permit time for the borrower to sell the property

if no alternative can be found. However, applications from borrower in negative equity to suspend orders / warrants may not be granted by District Judges as it could be seen as putting the lender at risk of increasing arrears and losses. Costs of applications: For all of the above N244 applications the borrower has to pay a fee. The borrower can apply on Form EX160 for exemption from the fee or remission if they are on a low income Post Execution If the borrower has already been evicted it is too late to apply for a suspension of the warrant. The only way for the borrower to re-gain possession at this stage is to find grounds for setting aside the original possession order or the warrant of possession. There are very limited grounds for these post execution applications and cases should be referred to a specialist money adviser or solicitor. It is important to act quickly in these circumstances. Sale of Mortgaged Property Where the sale of a property is the best option for the client, i.e. it is clear that the arrears cannot be paid off in any other way, then it is better for them to start acting on this at the earliest possible time because the sale price of a property is likely to be greater if the property is occupied although market activity will also be a factor for consideration. Where there is 'negative equity' the consent of the lender is required if the borrower wishes to sell. There have, however, been some recent developments in case law where, on the application of the borrower, the Court of Appeal has ordered a sale against the wishes of the lender "If the justice of the case on the evidence before the court requires it", (Palk v Mortgage Services Funding plc [1992]) It is not always possible for the borrower to initiate the sale so in cases where the property has already been repossessed, the lender is under a duty to the borrower to take care to obtain the current market value of the property when it is sold (Cuckmere Brick Company v Mutual Finance (1971)). However, the courts will not interfere with a sale unless the lender is plainly selling undervalue. The mortgagee in possession is under some limited responsibility to undertake necessary repairs to a property pending sale and most lenders do usually ensure that essential repairs are carried out. Mortgage Shortfalls On completion of the sale the borrower is entitled to be paid the balance of the sale monies after the mortgage has been redeemed and the lender's costs have been paid. If the sale proceeds are insufficient to pay off the mortgage and costs in full, the lender can sue the borrower for the shortfall. Limitations Act The Limitations Act 1980 governs the length of time a lender has to recover a mortgage shortfall. The period that applies depends on whether the shortfall is made up of capital only, or a mix of capital and interest; for any capital element the lender has 12 years to seek recovery whereas the period of recovery of any interest is 6 years. Notwithstanding this, members of the Council of Mortgage Lenders (CML) have committed to a six year recovery period. This also forms part of the FSAs rules (MCOB 13.6.4).

Building Societies, when selling as mortgagees in possession, are obliged to provide the borrower, at his / her last known address, with prescribed information within 28 days of the completion of the sale. This includes the date of completion, the sale price and the name of the purchaser (Building Societies Supplementary Provisions as to Mortgages) Rules 1986 SI No. 2216. Costs In mortgage cases the lender is entitled to all 'costs, charges and expenses' reasonably and properly incurred in preserving the security or recovering the mortgage debt, including the costs of possession proceedings. These costs can be very high, e.g. in excess of 500 for simple undefended cases. It is not necessary for the court to make an order in relation to the lender's costs, as they are recoverable under the terms of the mortgage deed, which allows them to be added to the security. However, lenders should be asked to justify any costs or charges that appear to be unnecessary and / or excessive. The borrower can apply to the court to disallow the lenders costs or to have the lender's costs 'assessed, i.e. checked by the court under rule 48.3 and paragraph 50 of the Part 48 Practice Direction in the Civil Procedure Rules CPR Practice Direction Part 48 but this risks further cost and expense. Specialist advice should always be sought if this is being considered.

Mortgages Rescue and Homeowner Support

Mortgage Rescue Scheme Mortgage to Rent option Homeowner has existing mortgage of between 75% and 120% of value of property The total amount of annual income for the household is 60,000 or less Registered Social Landlord (RSL) provider buys home and rents it back From 28th February 2011 property purchased at 90% of current market value 10% of the value of the property (the homeowner equity contribution) to take part in mortgage rescue Homeowners with less than 10% equity or in negative equity may still be able to join the scheme, but would need to make special arrangements with their lender. RSL provider owns 100% of freehold or leasehold RSL grants a 3 year assured short hold tenancy Intermediate rent (80% of the market rent) HB payable if eligible Repairs & maintenance are RSL responsibility Homeowner has a minimum of 25% equity and a maximum of 40% equity RSL loan (25% -75% of current mortgage) paid to the lender Loan is secured against the property as an equity loan

Shared equity loan

Mortgage is reduced in line with the equity loan Monthly payments made on the remaining mortgage and the equity loan An interest fee of 1.75% charged on the equity loan, payable in monthly instalments plus an annual increase of RPI plus 0.5% 3% equity contribution payable to take part in mortgage rescue (not a cash contribution) this will be 3% of the amount of the loan but is linked to the percentage charge on the property Repairs & maintenance remain the responsibility of the homeowner

The main functions of the adviser are to identify cases where Mortgage Rescue might be appropriate, and to provide a debt advice service. The local authority will need a before and after financial statement showing the current state of affairs and a new statement with a rent figure instead of mortgage. The Local Authority will be able to provide an estimated rent figure, which can be used on the statement and as an estimate for calculating housing benefit entitlement. The money adviser will have to show that other options for dealing with the arrears have been exhausted, and that repayments to non priority creditors have been rescheduled, or some other way of dealing with the creditors has been agreed (e.g. Bankruptcy, IVA, Admin Order). Impact of MRS on options for dealing with debt Admin Orders remain unaffected, assets and sale of assets are not considered as part of application BUT if the applicant can pay debts (e.g. through a lump sum received through MRS) then they would be solvent and therefore ineligible to apply, and if the lump sum was received whilst AO was in place the court would have to be informed and the Order reviewed. Bankruptcy those with significant equity will generally not consider bankruptcy for the usual reasons it is an asset and will most likely be claimed by the trustee. If in negative equity, any mortgage shortfall will be a bankruptcy debt whenever the shortfall occurs (i.e. before or after the Bankruptcy Order) as long as there has been no remortgage since the bankruptcy, and the debtor has not signed a deed of acknowledgement. Bankruptcy can be a very effective way of dealing with unaffordable debts and any future mortgage shortfall debt as part of MRS advice. If the bankruptcy occurs before MRS, negotiations will have to include the trustee, who will have to consent on behalf of the creditors (there are no problems envisaged with this and the Insolvency Service have indicated that they will be positive about their involvement in this scheme). IVA if proposed and accepted on an income only basis then the IVA should be unaffected, if however the IVA included equity then their IP will have to be involved as there may need to be a review of the arrangement or a variation. It is most likely that any lump sum received will have to be used for the benefit of the creditors. When advising re mortgage rescue, if it appears that there will be a lump sum payment that client would like to use for a full and final settlement of other debts, an IVA provider could arrange a full and final IVA; again this would need to be supported by the majority of their creditors. Debt Relief Orders are not suitable for homeowners as they have assets with a gross value over the 300 limit BUT if a mortgage to rent application is successful and there is no payment of equity, a DRO could be a viable option for other debts if the total debts are below 15k, the

applicant has less than 50 per month available after essential expenditure and their circumstances are unlikely to improve within the following 12 months. Homeowners Mortgage Support Scheme Homeowners Mortgage Support (HMS) was launched in April 2009 to help homeowners if they, or a member of their household, suffer a temporary loss of income which means they are no longer able to pay the contractual monthly interest payments on their mortgage. The scheme has now closed (as of 21st April 2011) so although the scheme will still operate for those clients already accepted onto the scheme, new applications cannot be made. In order to benefit from the scheme, borrowers needed to meet certain eligibility criteria and have a mortgage with a lender who signed up to the scheme. HMS allowed borrowers to postpone up to 70% of their monthly mortgage interest payments for up to two years. This is not a payment holiday; the deferred payments are rolled up and added to the principal value of the loan. They will have to be paid back after the homeowner leaves the scheme according to a schedule agreed between the homeowner and their lender. Interest will be charged on any amounts deferred. It was up to the lender to decide whether to admit a borrower to the scheme, which will be reviewed after one year (or earlier) to assess whether the scheme is still suitable for the borrower. All lenders offering HMS have the backing of a Government financial guarantee that will protect the lender if the customer ultimately defaults on the mortgage. If, during or after exiting the scheme, the borrower is unable to keep up with their mortgage payments, the lender may decide to repossess and sell the property. If there is a shortfall between the proceeds from the sale and the amount of money owed to the lender, the Government will pay the lender up to 80% of the interest deferred while on the scheme. HMS was designed for people who suffered a temporary loss in income, for example a cut in hours, unemployment or temporary difficulties with a business. By reducing monthly interest payments to an affordable level, it offered households valuable breathing space to get their finances back on track. While on the scheme, the lender could not commence or proceed with any repossession action as long as the homeowner maintained the agreed schedule of payments, giving the homeowner some confidence that they were no longer at risk of losing their home. There were risks associated with HMS, as the homeowner was increasing their overall levels of debt which may result in a worse position in the future should they come to be repossessed on leaving the scheme. HMS was just one of the forbearance options available to clients and should have been explored alongside other options. You may also find Shelters programme summary on outcomes for the scheme helpful.

Bankruptcy
The Law a) The Insolvency Act 1986 as amended by section 10 of the Enterprise Act 2002. The rules b) Insolvency Rules 1986. Useful websites

For England and Wales The Insolvency Service pages of BIS contain information, legislation, statistics, forms and guidance You can view thevery useful Insolvency Service Case Help Manual compiled and used by the Insolvency Service via : Insolvency Service Technical Case Help For information compiled and used by the Insolvency Service as a guide to household incomes visit BIS Personal where you will also find a range of other resources published by the Insolvency Service, including A guide to bankruptcy - Insolvency Service For NI NI Insolvency Service pages of DETINI contain similar information legislation, statistics forms and guidance What is bankruptcy? Bankruptcy is the granting of an order from the bankruptcy court following the presentation of a Bankruptcy Petition to the court to obtain protection from the collection efforts of creditors. Insolvency Statistics To see all of the most recent statistics follow the link: Insolvency Statistics Becoming Bankrupt. This can happen in one of three ways. If a creditor (or more than one creditor together) is owed 750 or more Your client is unable to pay their debts An IVA supervisor applies to the court for their clients bankruptcy due to payment default. The Process a) The Debtors Petition The 'petition' is completed using a set of forms, the debtor's petition and the statement of affairs (For E&W 6.27, for NI forms 6.30), which are available from the Insolvency Service pages of BIS for E&W and DETI for NI respectively. The statement of affairs (For E&W 6.28, for NI forms and 6.31) requires a considerable amount of information. Once the forms are completed and copied, they should be taken to the client's local court to be sworn, together with the appropriate fee and deposit. Any application for a fee exemption should be completed on an EX160 for E&W, and ER1 for NI. The deposit however cannot be remitted, just the fee. In the majority of cases there will not be a court hearing, however if there is the debtor is required to attend. At this hearing the matter may be referred to an insolvency

practitioner to assess whether an IVA is applicable. A report to this effect will be produced. This will happen if: Debts are less than 40,000 Assets are more than 4000 The debtor has not been subject to a bankruptcy proceeding in the last 5 years. It seems more appropriate to refer.

b) The creditor's petition These are much less common. The Insolvency Act (s267) sets out four conditions which must be satisfied before a creditors petition can be issued. A creditor (or two or more can combine) to apply if they are owed more than 750. The debt is unsecured, liquidated (a specific amount that can be quantified) and either payable immediately or at a particular time in the future. The debtor is unable to pay or has no reasonable prospect of paying There is no outstanding application to set aside a Statutory Demand

What is a statutory demand? This is the most common method which is used by creditors to satisfy the court that the client is unable to pay. It is the one that you are therefore most likely to see. There are different types of statutory demand and each has a prescribed form For E&W these are 6.1 - used for a debt for a liquidated sum which is payable immediately 6.2 - used for a debt for a liquidated sum which is payable immediately following a judgment 6.3 for a debt payable in the future

This asks the debtor to either pay the amount or secure it against the property or offer to pay in a satisfactory way. Rules 6.1, 6.2 and 6.3 set out the information which must be included in the Statutory Demand. The creditor does not need a judgment to issue a statutory demand. It is important to remember that some creditors use a statutory demand to try to encourage (or even scare) the debtor into paying and in fact the creditor has no intention to proceed to bankruptcy. Any adviser should try to check the creditor's intention by contacting them at this point, as a statutory demand can lead to a bankruptcy if it remains unanswered for 21 days. (For NI Forms see DETINI) Service of the demand

The rules (6.3(2) IR state that a statutory demand should be served personally (usually in reality done by a debt collection agency or county court bailiff). There are specific requirements for instance if personal service cannot be achieved i.e. if the debtor is of no fixed abode (called substituted service). If you are interested in the detail around service requirements then you might like to visit HMRC to view the Inland Revenues process for preparation of Statutory Demands. The Inland Revenue start bankruptcy proceedings regularly as a means of debt recovery. The debtor has some stark and basic choices in relation to their response: 1. Pay something to reduce the debt below the 750 2. Make an instalment offer - in other words 'comply' 3. Apply to set aside, if there are grounds to do so - (this must be done within 18 days of service) 4. Apply for an Administration Order or propose an IVA as an alternative. 5. Make a full and final settlement offer (lump sum or by instalments). 6. Apply for a Time Order (if debt is CCA regulated) 7. Offer to have a voluntary charge attached to the property. 8. Do nothing at all - if they would in actual fact be better off going bankrupt. If the client does not want to be made bankrupt then they should consider the following; 1. Can they pay in full? This needs to be done within 21 days in which case they will be compliant. 2. Is it possible for the client to secure the debt? 3. Can the client offer installments or a full and final settlement? (The creditor must agree of course) 4. Does the client have a possible counterclaim? 5. Does the client have any grounds for applying for the demand to be set aside? 6. Can the client apply for a time order? Setting aside (cancel) a statutory demand Any application must be made within 18 days of service of the statutory demand and it must be on the appropriate forms (6.4 and 6.5). The application will be put before a district judge and may result in a hearing, if there is a case to be heard. The court will consider the application to set aside. This is applicable where; 1. There is a dispute about the amount owed 2. There is a counter claim of equal to or more than the amount owed 3. The creditor holds some security which equals or is greater than the amount owed. 4. On other 'substantial grounds'. e.g. the debt is statute barred, the client is not liable for the debt.

The Bankruptcy Hearing Eventually, the debtor will receive a copy of the petition together with a date for a hearing and an affidavit, which will outline the circumstances. The debtor can, even at this stage, try to stop the bankruptcy by attending court, after giving seven days notice that they intend to oppose the petition. Of course payment can be made or an IVA applied for at this stage. At the hearing the creditor must prove that they have delivered the petition and they must file a certificate to the effect that the debt remains outstanding. If of course the client has paid the debt in full prior to the hearing date, it will be dismissed, (the DJ can ask the client to pay the creditor's costs). If the debtor has reduced the debt to less than 750 in the time between the petition and the hearing, the court can make a bankruptcy order, taking into account the conduct of the client. The court can dismiss the petition, adjourn the proceedings or make a bankruptcy order. What happens next? Soon after the order is made, the Official Receiver will contact the debtor. The debtor is asked to complete a detailed form (B40.01), which they should take to a meeting if one is arranged. However, where there is summary administration, this meeting will be conducted by telephone. 1. The bank account may be frozen 2. The debtor must give up any assets (not goods which are protected) 3. The Receiver will notify the bankruptcy to banks, building societies, courts, local authorities, insurance companies and the debtor's landlord if applicable. 4. The Receiver will register the bankruptcy with the Land Registry and in the insolvency register, and may advertise it in the London Gazette and a local paper. 5. The Receiver will make an assessment of the debtor's affairs. The role of the trustee Once the trustee is appointed, the debtor no longer owns all of their property (the bankrupt's estate). Certain items 'vest' in the trustee. This means that ownership of them passes to the trustee. The trustee is responsible for handling the debtor's affairs and getting together as much money as possible for the creditors. This will be done by gathering together any assets, selling them and distributing the proceeds. There are also some goods which are protected: 1. Tools of the debtors trade, which includes any necessary vehicle. 2. Household goods required for basic living of the debtor and their family. Vehicles not associated with employment are usually sold if they have a reasonable resale value. It is important to note that goods, which have a sale value of less than 500, are rarely, if ever, sold.

Effects of the bankruptcy upon:

Earnings

The trustee can suggest that the debtor pays a weekly or monthly payment from their earnings. If the payment is not agreed, then an income payments order can be obtained for from the court. The court however should leave enough money for the basic domestic needs of the debtor and the family. These orders are however quite rare. There are some very specific rules relating to personal pensions (see HMRC approved pension arrangements) and there is an important date to bear in mind (29th May 2000). Whether the bankruptcy occurred before or after that date determines whether the pension is part of the estate or not. Householders - Owner Occupiers The Official Receiver is only interested in the bankrupts legal share or beneficial interest of a property. For sole owners beneficial interest will be the equity in the property its value minus any sums owed against it. For jointly owned properties the bankrupts beneficial interest is also minus any other partys beneficial interest. Joint owners and those who share a home with the debtor should seek legal advice about potential beneficial interest. The debtors interest will be transferred to the trustee who will decide whether to sell the home in order to access the value, whether to secure the value by putting a charge on it or whether to consider offers from third parties to buy out the value. The Official Receiver will consider the debtors circumstances and also the best interest of the creditors. The proceeds of the sale will be distributed to creditors after the trustees costs have been paid. A sale can be delayed depending on the bankrupts or their family circumstances but for those who went bankrupt after April 2004 any steps to realise/secure the interest must be taken within 3 years of the date of the bakruptcy petition otherwise the property will automatically pass back to the bankrupt. As of 1 January 2011 (even if bankrupt before), the official receiver will look at the home, to see how much it is worth, 27 months after the bankruptcy order is made. Some circumstances such as extreme negative equity or a household member dependency issue might prompt this to happen earlier. If the beneficial interest in the property is less than 1,000 at this point, the home will be transferred back to the now discharged bankrupt. If the beneficial interest in a jointly owned property is low but more than 1,000, the bankrupt, or a third party, may be able to buy out the interest using a low cost property conveyance scheme run by the Insolvency Service. If the beneficial interest is significantly higher than 1,000, a buy out is still possible but may cost more. Discharge from bankruptcy Under the Enterprise Act 2002 clients will usually be discharged from bankruptcy after one year. Discharge will happen automatically even if no payments have been made to the creditors. If the client is discharged automatically, they do not have to do anything to get a discharge. A certificate of discharge is available to the client on request. However a

certificate is is not necessary in most cases. If one is needed then the client should write to the court that dealt with the bankruptcy to request this. The court will check with the Official Receiver that the client is entitled to an automatic discharge. A fee is payable to the court for issuing a certificate of discharge. The client will not get an automatic discharge: if the discharge period has been suspended, for example because they have failed to co-operate with the Official Receiver or trustee if they are subject to a criminal bankruptcy order

What is the effect of the discharge? The client will be freed from most debts that were incurred before the bankruptcy order. Debts in actual fact remain unenforceable. They will be able to obtain credit without having to mention the bankruptcy (unless they are specifically asked to do so). The debts the client is not freed from (there are others) include: any money owed under family court proceedings (for example, maintenance) or arising from any personal injury claims against the client unless the court directs otherwise any court fines or debts arising from fraud or certain other crimes (Parking penalties incurred via Northampton county court are provable in bankruptcy. Parking fines dealt with in the magistrates court are not) debts incurred after the bankruptcy order. since 1 September 2004, all outstanding student loans. If the client was made bankrupt before 1 September 2004 they may still have to repay the student loan. Clarification on this can and should be requested from the Official Receiver.

Rented Accommodation If a client fails to keep to the terms of their tenancy agreement, for example by not paying rent, the landlord may take action against them. The client may have to continue to pay any rent arrears following a bankruptcy order in order to avoid possession proceedings already started by the landlord to recover their property. If the client has rent arrears relating to the home they are renting these will be included in the bankruptcy and therefore do not need to be re-paid however the landlord can still take action to evict to recover the property rather than the arears. Where there is already a possession order suspended (or adjourned/deferred) on payment of the rent arrears, the client will be expected to apply to the court as soon as possible to vary the possession order with a view to ceasing payment of the rent arrears. Unless and until the order is varied, the payments towards the rent arrears will be treated as a reasonable domestic need in calculating the clients surplus income for an IPA/O. But payment of rent arrears by clients who are not subject to a possession order at the date of the bankruptcy order will not be treated as a reasonable domestic need and so, unless there is no IPA/O, the client will not be left with any surplus income and will not be in a position to pay rent arrears. Such clients will be very vulnerable unless a third party is in a position to make payments towards the arrears out of their

own income. Clients with DROs are in a better position whether or not there is a possession order because the Official Receiver is not able to claim their surplus income via an IPA/O. Mortgaged Properties It should be noted that secured creditors (lenders who hold security such as a mortgage for the money owed) still have the right to enforce or recover their security if payments are not met. Any assets that the Official Receiver or the trustee held or claimed during the bankruptcy remain under the control of the Official Receiver or the trustee. They are not returned to the client on discharge. It may be some time after the discharge before all assets, such as the home, are dealt with. The trustee does not have to realise the interest straight away and may decide to put off action in the hope that the equity position will improve in the future. The work of the Insolvency Service's Protracted Realisations Unit (PRU). This unit was set up in 1999 and basically deals with the assets which were part of preOctober 2002 bankruptcies. The PRU will send out a letter to the client explaining that the Official Receiver (OR) still holds an interest in the home and suggesting that the interest could be realised by the debtor either by paying off the debts in full, by buying back the interest from the OR or selling the home. The client basically has 6 weeks to respond, failing that the case will be passed to an Insolvency Practitioner (IP), for possible sale or repossession. The client does still have the option to pay the debts in full or the client might be able to show that sale or repossession of the home would be detrimental to them (or their family), which may influence the decision. If neither of the above apply then it will almost certainly be passed to an IP. Bankruptcy Offences Whilst you are bankrupt is it a criminal offence to: Take out credit of more than 500 without telling the lender you are bankrupt. Use a new business name without revealing the name you were made bankrupt under. Act as a director of a company or a charity trustee without permission. Act as an Insolvency Practitioner or as an intermediary for debt relief orders (see later).

Bankruptcy Restriction Orders Under the Enterprise Act (see later section) clients will usually be discharged from bankruptcy after one year. New rules have been brought in that give the court power to make a Bankruptcy Restriction Order against them if the Official Receiver feels their behaviour has been dishonest in some way or there has been unfit conduct.

A Bankruptcy Restriction Order can last for between 2 and 15 years and will appear on a public register. If the order is broken it can be a criminal offence. Unfit conduct can include: - Not keeping proper accounts for your business in the two years before you go bankrupt. - Gambling. - Trading whilst you knew you couldn't pay your debts. - Taking out credit which you knew you couldn't pay. - Giving away your assets to avoid them being included in the bankruptcy. - Paying some creditors over others. - Failing to co-operate with the Official Receiver. - Concealing property from the Official Receiver. A Bankruptcy Restriction Order means you are not allowed to: - Apply for credit over 500 without telling the lender about the order. - Become an MP or local councillor. - Be a director of a company or form a new company without permission. - Be an Insolvency Practitioner. A Bankruptcy Restriction Order does not stop the Official Receiver from taking criminal proceedings for an offence such as selling goods you have on a hire purchase agreement or putting false information on a loan application.

Individual Voluntary Arrangements (IVA)

What is an IVA? This is a formal arrangement, which is made between a debtor and their creditors, which by so doing creates a legally binding agreement between the debtor and their creditors. However, unless they agree, secured creditors are not included. Typically, the arrangement is that the debtor pays a certain percentage in the pound of their debts, for a fixed period of time. Upon successful completion of the IVA; all remaining debt (for those creditors bound by the Arrangement) will legally be unable to pursue the remaining debt and it will be written off. Despite a growth in the number of IVAs they still remain a minority remedy in comparison to bankruptcy. A Nominee works with the debtor to establish their Proposal, which is then put to their creditors for consideration. Whilst in practice many Companies employ support staff to work with their clients and the Nominee, the actual Arrangement can only be proposed by an Insolvency Practitioner. Insolvency Practitioner An Insolvency Practitioner is an authorised person who specialises in insolvency, usually an accountant or solicitor. They are authorised either by the Secretary of State or by one of a number of Recognised Professional Bodies Eligibility for an IVA

Whilst there is no set eligibility criteria for an IVA; hence Individual Voluntary Arrangement, there are some generalisations which can be made about the suitability of an IVA. Typically an IVA will be more appropriate for clients that have higher value, multiple debt (across a number of creditors), that they are unable to repay in full within a reasonable time period. Whilst there arent any rules about the percentage of debt the client must be able to repay; generally speaking offers below 20p for every 1 of debt owed, is unlikely to be acceptable. There is also no minimum monthly payment required (disposable income level); but any Arrangement needs to be sustainable for its duration. Typically clients with a disposable income of less than 150 per month are unlikely to be suitable for an IVA, due to their limited disposable income making it difficult to absorb any increases in day to day living costs; thereby making their Arrangement unsustainable in the longer term. Public register Records of IVAs are kept on a public register called the Individual Insolvency Register The IVA Process Where the client has a reasonable amount of available income and any informal repayment arrangements are likely to take more than 8 - 12 years, then an IVA should be brought into consideration. The reason for this is that the IVA is time restricted. In these circumstances, where the client understands the benefits and the consequences of an IVA, they should be encouraged to approach an Insolvency Practitioner (unless this is a service offered by your Company), and should also have a Financial Statement prepared, which includes a list of debts and importantly a list of the value of any assets. Some Insolvency Practitioners will conduct the first interview at no charge. Local Courts can give the names of local Practitioners and a list is also available from Official Receivers offices. Advisers can compile a list of Insolvency Practitioners in their area who do not charge for an initial interview or up-front fees, this will be useful for referral or signposting clients who may be suitable for an IVA. The IVA Proposal The first step undertaken by an Insolvency Practitioner is to work with the client to prepare a Proposal for their creditors. In order to do this, the client will need to provide extensive financial information, e.g. 1. Details of the Proposed Arrangement 2. Why an IVA is appropriate? 3. Details of all assets and their value 4. Any charges on their property 5. Their current income and any likely changes to this; throughout the duration of the Arrangement 6. Details of all of their debts 7. Any guarantees 8. How, if appropriate, they will carry out business during the IVA 9. How long the IVA will last (typically this is 5 years) 10. Details of any secured creditors and how these will be dealt with 11. Details of the Nominee and Supervisor, together with costs/fees or any other charges

This Proposal, once agreed by their IP, will be provided to the clients creditors for their consideration and vote. The Interim Order In some cases, a client can Propose an IVA as an alternative to Bankruptcy, even when a Petition has been issued by one of their creditors, In these circumstances, where the IVA is a better solution for the client; perhaps where the impact of bankruptcy would be a loss of their business or home, the client can apply to the Court for an Interim Order. The effect of this is to stop all other enforcement action from being taken, preventing creditors from presenting, or proceeding with, a Bankruptcy Petition while the Interim Order is in force. This Interim Order lasts for 14 days but they are often extended in order to allow a Creditors Meeting to take place. During the Interim period, the IP will prepare a report for the Court, which evaluates the Proposal and assesses its prospects before a Meeting of Creditors. This is usually all done at the previous hearing in reality. The creditors meeting Creditors Meetings, in consumer related debts, are typically called but voting is done by proxy (postal, faxed or e-mailed) instead of in person. This is usually because consumer IVAs are typically straight forward and convening an actual Creditors Meeting brings unnecessary costs. A face to face Creditors Meeting is more likely to be called and attended in relation to trade debts. If a meeting is to be held, the IP will arrange the Meeting and invite creditors and the client to attend (advisors are also permitted to attend). Only those creditors who had notice of the Meeting are bound by the Arrangement, so it is important that you have accurate records of all the clients creditors (as this may be challenged at a future stage, if any creditor believes they werent provided with a copy of the clients Proposal. The consequence of this could be the creditor seeks remedy from the Court, which might jeopardise the continuation of the Arrangement. The Proposal will be reviewed (or in face to face Meetings discussed) and any amendments suggested may have to be made, having been agreed by the IP and the client, in order for the Arrangement to be accepted by the creditors. At the Meeting, the creditors vote on whether to accept the Proposal. If enough creditors (over 75% in value of the creditors present in person or by proxy, and voting on the resolution) vote in favour, the Proposals are accepted. They are then binding on all creditors who had notice of, and were entitled to vote at, the Meeting. The individual creditors votes are weighted proportionately, in that the largest creditor has the largest % vote according the value of the debt. After the Meeting If everything has been agreed subsequent to the Meeting, then the role of the Nominee is to ensure that the client understands the terms of their Arrangement and their ongoing responsibilities. Once approved, the Nominees function is complete and a Supervisor is appointed to manage the Arrangement (in reality this is typically the same IP, although it doesnt have to be). Accounts will be prepared annually and sent to the creditors, reporting any breaches of the Arrangement and disclosing any information required. Any regular payments will be paid to the Supervisor and distributed to the creditors, in line with the terms of the Arrangement.

Provided the client adheres to the requirements outlined within their Arrangement (making all expected payments, providing annual up-dates on their income and expenditure etc), upon completion (once the Supervisor reports the Arrangement as being satisfied), the client is discharged from all liability in relation to all debts that were bound by the Arrangement. Variation of the Arrangement It may be necessary, during the course of the Arrangement, to Propose new terms for example where a clients income has changed and their payment is no longer affordable. This process is very similar to the original Proposal, in that creditors are again invited to vote for or against the new Arrangement. If the new Arrangement is unacceptable, the client can continue to meet the original terms of the Proposal, the client and the IP can adapt the terms (to meet creditor requirements), or where this isnt viable, can bring the Arrangement to an end (fail the IVA). Once an IVA has failed, all creditors are again free to pursue enforcement action. Fees The cost of setting up and supervising an IVA can be considerable; it would not be unusual to pay over 4,000. All IPs charge for the service but some of them incorporate the fee in to the debt total so there is no up-front fee. Possible advantages of an IVA Your client may well be running a small business which would be difficult to keep going if they were bankrupt. Your client may be in a profession where they could lose their job if they go bankrupt such as accountancy/police/armed forces. Your client may have access to a large lump sum and want an Arrangement with their creditors to accept the lump sum and write off the rest of the debts (although this can often be negotiated informally, but will not bind all creditors). Your client will not automatically lose the house or other assets which can be kept out of the IVA with the Agreement of the IP and the creditors, although the creditors will usually want most of the equity in the house. Your client will not have the same restrictions as if they went bankrupt, e.g. they can still use their bank account without saying they have an IVA. Possible disadvantages of an IVA If your client does not keep to the terms of the IVA then the IP or the creditors can make them bankrupt. If creditors do not accept the IVA proposal the client will have to consider another debt solution. If an up-front fee was paid for an IVA and it is not accepted, then the client may lose the fee and will be in a worse position than when they started. If an IVA fails, the client may well have incurred non refundable costs (upfront or Nominee) If the client owns their own house the IP and creditors may require them to make most of the equity available, perhaps though a remortgage or third party (however selling the house is generally avoidable). It is standard for IVA agreements to include a clause that the client will get their house valued after a set number of years (usually 4) with a view to giving most of the

owned value or equity in the house to their creditors. This is dependent on the client be able to raise or release the equity. Where it is possible for the client to do this they are entitled to be left with at least 15% of the equity in the property. It is important that if the client re-mortgages or takes out a secured loan, that the payments are affordable (generally the Proposal will stipulate the increase of the re-mortgage payment is less than the payment being made into the IVA each month). It will also (typically) allow for a reduction of the usual monthly IVA payment to provide for this (assuming the equity release does not satisfy the terms of the Arrangement). If the client is unable to maintain the payments there is a risk that they might be made bankrupt and so lose the home anyway, so it is important the client and the IP ensure any proposal is viable. Often where there is equity in the property, but the client cannot access it (for example because they cannot get a remortgage) the IVA will contain terms that allow for the Arrangement to be extended, typically for a further 12 months, to compensate for this (although the amount repaid in these 12 months may not meet, nor have to meet, the full amount of the clients equity). See the IVA Protocol for more information on this. There is a risk that the IVA is agreed on the basis of monthly payments that the client cannot afford long term. The client needs to be very careful that the payments are set at a realistic amount in the first place and confident of their ability to meet this level of payment for the duration of the Arrangement, if in doubt, the client may be better suited to another debt relief option Fast Track IVA From April 2004, under the Enterprise Act, there are new Rules on how to get an IVA after being made bankrupt. The client can apply for a Fast Track IVA by putting a Proposal to the Official Receiver even after they are bankrupt. The Official Receiver may agree to act as Supervisor of the IVA, if they feel it will produce a better deal for the creditors than they would receive through bankruptcy. There is no formal Creditors Meeting. The Proposal is sent by post and creditors can either take it or leave it. The IVA Proposal cannot be modified. If the IVA is agreed, the Official Receiver will annul the Bankruptcy Order. If the IVA fails, the creditors could make the client bankrupt again, but the Official Receiver will not take any further action. The IVA Protocol The Insolvency Service has drawn up an IVA Protocol which applies from 1 February 2008. This provides guidelines for Insolvency Practitioners on how a straightforward consumer IVA should be drawn up and how the IP and creditors should behave. It covers how the IP should review the clients income and expenditure, how the creditors should treat the IVA Proposal, including how any equity in the home should be dealt with. The IVA Protocol covers the following areas:
what the IP should do to check clients income and outgoings; creditors should accept the clients figures if they fall within the set limits (CCCS guidelines);

how any equity in the home should be dealt with the IP should make sure the client has had full advice on other ways to deal with their debts; what the client should do when their income and outgoings go up or down, and what should happen if they miss any payments

An IVA does not have to be Protocol compliant, the Protocol was developed to bring standardisation into consumer IVAs and, in some circumstances, it may be appropriate for a nonProtocol compliant IVA to be Proposed (for example where a client wishes not to include any of their equity or where a lump sum IVA is being offered).

Complaints about insolvency practitioners

A complaint should first be made in writing to the IP. If the client is still not happy, they should write to the authorising body for the IP. The IP should have provided this information to the client prior to taking action. There is a useful leaflet called 'How to make a complaint against an insolvency practitioner', which can be accessed via the Insolvency Service website . If the insolvency practitioner is acting on behalf of a trustee in bankruptcy a complaint must go to the Official Receiver first, followed by the Insolvency Service.

Administration Orders
Introduction: This is a debt relief remedy where by a client who already has a CCJ and has more than one debt the total of which does not exceed 5000, can apply to the County Court to 'administer' their payments. Consequently this remedy depends on the debtor having some available income which is split fairly amongst creditors. Whilst the Administration Order is in effect, it offers the client protection from collection and enforcement action and also prevents creditors increasing the debt by adding interest or charges Making an application This is done by completing a form N92 which is available from Justice (the new Ministry of Justice website) via the Court Form Finder Service. Following receipt of the application by the court, the court staff may make a proposed order without a hearing or refer the matter to the judge. The judge can make an order without a hearing including adding a composition order or extending the period of payment but cannot dismiss an application without a hearing. The court will then inform creditors and the client. The creditors and the client have 16 days to make any objections to the court to a proposed order, for example that the repayment suggested is too low or that the amount owed is wrong. When an objection is received the judge should order a hearing. Where a hearing is ordered, the interested parties should attend. The judge will listen to arguments from both sides and then make a decision to include / exclude creditors and to grant the order or not. Priority Debts Priority creditors should be included in the application under part A which is the Income / Expenditure section and Part B if it is intended that any arrears are to be scheduled as part of the order. There is some contradiction between the legal requirements and the guidance notes on the

N92 though as the guidance notes state that a debt should not be represented in both sections. Priority creditors may object to being included in order and object in order to pursue a separate agreement and remedy. The adviser might consider whether to discuss the application of the Administration Order in advance to get an indication of whether priority creditors are likely to object or whether they prefer not to alert creditors to the forthcoming application. Courts vary considerably with their approach to Administration Orders some have queried the inclusion of Council Tax and Fines but in 1995 Preston v Riley held that they can all be included. In some cases adding priority debts like mortgage arrears might take the total over 5,000. Many courts have accepted this on the basis that the debt will be excluded and a separate re-payment can be agreed. Where priority debts are detailed on an application but the client is asking for them not to be included the adviser should include this information in an attached covering letter. It might be possible, if the debts do exceed the 5000 limit to write to the creditors and ask them to write off some of the debt in order to get the total below the limit. Some courts have made orders where the debt is slightly over the 5,000 limit. Advisers should establish local practice. Debts to the Department of Works and Pensions Overpayments and Social Fund loans should be scheduled in the application but it is common for it to be left out by the district judge. This is following a recent court decision concluding that social fund loans and benefit overpayments are not ordinary debts and must be repaid by deductions from benefits where possible. If the applicant is no longer on benefits there is unlikely to be an objection. Joint Debts Joint debt must be scheduled using the whole value of the debt even if a couple are both applying for an AO. However, if the applications are made at the same time it may in theory, be possible to divide the liability between the two liable parties. If the CCJ is for a joint debt it can be used by both applicants as the qualifying CCJ. The order If the application is successful the court order becomes a single court order which covers all of the credit debts and possibly some priority debts. All the debts are lumped together and one monthly payment is divided amongst the creditors who appear on the order. The court will divide the single monthly payments on a pro-rata basis and distribute them to the creditors. Whilst no payment is made upon application to the court; a 10% fee is taken from each payment to cover the administration costs. The order can be reviewed at any time by the court; creditors and the client can request a review. It may be a provision of the order that it is reviewed periodically. A review request from a client may be to reduce or increase payments following a change in circumstances. A letter should be sent to the court to explain this and a hearing will be scheduled. Composition Order A composition order can be made by the judge; it has the effect of reducing the debt or setting a total payment period which has the same effect. An adviser can request that a Composition Order is made either on the original application or after an order is made if the repayment of debt is going to take more than 3 years. The adviser needs to suggest the total amount of pence in the pound which will be paid off, to work this out:

Decide how long the client can reasonably manage to pay (the court often considers 36 months to be reasonable) Multiply the amount you can offer each month by the number of monthly instalments the client will pay. Work out 10% of the total the client will repay which will be taken by the court as a handling fee. Take away this amount from the total. Multiply the new total figure by 100. Divide the result by the amount of the debt. This will be the final offer to pay to the 'extent of x pence in the '

As well as showing the amount of pence in the pound to be paid off it is useful to explain in an accompanying letter to the court why it would be better to make a Composition Order; especially where otherwise the order would go on for years and particularly if the client is elderly or has health problems. How long does an Administration Order last? Unless a composition order is in place the Administration Order will last as long as payments are made to the court according to the order, and will remain in place until the debts are paid in satisfaction of the order. If terms of the order are breached, for example if the client ceases to make payments, the order will be revoked. Once an order is in place All Administration Orders are registered at Registry Trust The court will take a handling fee of ten pence out of every pound paid in over the time the order lasts. This means the handling fee is 10% of the clients total debts. The fee is deducted from payments made into the court. Whilst an administration order is in place, none of the creditors listed on it can take any action without first getting the court's permission. Visits from debt collectors, letters or phone calls from creditors should stop once the administration order is in place. Having an administration order can save time and money as the court deals with payment debts on the clients behalf. Interest and other charges that were being added on to the debts are stopped.

Evaluation of Administration Orders Administration orders offer good protection to the client allowing them time and space to re-pay their debt but despite this; there is growing concern that they have become less effective as a debt relief measure.

Debt Relief Orders

Background

DROs came into force on 6th April 2009. In contrast to other forms of debt relief, they are not available through the court system. Instead the orders will be made by an Official Receiver, and a separate unit for this purpose has been set up at the Official Receiver's office in Plymouth. There are many similarities between DROs and bankruptcy but also important differences. One major difference between bankruptcy and DROs is that there is no debtor's estate when a DRO is made, and so the Official Receiver will have no legal claim over the debtor's property and will not be seeking to realise assets and pay dividends to creditors. It is a basic requirement of the DRO process that debtors do not have sufficient assets or surplus income to make any realistic payment towards their debts. Intermediaries and Competent Authorities Debt Relief Order applications can only be made online and only by an Approved Intermediary. Intermediaries are skilled debt advisers deemed fit and proper according to the regulations and authorised by a Competent Authority. There are a small number of Competent Authorities which have in turn been authorised by the Secretary of State for the purpose of approving and supporting Intermediaries. A list of Competent Authorities: Insolvency Service Website Insolvency Service and DROs The central premise for Debt Relief Orders is that they should be a readily accessible option for debt relief. The Insolvency Rules state that Intermediaries must draw the clients attention to conditions, consequences and procedures relating to Debt Relief Orders. This follows the usual business for advisers. The rules also state though that an Intermediary must process an application for a client if they request it even if it appears they have advised the client that they may not qualify. There is provision for an Intermediary to highlight whether or not they agree with the submission of the application. Advisers should consider Debt Relief Orders together with the other forms of debt relief as an option for their clients. Organisations should therefore ensure that they are either able to provide this service or have suitable referral systems in place to organisations which do. It is important that advisers familiarise themselves with their available options for referral or signposting. Legislation Legislation relating to DROs, Intermediaries and Competent Authorities: Section 251U Insolvency Act 1986. A new part 7a has been inserted into the act making provision for DROs Rule 5A.5 Insolvency Rules 1986

Legislation relating to DROs, Intermediaries and Competent Authorities can be accessed via the UK Legislation website. In addition to the legislation the Insolvency Service has provided Intermediary Guidance Notes. There are also some useful resources on the IMA website, see IMA Intermediary Resources Eligibility for a DRO General conditions In order to be eligible for a DRO a debtor must satisfy stringent qualifying conditions, including full disclosure of income and expenditure. The principle parameters for a DRO are liabilities of less than 15,000, assets under 300 and a disposable income of less than 50 per month. Applicants will be allowed to have a vehicle with a value of less than 1,000.

Residence conditions The client must currently be domiciled i.e. have their permanent home in England or Wales, Or in the last 3 years Have been ordinarily resident or Have a residence in or Carried on business in England and Wales

Insolvency conditions People who are already involved in another formal insolvency procedure at the time of their application will not be able to get a DRO. Therefore in order to be eligible a client must not: Be an un-discharged bankrupt Be party to an Individual Voluntary Arrangement (IVA) or an Interim Order Be subject to a Bankruptcy Restrictions Order (BRO) or Undertaking Be subject to a Debt Relief Restriction Order or Undertaking Have a pending debtors bankruptcy petition unless a judge has referred them for a DRO Have a pending creditors petition unless the petitioning creditor has agreed to the DRO application Have had a DRO in the last 6 years.

If any of the above apply and a DRO application is made then the application will be declined or revoked and the applicant will lose the DRO fee. Before applying for a DRO - it is therefore essential to check the Insolvency Register using the following link http://www.insolvency.gov.uk/eiir/ A Bankruptcy Restriction Order could have been made in the past (up to 15 years ago) which has been forgotten about or the client may have missed payments on an IVA and believes it is no longer in force but it hasnt officially failed yet. If the client has a current Administration Order and wants to apply for a DRO instead, they can do so. Once a DRO is made the court will revoke the Administration Order. Further qualifying conditions Preferences and transactions at an under value Further qualifying conditions are that a client must not have: Entered into a transaction at an undervalue this is where the client has given away property to someone, receiving less than its value or nothing in return Given a preference to any person where the client has done something that puts a creditor or guarantor in a better position than the one they would otherwise have been in for example paying a relative in full and not paying other creditors. If a transaction at an undervalue or preference has taken place, the Official Receiver may refuse to make a DRO. The Official Receiver will look at the individual facts surrounding each case and will consider factors such as: When the transaction at an undervalue or preference took place Who the transaction was with or who the preference was given to

Why it happened How much was involved, compared to the total amount of debt Again, if the client makes an application for a DRO but the order is not made because of the transaction at an undervalue or preference then the fee will not be refunded. Advisers will need to discuss with the client whether a preference has actually taken place and the reasons for this or whether payments have been made unevenly without intention to prefer one creditor over others. Reduction of liabilities to meet qualifying parameters Whilst the reduction of liabilities to meet the DRO parameter in not necessarily in contravention of the legislation, intermediaries need to be alert to any such action and ensure that they review any such transactions for preferential payments to individual creditors. Similarly if a debtor borrows money from family or friends to use in reduction of their indebtedness, advisors should be aware that loans from family or friends are unsecured debts and should be scheduled in any DRO application. Therefore the subrogation of debts to friends or family does not in fact reduce the debtors overall indebtedness. There is of course nothing to prevent a 3 rd party using their own funds to reduce a debtors liabilities, provided that the funds do not have to be repaid by the debtor. Types of Debt and DROs Qualifying debts Qualifying debts will be subject to protection from creditor enforcement action and, unless the debt has been incurred fraudulently, will be written off at the end of the DRO moratorium period. Examples of qualifying debts: Phone and mobile phone bills Income tax, VAT and national insurance Water arrears Parking penalty charges Benefit overpayments University accommodation / hostel fees Unsecured debts Credit cards and store cards Bank overdrafts and bank loans Loans to finance companies Catalogues Home-collected credit Hire purchase and conditional sale agreements Mortgage shortfalls Buy now pay later agreements - A liquidated sum for a certain amount for which payment is not yet due

Priority debts which are qualifying debts: Rent arrears Gas and electricity debts Council Tax, business rates and community charge Clients will need to pay ongoing rent, fuel, Council Tax bills and so on as normal. Rent arrears The treatment of rent arrears in DROs has recently been subject to active litigation in the case of Godfrey v A2 Dominion (the appeal was heard along with the appeal in the case of Sharples v Places for People Homes Ltd and appears in case listings under this case name). The subject of the case was whether a landlord could take action to recover the property where the debt was presented on a DRO. Details of the judgment is summarised by this article from Arian Edition 31. (Arian is a money advice periodical available from Citizens Advice Specialist Support Unit on subscription). Many thanks to Citizens Advice Specialist Support Unit for giving us permission to share this with you. DWP Recovery of overpayment of benefits and social fund loans: However, developments in the case of Cooper & Payne v Secretary of State for Work and Pensions [2011] UKSC 60 have changed the position, and it is now clear that the Secretary of State does not have the right to recover overpayments of Social Security benefits that have been scheduled as a qualifying debt in a DRO. The position on Social fund loans is different after a Statutory Instrument was laid before parliament which amends regulations governing DROs and Social Fund loans; the result is that from 19th March 2012 these debts will be classed as Excluded Debts for the purposes of a DRO application. This meansthat the DWP will be able to recover Social Fund loans during the DRO moratorium and clients will not be released from the debt at the end of the DRO moratorium. The changes introduced by statutory instrument effect social fund budgeting loans and crisis loans only. For benefit overpayment accrued as a result of fraud - see fraudulent debts below Council tax The High Court decision R (Mohammed) v Southwark LBC [2009] EWHC 311 (Admin) the Administrative Court concluded that if a resident to whom a demand for a payment on account of council tax is properly addressed fails to pay an instalment on time, or fails to respond quickly enough to a reminder notice, or a final notice, he may become liable to pay the whole balance of the estimated amount of tax for that financial year within a short period, normally 7 days. The council will then be entitled to seek a liability order against him for that amount if it is wholly or partly unpaid. Therefore when applying this judgement to Debt Relief Orders, if the debtor has defaulted in respect of a reminder notice, the whole of the amount is due and payable and therefore a qualifying debt (whether or not the council has obtained a liability order), if the debtor has maintained their instalment agreements in accordance with the demand notice, or no reminder notice has been issued only sums accrued and unpaid up to the DRO are a qualifying debt. Where a liability order has been obtained by the council, prior to the Debt Relief Order being made the whole debt as notified within the liability order becomes due and it is therefore a qualifying debt.

Water rates The guidance in relation to bankruptcy and the effects on water rates is quite clear and there is no reason to believe that this guidance is not equally applicable to Debt Relief Orders. How a water rates bill will be dealt with will be dependent upon the charging regime operated by each provider. It is the responsibility of the intermediary/debtor to establish the water companys position with regards to the debtors account and where the full amount for the year may be scheduled, it should be scheduled. Where water is unmeasured any standing charges are due and payable in advance, generally on 1 April each year. Therefore, the whole of that years charge is a liquidated debt at the date of the Debt Relief Order and may be scheduled in the application, in addition to any arrears from previous periods. As the whole debt becomes due prior to the insolvency, it is a qualifying debt. Clients with a metered water supply pay for their water in arrears. Any amount billed and not yet paid is a qualifying debt and counts towards the debt limit.

Some water companies have sent clients new bills starting from the day after a DRO is made until the following 31 March, even though the whole year's bill has been included in the debt relief order. If this happens you may be able to challenge the water company. See the article In deep water which discusses the topic in more depth (Adviser Magazine Edition 143, January 2011) Prepayment meters for utilities Intermediaries will be aware that utility companies often use prepayment meters to collect arrears, by way of recalibrating their meters. If a debtor has scheduled a utility bill in their DRO application the provider no longer has any remedy in relation to such a qualifying debt and debtors should therefore be encouraged to ensure that their provider recalibrates their meter so as to ensure that the continued collection of arrears is ceased. TV Licence liability A Television Licence is required by law if someone intends to use a TV, and this is covered in the Communications Act 2003 and the Communications (Television Licensing) Regulations 2004 (as amended). Outstanding sums due to the TV Licensing Authority at the time of application for a DRO do not constitute a qualifying debt, as they are comprised of a statutory fee required to be paid in advance by a person to install or use a television receiver. Hire purchase agreement debts There have been shifts in the guidance issued by the Insolvency Service regarding Hire Purchase and DROs. The Insolvency Service have outlined their position in detail in the DRO and Hire Purchase agreements document later in this section. Joint and several liability With regard to Joint debts, including joint bank accounts, the making of a Debt Relief Order will not protect or write off the liability of any joint debt holder, or anyone who has guaranteed the debts of an individual who is the subject of a DRO. Where a joint debt is scheduled in a DRO application and is one of joint and several liability, the moratorium period will only relate to the person subject to the DRO and the creditor will be able to seek remedy against the ostensibly solvent partner for the full sum outstanding.

Fraudulent debts Where a qualifying debt has been incurred as a result of fraud, the client will be protected from enforcement during the moratorium period but will not be discharged from liability at the end. Debts subject to execution / distress With regards to Execution and Distress no creditor with a qualifying debt has any remedy without the leave of the Court and this must include the right to levy execution or distress. Where a creditor already has the benefit of a walking possession agreement that creditor would be deemed to be a secured creditor and the rights of secured creditors are unaffected by the making of a DRO. The costs of any incomplete execution would represent a qualifying debt and where appropriate should be scheduled as such. It should be noted that where there is a walking possession agreement this should not comprise assets in excess of 300, otherwise the debtor would fail to meet the asset parameter for a DRO. A debtor should schedule the debt as a qualifying debt as it is only not a qualifying debt to the extent that it is secured and of course with a walking possession agreement the extent of the security held is unknown until such time as the goods might be sold. If the debtor has an agreed repayment schedule in relation to a walking possession agreement, then the debtor would need to continue the payments in order to prevent the removal of the goods subject to the agreement. Excluded debts Some debts are excluded by the Rules and do not count towards the 15,000 debt limit these are: Magistrates court fines Social Fund Loans Student loans Child support/maintenance Obligations under a criminal confiscation order Damages; any debt which consists of a liability to pay damages for to any person is an excluded debt where the DRO application is made on or after 6 April 2010 Secured debts The rights of Secured Creditors to deal with their security are unaffected by the making of a Debt Relief Order. Secured loans, including loans secured by a bill of sale, are not qualifying debts however they still count towards the 15,000 limit and so must be included on the application. Secured creditors (or the secured element of any debt) must be listed on the DRO application and identified as a secured debt by marking the relevant tick-box. If the value of a secured item is less than the total amount of the secured debt, the balance of the debt will be treated as unsecured. This unsecured element of the debt would therefore form part of the DRO, and must be scheduled separately as an unsecured debt on the application. If a debtor owns secured property with a value exceeding 300 the debtor will not qualify for a DRO. Income and Assets Available income The clients available income must be 50 per month or less and is calculated by using the total amount of income from all sources including:

Earnings (including any earnings from self employment) Benefits (including any disability benefits, tax credits and child benefit) Pensions Contributions from other household members to the expenditure listed in the application Rental income Less an amount to cover the expenditure on the reasonable domestic needs of the client and his or her family. The income and expenditure account on the DRO application is based on the summary page of the Common Financial Statement (CFS). The CFS trigger figures will apply and any unusually high expenditure will need to be explained. See the Money Advice Trust Website at www.moneyadvicetrust.org for further information on the CFS and the trigger figures. Assets DROs differ substantially from bankruptcy in that there is no debtors estate held in trust under a DRO. This in turn means that the Official Receiver will have no claim over the debtors property and will not seek to realise assets or pay dividends to creditors as he/she would under the trustee function in bankruptcy. It is a fundamental requirement of the DRO eligibility criteria that the debtor does not possess sufficient assets or surplus income to make any realistic contribution towards their debts. The gross value of a clients assets must not be worth more than 300. This means that home owners with a property worth more than 300, (even where there is negative equity) will not qualify for DROs. Assets will include things like savings, shares (including credit Union shares), cars, caravans, antiques, and collectables. It is the clients property which counts. Any jointly owned goods should be split 50/50 unless the client advises ownership is held in another way. Beneficial interest If the client has a beneficial interest in someone elses property this will count as an asset. Clients may need specialist advice in order to establish whether or not they have a beneficial interest. Motability lease agreements A car which is subject to a motability lease scheme will not count as an asset. These payments can continue after a DRO is made and can be included as essential expenditure in the application. However, Motability HP agreements are treated in the same way as other HP agreements. Disregarded assets The rules state that some types of property are disregarded for the purpose of determining the value of the clients property. These are: such tools books and other items of equipment as are necessary to the debtor for use personally by him in his employment, business or vocation. such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the debtor and his family.

a car which has been specially adapted for use by the client because he or she has a physical impairment that has a substantial and long term adverse effect on his or her ability to carry out normal day to day activities One domestic motor vehicle worth less than the prescribed value the prescribed value is currently 1,000.

For the purposes of a DRO a motor vehicle includes any registered vehicle such as a car, motorbike or scooter but disregarded assets does not include vehicles to be used in employment business or vocation. This means that for example a self employed person with a work van worth more than 300 will not qualify unless it is the only vehicle and is also used for domestic purposes. Pensions Previously if the client had any type of occupational personal or private pension plan then the value of the pension fund counted as an asset. The legislation has now been amended to exclude approved pensions as an asset when determining eligibility for a DRO - see [1.(1) Rule 5A.10], In order to trace a pension or scheme you can refer to the Direct Gov facility for electronic or telephone help; Direct.gov/Tracing Pensions If the client is receiving pension payments from a fund, it is ignored completely as an asset but payments are treated as income. The Application Process It is recommended that an intermediary will have completed basic checks on the information provided by the debtor, such as considering paperwork and evidence of income and liabilities. If after having been presented with the various debt options available, the debtor wishes to proceed with an application for a Debt Relief Order, the intermediary will then assist the debtor with the completion of the online application. Entering the correct creditor details Every effort should be made to enter the correct details about the debt and the creditor including reference number on the DRO application form. Where a creditor has obtained a judgement, it is the creditors details and not the courts which are required on the application. If a client fails to include a debt in the application then it will not be scheduled to the DRO, the client will not get protection from enforcement and so will still need to pay that creditor. It is not possible for the debt to be added at a later date. If a missed debt comes to light after the DRO is made and inclusion of this debt would have brought the clients total qualifying debts over the 15,000 limit then the DRO may be revoked. It is good practice to obtain a copy of a clients current credit reference file before applying for a DRO in order to help ensure that all debts are included in the application. If the debtor disputes the information including the amount of debt on the file this issue should be resolved with the credit reference agency before the DRO application is made. The Official Receiver will always carry out a credit reference check following an application for a DRO.

Effect of a DRO on a debtor Moratorium period The principal effect of a DRO will be to place a moratorium period upon the debts of a debtor, that are scheduled within the DRO. During the moratorium period a creditor to whom a qualifying debt is owed: Has no remedy in respect of that debt May not commence insolvency or other proceedings to recover that debt without the leave of the court and on such terms as the court may impose.

Once this period has expired (usually 12 months), the debts scheduled in the DRO will be discharged and the debtor will be free from those debts. Debtors who have had their DRO application approved will be subject to the same restrictions as bankrupts. The Operation of Bank Accounts The debtor is permitted to open a new bank or building society account after the granting of a DRO, however the bank or building society may require them to disclose that they are the subject of a DRO. It is then a matter of policy on behalf of the bank or building society as to whether or not to permit the debtor to open an account, and whether to impose any conditions or restrictions on the debtors use of the account. Likewise for accounts already in use the bank or building society will decide whether or not to allow the debtor to continue operating the account and whether it will be frozen for a period. Continued creditor contact with the debtor Upon the making of a DRO the Official Receiver will make immediate contact with the qualifying creditors scheduled in the DRO application, however debtors should be advised that they may continue to receive correspondence from their creditors subsequent to the making of their DRO. As there is provision within the DRO legislation for a DRO to be revoked, some creditors may continue to contact the debtor in order to comply with the Consumer Credit Act. Other creditors may for whatever reason be unaware of the making of the order and therefore the debtor should contact the said creditors and advise them of the making of the order, providing them with their DRO number and the date the order was made. The Official Receiver will consider intervening should there be any evidence of harassment and bullying on the part of the creditor. Payments to creditors Creditors will be informed that as a result of the DRO, the debts scheduled as owing to them are irrecoverable. If the debtor receives any requests for payment from creditors that are scheduled within the DRO during the period of the Order, the debtor should indicate that they are subject to a DRO, and as such creditors have no remedy in respect of these debts. Debtors should not make any payments to the said creditors. There are some exceptions such as debts subject to a walking possession agreement. Further advice should be provided to the debtor in these circumstances. Investigation of Debtors Upon the submission of a DRO application the Official Receiver will apply for a Credit Reference check to verify the amount of debt. The consequences of omitting information from

the application form, which is required by the Official Receiver to grant a DRO, are that the application will be declined or if already made revoked. The Official Receiver does not have a statutory duty to investigate the affairs of debtors subject to DROs, unlike in bankruptcy. However, the Official Receiver does retain significant powers of enquiry and enforcement under the DRO regime. These range from revocation of the DRO to criminal and civil sanctions if the information provided by the debtor proves to be untrue, or if it is found that the debtor has failed to disclose assets, liabilities or income within their application for a DRO, or assets acquired or increases in income during the period when the DRO is in force. Should a debtors circumstances change sufficiently to allow them to make contributions to their creditors, the Official Receiver will need to consider whether or not to revoke the DRO. If the changes in circumstance occur close to the end of the moratorium period, the Official Receiver can extend the moratorium period for up to three months to allow the debtor to come to an arrangement with their creditors before taking revocation action. During this extension time a debtor will be subject to the same restrictions, and protections, as they experienced during the first 12 months of the DRO. The client therefore has a duty to: Ensure that they provide a complete and accurate disclosure of their affairs, liabilities and assets and comply with any request by the Official Receiver to provide further information. The Official Receiver may not need to contact the debtor. However, applicants should be prepared to cooperate fully with the Official Receiver if they are requested to provide further information including documents in addition to their application form. Inform the Official Receiver of any property or increases in income that they obtain whilst subject to a DRO, for example lump sum cash payments, windfalls, property and money left in a will. Keep the Official Receiver informed of their whereabouts at all times during the course of the moratorium period

Credit Rating Intermediaries should remind applicants there will also be a lasting impact on their credit rating and that the DRO will be displayed on the Individual Insolvency Register as currently occurs in bankruptcy. The debtor will remain on the Individual Insolvency Register for the duration of the time that the order is in effect, plus an additional three months. Audit of Applications Approved Intermediaries must be aware that the Insolvency Service reserves the right to audit DRO Applications at future date. They will be able to request information from Intermediaries about a specific case. It is vital therefore that applications and any case notes must stand up to any subsequent scrutiny, otherwise this might lead to the potential revocation of the order. Intermediaries should apply a consistent and logical approach which you should be able to justify if challenged.

Hire Purchase: Guidance issued in October 2011 by the DRO Unit of the Insolvency Service.
It should be noted that the subject goods should not be declared by the client as an asset, as they will not belong to the client until all of the payments under the hire purchase agreement have been paid to the finance company. A client will only own goods subject to HP/Conditional Sale once all of the terms of the agreement have been met. The current guidance to intermediaries is, broadly speaking, correct. The future instalments due on a hire purchase agreement are a contingent liability as defined by Section 382(1)(b) of The Insolvency Act 1986 (being contingent on the arrival of the date an instalment falls due and termination of the agreement not having been given). However, solicitors advise that the debt is for a liquidated sum payable at a future date and therefore falls within the definition of a qualifying debt. It is currently considered that Rules 5A.3 (9) and (11) of the Insolvency (Amendment) Rules 2009 could potentially be Ultra Vires, as they would allow for something that is not possible under the primary legislation. However The Rules project is not currently expected to deliver amendments before October 2013 and therefore the DRO Unit has to interpret the legislation as it currently stands and issue revised guidance on the subject of hire purchase agreements. Basically any unpaid instalments where the due date has passed must be included in the application (rule 5A.3(9)) but, as matters currently stand the client has discretion whether or not they include the balance of the debt (rule 5A.3(11)) It should be noted that many financial institutions have insolvency clauses contained within the terms and conditions of their agreements which automatically terminate the agreement upon formal insolvency of the customer. The position therefore is, that where the client has arrears under a hire purchase agreement they must include that debt as a qualifying debt and any further payments to the HP company in reduction of the arrears are excluded, as it is considered the hirer accepting payments from the client is a remedy in respect of the debt.

Please note that the Insolvency Service could not and would not object to a third party making payments under a clients hire purchase agreement, however for all parties concerned the agreement should be transferred into the third partys name, although this is not a pre-requisite and would be down to the finance company and the individuals involved. Where there are no arrears, the balance of the debt to the HP company is still a qualifying debt; but it is a debt which the debtor can elect to exclude from their DRO application. Therefore the debt would not be a specified qualifying debt, not a debt from which the debtor is released and one for which the creditor retains a remedy.

If a client decides to omit an up to date hire purchase agreement from their DRO application, the intermediary would need to determine whether future payments towards that HP agreement was an allowable expense. As an item of expenditure it would only be an allowable expense if the items which are deducted from income are those necessary to satisfy the basic domestic needs of the debtor and his family. Therefore where an item on HP falls within the items excluded by rule 5A.9 then it would be arguable that the payments in respect of the debt excluded from the DRO might be allowed.

The difficulty would be with vehicles where the client could demonstrate to the intermediary that the vehicle had a value of less than 1,000, payments would be included. However, unless the agreement was near its end, it is considered very unlikely that a vehicle subject to hire purchase would have a value of less than 1,000. If a client has a vehicle that is subject to hire purchase and is not scheduled in a DRO application because there were no arrears, then it would not be an allowable expense if the value exceeded 1000. Intermediaries should note that a client who has multiple HP agreements which consume a significant proportion of their income (who elect to exclude those debts from their DRO application) may be considered to be abusing the process and the application may be refused, or later revoked - if the official receiver identifies this as an issue after the approval of their DRO. Any HP liability that is omitted from a DRO application (because there arent any arrears) would not count towards the 15,000 liability limit. If however an Experian report demonstrates total debts exceed 15K, the intermediary would need to contact the DRO Unit (prior to submitting an application) to explain this.

Example Scenarios: Client has arrears on a Hire Purchase agreement. Action: The client can either: Schedule the whole liability in the DRO application and this would count towards 15K liability parameter. Schedule just the arrears in the DRO application and choose to exclude the future contractual HP liability. In this case the arrears would be a specified qualifying debt and count towards the 15K limit; the excluded element of the HP liability would not be a specified qualifying debt and not count towards the 15K liability parameter. It would then be necessary to inform the DRO Unit about any HP liability appearing on the clients Experian report that the client has chosen to exclude Outcome:

Whole debt is a qualifying debt and one that would be discharged at the end of the moratorium period; the client is unable to maintain payments and creditors only remedy would be to seek recovery of their goods. Scheduled arrears are a qualifying debt and one that would be discharged at the end of the moratorium period; excluded element of HP liability is not a specified qualifying debt and the client would remain liable for the remaining HP liability. If the goods in question were for the debtors basic domestic needs the HP repayments would be an allowable expense. However it is likely that if arrears are scheduled in a DRO application the client would be in default and the HP company may seek recovery of their goods.

Client has Hire Purchase agreement with no arrears. Action: The client can either: schedule the HP liability in their DRO application and this would count towards 15K liability parameter, or choose to exclude the HP liability from the DRO application in which case it would not be a specified qualifying debt and not count towards the 15K liability parameter. Inform the DRO Unit about any HP liability appearing on the clients Experian report that the client has chosen to exclude. Debt is a specified qualifying debt and one that would be discharged at the end of the moratorium period; client is unable to maintain payments and creditors only remedy would be to seek recovery of their goods. Debt is not a specified qualifying debt and the client would remain liable for HP liability. If the goods in question were for the clients basic domestic needs the HP repayments would be an allowable expense.

Outcome:

Client has hire purchase agreement with no arrears for a motor vehicle worth 3000. Action: The client can either: schedule the HP liability in their DRO application and this would count towards 15K liability parameter, or choose to exclude the HP liability from the DRO application in which case it would not be a specified qualifying debt and not count towards the 15K liability parameter. Inform the DRO Unit about any HP liability appearing on the clients Experian report that the client has chosen to exclude. Debt is a specified qualifying debt and one that would be discharged at the end of the moratorium period; client is unable to maintain payments and creditors only remedy would be to seek recovery of their goods. Debt is not a specified qualifying debt and the client would remain liable for HP liability. As the vehicle in question is worth in excess of 1000 the repayments on the HP agreement would not be an allowable expense.

Outcome:

Client has Hire Purchase Agreement with no arrears for a motor vehicle worth 900. Action: The client can either: schedule the HP liability in their DRO application and this would count towards 15K liability parameter, or choose to exclude the HP liability from the DRO application in which case it would not be a specified qualifying debt and not count towards the 15K liability parameter. Inform the DRO Unit about any HP liability appearing on the clients Experian report that the client has chosen to exclude. Debt is a specified qualifying debt and one that would be discharged at the end of the moratorium period; the client is unable to maintain payments and creditors only remedy would be to seek recovery of their goods. Debt is not a specified qualifying debt and the client would remain liable for HP liability. As the vehicle in question is worth less than 1000 the repayments on the HP agreement would be an allowable expense.

Outcome:

Client has hire purchase agreement with no arrears for a lap top worth 500. Action: The client can either: schedule the HP liability in their DRO application and this would count towards 15K liability parameter, or choose to exclude the HP liability from the DRO application in which case it would not be a specified qualifying debt and not count towards the 15K liability parameter. Inform the DRO Unit about any HP liability appearing on the clients Experian report that the client has chosen to exclude. Debt is a specified qualifying debt and one that would be discharged at the end of the moratorium period; the client is unable to maintain payments and creditors only remedy would be to seek recovery of their goods. Debt is not a specified qualifying debt and the client would remain liable for HP liability. As the item in question is not to satisfy the basic domestic needs of the client or his family the repayments on the HP agreement would not be an allowable expense.

Outcome:

Client has hire purchase agreement with no arrears for a fridge and cooker worth 800. Action: The client can either: schedule the HP liability in their DRO application and this would count towards 15K liability parameter, or choose to exclude the HP liability from the DRO application in which case it would not be a specified qualifying debt and not count towards the 15K liability parameter. Inform the DRO Unit about any HP liability appearing on the clients Experian report that the client has chosen to exclude.

Outcome:

Debt is a specified qualifying debt and one that would be discharged at the end of the moratorium period; the client is unable to maintain payments and creditors only remedy would be to seek recovery of their goods. Debt is not a specified qualifying debt and the client would remain liable for HP liability. As the items in question are to satisfy the basic domestic needs of the client or his family, the repayments on the HP agreement would be an allowable expense.

Business Debts
You should read through this section carefully, some will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Introduction Debt management advisers may feel that they are not able to advise someone who has business debts and it is often necessary to make a referral to an external agency/solicitor for help. However this may not be necessary for clients who have ceased trading. Equally there are limited actions that advisers can take for clients who are still trading. Much of the legislation around business debt is complex and requires specialist help; this section aims to clarify these areas. Clients who have been in business may present additional challenges to an adviser based on the experiences they have had. For example the client may be facing feelings of failure and lacking confidence as a result of their business difficulties and it is important for the adviser to acknowledge this in their work and give the client appropriate support. Liability As with any client it is important to check and reduce liability as far as possible in the same way as non business debts; including checking for payment protection. The enforcement of these debts should be checked for example if the agreement was entered into as a result of misrepresentation or undue influence or where a second party has not been recommended to seek separate legal advice when accepting a charge, security or guarantor for a debt. This is particularly relevant as banks lending money for businesses often seek to secure debts on an individuals home. Specialist advice should be sought in these cases as the law relating to business lending is complex. A trader's personal liability for their business debts will depend on the type of business a client is or was in; most commonly sole traders, partners, limited company or company directors. More details about these types of traders will help to identify them and explain the extent of their liability. Sole trader / self employed A sole trader does not have business partners and may be in business in their own name or using a business name; which is often referred to as trading as .... Sole traders are self employed and are responsible for retaining information about their business finances for six years, completing annual self assessment tax returns, paying tax and National Insurance liabilities. They are personally liable for their business debts in exactly the same way as personal debts. There is no legal distinction if a sole trader is unable to pay debts, their personal assets would be at risk as

well as any business assets they own. Any trader can be a sole trader or self employed but typically occupations such as taxi-drivers, window cleaners, electricians, hairdressers and joiners are often sole traders. See Business Debtline Sole Traderships factsheet for more information. Partnerships A partnership is the business relationship between two or more people trading as a single entity under a business name or as the partners names. There is no legal requirement for a written partnership agreement, though it may be desirable to have a formal agreement setting out the rights and responsibilities of partners. If no partnership agreement exists then all that is required is that partners names appear on the business notepaper as a partner and the Partnership Act 1890 applies. Partners can make formal agreement to specify shares of liability or profit but unless otherwise specified in a partnership agreement it is assumed that all parties are bound equally by business transactions; distribution of profit is legally equal and partners are jointly and severally liable for all business debts (with the exception of income tax see below). This means that all partners can be pursued for the total debt; it is not possible to divide it into partners shares. If creditors cannot obtain payment of a debt from one partner, for example because they are not traceable, they have no assets or if they become insolvent, they will seek payment in full from the others. Where a personal guarantee or a legal charge to a creditor is given as security for the business debts, the partner can limit this security to the period they are in the partnership if agreed in advance with the creditor. Partners with the most assets generally have the most to potentially lose. If one partner has had to pay a partnership debt; that partner has the right to sue other partners for their share of the debts; but success is of course limited to their ability to pay. If a partner leaves the partnership this must be agreed formally, it is important that they remove their name from business correspondence and that they notify existing creditors that they will not be responsible for debts incurred after the partnership is dissolved. However, they will remain liable for any debts incurred whilst they were a partner unless an arrangement is made with the creditor(s). It is better to reach a formal agreement regarding ending liability and entitlement. For income tax purposes, partners are taxable only on their share of the business profits. The Inland Revenue must be notified of the existence of the business and tax returns must be submitted each year. Under the partnership taxation rules; a partnership is not regarded as a separate entity for the purpose of taxation and assessments are not raised on the partnership itself. Instead the profits of the partnership are allocated between the partners and assessments are then raised on the partners as an individual. The tax return provides information on the profit or loss for a period of account ending in the tax year and gives details of the profit-sharing agreement. For more information about this see Business Debtline Partnership factsheet and for more information about business tax see TaxAid Limited Companies A limited company can be made up of a single worker or a group of people and is a single legal trading entity. Companies are owned by shareholders and are run by directors who are elected by the company shareholders and employed and paid by the company. Even though the company may be owned and directed by a single person the company is separate from its directors and shareholders. A limited company can be public; where shares can be traded on the stock market or private where shares are owned and transferred among a limited number of people. Companies are governed by legislation which requires specialist knowledge generally beyond

the scope of advisers so referrals should be made where appropriate. Company legislation is generally administered by Companies House where the company must be registered and where accounts and records for companies are also kept. Profit can either be contained within the company or distributed to the owners as dividends. Generally a director or owner is not personally liable for the companys debts. Credit agreements made in the name of a limited company cannot be regulated under the Consumer Credit Act 1974. Company legislation is designed to protect individuals from corporate debt therefore encouraging developing business. However exceptions to personal liability are: personal PAYE and National Insurance (NI) deductions which are unpaid any unpaid income tax arising where cash has been drawn from the company any personal guarantees given on behalf of the company, most commonly to banks, finance companies, landlords and occasionally major trade creditors any liability where the person has benefited from a transaction at an undervalue and/or preference any liability resulting from fraudulent trading any liability arising as a result of trading while insolvent prior to the company ceasing trading and/or being put into liquidation. This is known as wrongful trading;

Care needs to be taken that a company does not trade where there is doubt as to whether the company is solvent. Directors owe a duty of care to the company, its shareholders, and employees and, where there is doubt as to its insolvency, also to creditors. A company is deemed to be insolvent when it is unable to pay its debts either as they fall due or where the value of its assets is less than the amounts of its liabilities, including contingent and prospective liabilities. Assets will include stock, fixtures and fittings and could include money that is owed or work in hand. In addition, contingent and prospective liabilities include money owed in the future. More information about dealing with the debts of limited companies is available on the Business Debtline factsheet. Business viability It may be necessary to encourage the client to assess the viability of a business. This is not an area which advisers are expected to be competent in but it is important to guide the client towards further help from a small business adviser. If a business is in substantial debt and is failing the client will need to decide whether help is needed to improve it or whether it is better to cease trading. Ending the business may benefit the client by minimising the debt. The client should be referred to a small business adviser or Business debt line (part of National Debt line) have more information about this. The adviser should be aware that to improve the viability of some businesses it may be necessary to seek further finance which goes against the broad principle of debt advice. Small businesses may be able to access cheap loans in some circumstances. Clients may need business advice to do this, but also to help them to assess their own viability consider assets, income and expenditure. Assessing business assets Business Premises: can be valued by estate agents but are unlikely to be free. Estimates may have to suffice but will be affected by other market forces more readily than homes are.

Leases can only really be valued by professionals. Their value will depend on the length of time left to run and also potential demand; therefore leases could represent a liability rather than an asset. Business vehicles: Auction value estimate can be gained from internet. Machinery / tools / equipment / stock: based on re-sale value.

Assessing viability In order to assess viability of the business the client will need to draw up a dated list of expected business (not personal) income and expenditure. This is called a basic business plan and should be done for a future period (between 6 months and 5 years but depending on the nature of the business). It is likely to be necessary to refer the client to an external agency for this purpose. This is a basic business account or plan and should include: Likely income: a realistic assessment of likely income (i.e. for new scheduled work or sales and work or money owed for work or sales concluded) with dates over the period. Likely expenditure: a realistic list of dated expected business expenditures for the same period. Including rent / lease, bills, fuel, wages, tax and NI etc.

The client will be able to see how much (if any) is available to pay themselves or draw down based on the excess income over expenditure. If there is no foreseeable amount available then it would seem likely that to cease trading is the best option. Where there is any doubt the ultimate decision of the viability of a business should be made by the client with specialist business advice. Improving the business The Businesses and Self Employed pages on the Gov.uk website carries general information on improving or growing businesses, including the contact details for Business Link Helpline who can provide more specialist help. Maximising income In addition to the usual methods of income maximisation there are further considerations for parties who are trading: Sole traders may still be entitled to tax credits which will be based on the annual earned income for the previous year. Entitlement to Income Support, income based JSA, Housing and Council Tax benefits are similar to that for an employed person but the earned income will be assessed for entitlement to means tested benefits on an ongoing basis. People who are unable to trade due to sickness may be able to claim Employment and Support Allowance if their National Insurance payments are up to date. Traders may be able to get help with grants or other small business incentives and can be directed to the Businesses and Self Employed pages of Gov.uk for more information. It is important to reduce the tax liability as far as possible for example by offsetting tax allowances, reliefs and certain expenses. Information is available from HMRC but as this can get complicated traders can employ accountants to help with this at a cost.

Listing Income and Expenditure In order to establish the clients personal income and expenditure they will need to draw up an income expenditure list for their personal affairs which must be distinct from those which have

been included on the business plan above, although their personal income (or drawings) will be dependent on the profit from their business. Sometimes it is difficult to separate these, for example a self employed person may work from home or may also use a work vehicle for personal use. In these cases it is important to proportion costs to both business and household expenditure. Traders often find that their income is more erratic than employed people and this should be made clear in their Financial Statement. It is often at this point that the full viability of the business, or not as the case may be, becomes apparent. If this stage becomes too complicated or falls outside of a companys remit the client can be referred to an external agency or solicitor for advice or specialist help.

Types of debt and enforcement.

For any debt relating to a clients business that is still trading, the Debt Adviser should refer the client to an appropriate external agency/solicitor for support. Some DEMSA members may be equipped to offer advice and to negotiate on business debts; where the client has ceased trading. You should check with your line manager to see if this is possible. Fuel Debts Fuel companies can disconnect supplies from business premises if payments are not received following a disconnection notice. If fuel debts on commercial premises are outstanding once a business has ceased trading, the suppliers can apply to disconnect the supply from the home address if the bills are in the same name, (Electricity Act 1989 and the Gas Act 1986). The same applies if the person is trading from their home. This has obvious implications if the client is hoping to continue to trade. Advisers can explain the possible sanctions to the client and contact the fuel companies to negotiate where possible. Water Debts Water companies since 1999 cannot disconnect supplies to residential properties but can disconnect supplies to business premises. For companies who are still trading, health and safety implications of being without water could force the business to stop trading. Water can be disconnected in mixed-use premises (i.e. business / domestic) but this is very rare. Advisers can explain the possible sanctions to the client and contact the water companies to negotiate where possible. Business Rates Business rates are collected in the same way as Council Tax except that following a liability order for distress purposes tools of the trade are not exempt and bailiffs can seize a rate-payers property from anywhere. If the client has a lease for a business property then Business rates can be charged until the end of the lease period otherwise they wont generally be charged in empty premises but this varies between different authorities. Authorities have the discretion to write off fairly considerable amounts of unpaid business rates in cases of severe hardship and in practice many use this power to do so where trading has ceased. Advisers can explain the possible sanctions to the client and contact the local authority to explain the circumstances and try to negotiate where possible. Property Leases

The landlord is entitled to receive the agreed amount of money specified by the terms of the lease which are governed by the Landlord and Tenant Act 1954. If a client falls behind with regular payments the client or adviser may be able to contact the landlord to negotiate where possible. If a client decides to cease trading or trade elsewhere, their business premises lease might be a valuable asset if it is transferable. The client should seek legal advice to value and where appropriate reassign the remaining lease. The landlords permission would also be needed to transfer a lease and in some cases the payment of the lease remains the responsibility of the client even though there may be a new tenant. So the client should consider whether it is better to agree a surrender value with the landlord or an agreement which just releases their contractual obligations, especially if it is unlikely that the landlord would be able to collect the debt in the future. However the adviser should remind the client to consider whether they might be able to gain a decent value of sale. Equipment leases Business may involve other leases for example for equipment or machinery. Many lease agreements are very complex and where necessary clients should be referred for specialist help but first the following should be checked: Is the lease is regulated under the Consumer Credit Act 1974? Does the equipment belong to the lessee at the end of the agreement (lease-purchase agreement)? Is there an option to return the equipment to end the agreement? Is the full amount is payable whether the equipment is returned or not? Will the equipment be recalled if payments are not received?

Deciding on how to treat these arrears will depend on what sanction the lessor can apply and whether the client intends to continue to trade and if so, whether this equipment is vital to this end. Where appropriate advisers can contact the lesser to gather more information about the nature of the agreement, explain the circumstances and negotiate where appropriate. Rent Arrears Unlike residential agreements distress for business rent is possible as soon as rent is overdue without a court order. It is therefore essential to treat these arrears as a priority if the person intends to continue trading. It is especially difficult for people who intend to continue to trade as it would be difficult to stop bailiffs making a peaceable entry and seizing business stock or material. Bailiffs can only remove goods from the business premises, unless the trader has removed goods to their home to avoid distress. Advisers can explain the possible sanctions to the client and negotiate with landlords VAT When purchases are made there is often a figure for VAT on the bill, sometimes the VAT is included in the overall price and so it may not be obvious that it has been paid and sometimes no VAT is charged. If any traders annual gross turnover exceeds or is expected to exceed an amount (2011 currently 73,000) they will have to register for VAT. This means that they will charge VAT (2011 currently 20%) to their customers on each sale. The trader must submit VAT returns to HMRC at agreed intervals; monthly, quarterly or yearly. The returns will detail the amounts of

VAT they pay out on purchases and the amount they receive on sales and the difference will either be due to or from HMRC. If a return is late HMRC will apply an automatic charge on top of the amount owed. If a VAT return is not submitted, HMRC can estimate the amount due and this amount will be due immediately. For more information about VAT, visit HMRCs website at www.hmrc.gov.uk or www.taxaid.org.uk Collection of VAT debts is carried out by Revenue Officers and is governed by the VAT Act 1994. The collection of VAT is pursued very quickly and by using the most effective methods available to the Revenue Officer usually by distress of property. Generally the officer will contact the debtor either in person; phone or letter to inform that payment is due immediately. If payment is not forthcoming they will threaten distress followed by a formal notice warning of bailiffs. A distress warrant is then issued by the Revenue Officer without having to go through any court procedure. The Officer will then usually attend the business premises with bailiffs. Even though the bailiffs have no right to force entry, the business premises is generally open to the public and therefore allowing bailiffs to gain peaceable entry. Obviously distress of stock or equipment can have devastating effect on a business so where clients are still trading they must be treated as a high priority. Advisers can explain these sanctions to clients and for those who are still trading can negotiate on their behalf with HMRC. The adviser may be able to come to a payment arrangement or establish a little more time for the client in order that they can: consult with an accountant to check the amount claimed stabilise their affairs consult a business adviser to discuss the viability of the business

Where distress is not successful or appropriate HMRC often petition for bankruptcy as a means of collecting the debt. Income Tax Companies do not pay income tax. They pay corporation tax on their profits. But people who work for a company pay income tax on earnings they receive from the company. And individuals who hold shares in companies pay income tax on dividends they receive. Whereas employed people are taxed according to the amount they earn on a regular basis (Pay As You Earn), self employed people have to calculate their own tax based on their earned income. They have to return this information following each years income to the HMRC together with payment. This process is known as self-assessment. The trader should keep all documents used to calculate the self assessment for at least 6 years as the HMRC can investigate. For business with less than 30,000 annual turnover it is a is fairly straightforward process of supplying details of total turnover (gross income) minus total expenses and cost of purchases leaving the amount of profit which is then taxed on a percentage basis. Generally the taxation rate for self employed business profit is 20% (2010) but there are different rates which apply to different types of income, more information is available from income tax rates section www.taxaid.org.uk It is good practice where possible to put aside roughly this amount on earned income throughout the year to avoid a large annual bill. Traders who are also employers will also have to pay tax and national Insurance for employees. Advisers will not be able to help with tax assessment process so referrals should be made to a specialist adviser if help is needed with this.

Failing to submit a tax return will prompt the HMRC to make its own assessment of the tax owing for which payment will be due immediately. This can be superseded by filing a return but penalties can be charged for both late filling of returns of up to 60 per day or for non-payment of tax due. The client or the adviser may be able to pursue the HMRC to waive these penalties or go on to appeal against them if there is a reasonable excuse. But it is essential that a tax return is filed as soon as possible to stop the late filing charges and to reduce the liability. Interest (currently 7.5% per year) is charged on any money owing and the HMRC is not able to exercise any discretion with the charging of interest or the amount charged and even this continues even after any County Court Judgment. Following determination or self assessment the collection of debts to HMRC are dealt with by Debt Management and Banking (DMB). HMRC can rely on various sanctions to collect the debt: Seize goods using bailiffs but without requiring a court order this is generally only used when business are still trading. County Court action: If collection was not successful by levying goods then the HMRC can start County Court proceedings. If the client wishes to contest the amount it is generally better to do so directly via the HMRC rather than by defending the claim. Advisers can also request that county court action is delayed whilst the disputed amount is considered. Magistrates Court: Only if the debt is under 2000 and the liability has accrued within the last 12 months. If the client attends the hearing they can make a request to pay by instalments. The request would need to be supported by a financial statement. Imprisonment: If the agreement made at the magistrates is not kept the HMRC can apply for a judgment summons and request a committal hearing. The client would need to present a case showing that the non-payment of tax has not been as a result of wilful refusal or culpable neglect. HMRC would rarely use this option and then generally as a last resort. Bankruptcy petition: Although HMRC could issue a statutory demand for a debt over 750 (currently 2010), generally they will only apply if the debt is over 2,000 and they are therefore unable to use the magistrates court. This may represent a fresh start for the client if they have no assets and are unable to pay their debts but if the client would not benefit from bankruptcy then the client would have to try to prevent the bankruptcy by responding to the statutory demand to find an alternative to bankruptcy.

What advisers can do: It is important to note that not all advisers will get involved with business debts to this extent depending on company policy, their own expertise and or the complexity of the clients situation. Even where you do not, it is still useful to know the relevant procedure: Once the adviser has compiled a financial statement the adviser can help to negotiate with the DMB for time to pay or to make a payment arrangement with them. DMB generally welcome contact from the community (NfP) advice sector. Advisers can inform clients about the bailiffs rights of peaceable entry and about protected goods

Advisers might want to suggest an interim arrangement whilst an accurate return is being filed in order to stabilise the clients situation and to halt enforcement action. DMB can usually set up repayment arrangement which clear the arrears in 3 years as long as the financial statement shows that any on-going tax bills during this period can also be met, (VAT or PAYE debts would be required within 1 year). Advisers should ask DMB to confirm any agreement in writing. Help the client to respond to court action HMRC can consider waiving or remitting the tax due in full but this would only be appropriate for example where people have ceased trading, have no assets, no means of payment and / or exceptional hardship or illness. This is not the same as writing off the debt as it can still be pursued if the circumstances improve. You can help the client to present a case for remission more information about this is available from Tax Aid.

Other creditors For people trying to stay in business some business debts may need to be treated as priority debts if they are essential in order to stay in business for example a supplier of a material which cannot be accessed elsewhere.

Judicial Review.
A Judicial Review is a form of court procedings where a judge reviews the lawfulness of a decision or action by a public body. The court is not able to consider whether the public body has made the correct decision, but will look at whether the correct legal basis has been used in reaching the decision. The court will not normally consider an application for judical review that is more than three months after the decision complained about. To commence Judicial Review the debtor would need representation. An application is made to the court for permission and if granted a court hearing will take place. The procedure for bringing the case to court can take several months and the hearing itself could last a few days to several months, so this is not a quick solution. There are initial court fees and there can be substantial costs involved in bringing the case to court. It is therefore a remedy of last resort. The best example of a successful judicial review is the DWP v Balding case in the Court of Appeal which was abstracted in Adviser 126. The Public Law Project may be able to assist with such cases if it fits within their casework strategy and casework priorities. The website gives further details and also you will find examples of the cases that they have undertake over the last few years. They also have a range of useful leaflets which will assit you to understand the process. What is Judicial Review? The Grounds for Judicial Review. The Judicial Review Procedure

A considerable amount of information about judicial review is also obtainable from the Justice website.

Student Debt
You should read through this section carefully, some will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Having to pay tuition fees and living costs often using student loans, or being reliant on parent support; it is not surprising that students often experience high levels of debt and most accept that it is inevitable. Just because students are expected to be in debt, the effect of this debt on a student should not be underestimated. Students often suffer in the same ways that other people do when faced with debt and have the added pressure of maintaining their studies. Financial difficulties are often compounded by the fact that student income can be irregular and many students are comparatively inexperienced at managing household bills by virtue of age. There can be large variations between students circumstances which can depend on the type of course they are on. The definition of whether a student is full or part time depends on whether the course is designated as such and not the number of hours which they carry out in a week although the two are usually related. Income / Expenditure Payments in (student loans, grants, bursaries, benefits, earnings) and payments out do not follow a usual weekly or monthly pattern but should be calculated and recorded as such in order to make more sense of the finances and to improve the students understanding of budgeting. For example if a loan instalment is received three times a year then to get a weekly figure it needs to be divided by 17.33 (or times 3 divided by 52). If the student has alternative income when the college period ends this should be reflected in the calculation. Advisers should consider additional possible incomes for students: Childcare grants, bursaries, disabled students allowance, adult dependants grants, help with NHS costs Although most students will be reliant on student loans there are still some grants which they may be eligible for. Grants for Full Time students Wales: Students can apply for a grant to cover part of the fees England and Wales: Students can apply for: Means tested maintenance grant Means tested benefits and special support grant

 Bursary from the education institution (College or University) Discretionary help from the Access to Learning Fund (England) Discretionary help from the Financial Contingency Fund (Wales) Grants for Part Time students. This is a separate system of funding as the fees associated with part time courses are unregulated and vary between courses and institutions. Students can apply for: Grants to help with the cost of fees Grants to help with course costs including a grant specifically for small courses Bursaries from educational institutions, employers or specific funds Allowances for students with children (Wales) Exemption of tuition fees on some health related courses (paid by NHS) Payments out Tuition fees: Need to be included in the expenditure if they are included in the student loan or grant as income. Books and reading: It is often easiest to work out the annual cost of books and divide it into weekly equivalent the same would apply to stationary, materials, IT and other equipment. Travel: Transport would probably include trips home. Again it may be easier to use an annual figure and divide it into the weekly equivalent. Council Tax: Properties housing only students are exempt, where non-students are resident they (that is, the student) should receive a 25% discount Usual benefit checks should be carried out and investigation of benefit entitlement including, Income Support, Housing and Council Tax Benefits, Child Tax Credits (entitlement to these will depend on existence of partners and / or children) Most students will be eligible for help with NHS costs upon application

Students on postgraduate courses or second degree courses will have very little access to statutory funds. Types of Student Debt. In addition to usual debts and implications there are some differences and additions for students. Priority Debt Priority debts in student debt cases are more difficult to define and should be considered more on a case by case basis. Students often move accommodation yearly which will render some of the usual fuel and accommodation arrears as non-priorities. Homelessness and disconnection can have greater impact on students because they may not have usual support networks. Debts to the education institution Institutions often apply sanctions for the non-payment of debts owing to themselves. They might for example bar the student from continuing to the following year or refuse to provide the student with qualification awards or exam results for non-payment of tuition fees. The OFT have issued guidance on this and say that institutions cannot use the sanctions which apply to a different contract, the debts are distinct and should be treated as such. Despite this though, Trading Standards officers have chosen not to enforce the OFT guidance. So whilst these types of institution sanctions may be a legitimate course of action for collection of tuition fees, advisers should challenge this for other debts to the University / college such as accommodation charges, library fines etc. Some DEMSA members may be equipped to deal with this sort of enquiry, however, if not, the client should be referred to an external agency for support (such as a University Student Union Advice Service). Accommodation Charges: Rent is payable under tenancy agreements or license and the terms of these agreements will be detailed either in the individuals contract or in university regulations. The agreements are often for the period of time covered by the academic year. Tuition Fees: Should be treated as a priority debt whilst a student and sometimes even afterwards, if it is owed to an institution who will withhold the results or an award until the fee is paid. The absence of the qualification can have major effect on potential employment. Non-Institution Student Debts Overdrafts: Student overdrafts often have set limits which are interest free. Where this is exceeded it is good practice to contact the bank to inform them that their customer has sought help and try to negotiate an extension to the overdraft limit. As a short term remedy advisers should consider using the first right of appropriation to earmark new payments coming in to essential costs. Graduate Loan, Post Graduate Loan, Career Development Loans: Usually fixed interest regulated CCA agreements with deferred payment agreements. Student Loans Up to 1990 Student grants 1990 1998 Fixed term loans (mortgage style)

1998 2005 Old system student loans 1990 Loans for living costs for full time students 1998 Loans for tuition fees began 2006 Higher rates for tuition fees (New system) Student Loan - Fixed Term: Regulated by the CCA. These are loans given out to full-time students who began their course between September 1990 and September 1998. Repayment of these loans is based on gross income level of the client but not taking into account any of their expenditures. If the borrowers gross income is less than 85% of the national average earnings, then payments to the Student Loan Company can be deferred annually. If deferment is not applied for, then payments become due and debt collection procedures are initiated. Interest is charged at the inflation rate throughout the life of the loan. Student Loan Income Contingent: These are loans given out to students from 1998 to help with living costs and from 2006 also for tuition fees. The student decides what level of loan is needed including to cover tuition fees and applies for appropriate amount. The loans are low cost and are not regulated by CCA. Repayments are made through HMRC PAYE system based on a percentage of earnings. Interest is charged at the level of inflation. Penalty charges can be added for failing to pay or failing to inform the loan company about living overseas. It is not possible to include these types of student loans in bankruptcy petition. Both of the above types of loan are subject to cancellation if / when: The borrower becomes permanently ill or dies 25 years has passed The borrower reaches 50 or 60 if the student started the course aged over 40

Bailiffs
You should read through this section carefully, some parts will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Bailiffs are people authorised to recover the money that is owed by a person or an organisation. They are primarily employed to seize goods rather than to act as debt collectors but the threat of removing property is often an effective method of drawing payment from a debtor. There are different types of bailiffs: County Court Bailiffs: Are employed by the county courts and are responsible for enforcing court orders by recovering money owed under a county court judgment. This means they can

seize and sell goods to cover the amount of the debt. County Court Bailiffs also supervise the possession of property and the return of goods under hire purchase agreements. The Courts and Tribunals Service Leaflet ex345 is a good source of general information for clients about bailiffs. Private Bailiffs: Are engaged by an organisation and are entitled to recover the money owed for debts by seizing and selling goods but cannot collect money due under county court orders or levy distress for rent, council tax, or road traffic debts unless they are certificated. Certificated Bailiffs: Some of the work carried out by private bailiffs necessitates that they hold a certificate and become certificated. This certificate is necessary to enable them to levy distress for rent, road traffic debts and Council tax. Certificates must be applied for every two years via the County Court. If the court are satisfied that the applicant is a fit and proper person with sufficient knowledge of the relevant law and have lodged a deposit of 10,000 they are granted a certificate. In reality there is very little investigation carried out by the court to test the suitability of applicants. It is not required that all employees of bailiff firms who carry out certificated work must hold a certificate. However, it is a criminal offence for a bailiff to collect a debt requiring a certificated bailiff if there is no certificate or if it has expired. The Ministry of Justice website has a facility to check if a bailiff is certificated. High Court Enforcement officers: Previously known as Sheriffs Officers, enforce High Court judgments and those transferred from the County Court. Debts, Bailiffs and the Law Type of Debt County Court Judgements Hire purchase Creditor Various creditors Various creditors Court County County High Bailiff / Distrainer Law Court Bailiffs Court Bailiffs High Court Enforcement Officer (usually private bailiffs) County Court Execution County Court Execution High Court Execution

High Court Judgement Various creditors

Rent Arrears

Landlord

County

Certificated Bailiff Common Law Certificated Bailiffs Common Law / Distress Damage Feasant / County Court Execution

Road Traffic Penalties Local Authority County Parking Fines

Magistrates Court Orders

Damages Compensation Fines

Government / Police

Magistrates Civil enforcement Statutory Distress officers or private Bailiffs

Child Support

Government / Child Support Agency HMRC

Magistrates Private Bailiffs

Statutory Distress

Income Tax VAT Council Tax Business Rates

None necessary

HMRC Collector

Statutory Distress

Local Authority Magistrates Certificated Bailiffs Statutory Distress

The Laws Relating to Bailiffs In addition to the special legal powers assigned to the different types of bailiffs the Lord Chancellors Department produce the National Standards for Enforcement Agents (NSEA). Whilst this provides a guide to best practice in the area of enforcement, there is no mechanism for monitoring or imposing its application, which has long been recognised as a weakness. In 2012 the Ministry of Justice embarked on a consultation exercise on the subject of bailiff reform. On 25 January 2013 the response Transforming Bailiff Action: How we will provide more protection against agressive bailiffs and encourgage more flexibility in bailiff collections was published. A key finding of the consultation was that many of the problems with bailiff action could be addressed by implementing Part 3 of the Tribunals, Courts and Enforcement Act 2007 (subject to some parliamentary amendments via the Crime and Courts Bill 2013 ), and by the creation of supplimentary regulations to clarify and unify the law, and to implement a new fee structure (in the form of the proposed Taking Control of Goods Regulations due in summer 2013). Common Law Distraint Generally speaking a warrant needs to be obtained before goods can be taken but an exception to this is the law relating to common law distraint as a remedy of landlords in respect of liabilities owed in connection with land. This law can be traced back at least as early as the 12 th Century although it has developed through case law over the centuries. Distress for Rent allows a landlord (or more likely, a certificated bailiff acting as his agent) to distrain or seize goods that are present at the premises and retain them until the rent arrears are paid or the seized goods are sold to off-set the rent arrears. Distress for Rent is only available if the tenant is in arrears with the rent and certified bailiffs can only collect unpaid commercial rents; bailiffs are not but landlords are,allowed to levy distress on residential tenants. Another ancient remedy; Distress damage feasant has been re-applied more recently for the seizure of trespassing chattels or now more easily recognised as the wheel-clamping of illegally parked cars. Execution Execution is where enforcement is carried out by officers of the court in respect of court judgments. Execution involves the seizure and sale of goods owned by the debtor. Types of execution depend on the court involved and the nature of the debt: County Court County Court Bailiffs are employed by the Court Service to enforce the warrants of execution within each courts locality. Judgments which county courts will enforce are those which

naturally fall within the County Court jurisdiction (i.e. all CCA debts, all judgments under 600) but will also deal with any other judgment for up to 5000 which the creditor chooses not to transfer to the High Court. Warrants of execution can be suspended or payment instalments reduced by making an application to the court using a N245 form. An application to vary the judgment should also be made at the same time on the same form. Road Traffic Penalties Road Traffic Penalties cover the following:
Parking contraventions (increased cost for clamping and removal of vehicle) Moving traffic violations Congestion Charges non-payment Violation in relation to Vehicle Emissions

These decriminalised offences are defined by a mixture of legislation and special provisions but the same enforcement regime applies to the recovery of all of the above penalties and costs; b asically they are subject to County Court execution and levied on by private bailiffs . Local Authorities can use private certificated bailiffs to enforce these unpaid penalties and costs. Even though the recoverable amount is processed through the county court allowing a warrant of execution to be obtained, the usual options for dealing with a County Court warrant do not apply.
A warrant has a lifespan of 12 months only and cannot be reissued. If the authority failed to recover the charge by means of a warrant within this time and wishes to pursue this means of enforcement, it must ask the Traffic Enforcement Centre (TEC) for authorisation to prepare another warrant The warrant cannot be suspended or varied by N245 County court do not have control over bailiffs Offence of rescue does not apply but instead there are provisions on custody of seized goods by fit persons (i.e. walking possession); instead, Goods seized shall, until sale, be deposited by the bailiff in some fit place. Implying that they will be removed.

There is nothing in the legislation to prevent the debtor from making payments to the Local Authority even after the bailiff has been instructed; however the Local Authority could refuse to accept payments whilst the debt is with the bailiff if this would break the terms of the Local Authority/Bailiff agreement. The debtor may therefore need to negotiate payments with the bailiff. If during this period recovery of goods by the bailiffs is not successful then other County Court methods of enforcement can be applied. High Court The High Court use enforcement officers which are actually private bailiffs to carry out warrants of execution. They have similar powers to County Court bailiffs but because they are private bailiffs they are often preferred by some creditors who feel that that are more effective. So as well as enforcing judgments arising naturally from the high court including those over 5000 non CCA debts, they also deal with debts between 600 and 5000 which are non CCA if the creditor chooses to transfer them. If the debtor cannot come to an agreement with the enforcement officer they should make an application for a stay of execution on a N244 court form. The N244 should state that a request is being made for a stay of execution with an offer of payment to pay by instalments or a lump sum payment of the whole amount by a certain date. An application to

vary the judgment should also be made at the same time. It is more difficult to have an offer of payment by instalment accepted by the High Court. Statutory Distraint Statutory distress is a remedy available only to certain specified creditors where the creditor takes into his/her possession the property of a debtor (which may be a company or an individual), without a specific court order, to satisfy a debt or demand for payment. The major difference between execution and distress is that, in the case of execution, there must be a court order and in distress, no court order is required. Statutory distraint is a power to seize goods granted under a particular statute or law. The creditor who carries out the act of distraint or levies distress is referred to as the distrainor. Distraint can only be halted by the debtor at one of two specific stages. The debtor can pay the sum owed before the seizure of his property or before the sale of the seized goods in order to halt the distraint. The right to levy statutory distress is available to the following:
Her Majestys Revenue and Customs (HMRC) - for the collection of taxes Local authorities, - for the collection of unpaid non-domestic (i.e. business) rates and unpaid council taxes (but only once a liability order has been made by the Magistrates Court) Magistrates for any unpaid fines Local parking authorities unpaid road traffic penalties The Child Support Agency (CSA) unpaid child support maintenance

Some specific features of the debt covered by statutory distraint: Income Tax HMRC does not require a court order to visit business premises to take away stock and equipment, up to the value of the debt. If there are not enough goods at the business premises, staff can go to debtors home and take goods from there (unless the trader is also a limited company). If you refuse HMRC officials entry they could obtain a warrant to break in, but this is unlikely. They are more likely to commence county court action or start bankruptcy proceedings. VAT VAT arrears will usually have to be paid in full before the next VAT return is due. Penalties will be added to the bill for late payment. The officer will usually look at a debtors past record of VAT payments before deciding what payments to accept so it is generally better for debtors to start paying something immediately, no matter how small the amount. If the arrears are based on an estimated assessment, an accurate return must be submitted, which could reduce the bill. Even if payment cannot be made, it could still avoid a surcharge for not making a return. If HMRC cannot recover the money owed by taking away goods, they will usually apply for a bankruptcy order. However, if a debtor ceases trading they should inform HMRC, or apply to deregister. It is then often easier to come to arrangements to pay off arrears by instalments. Council Tax and Business Rates The local authority must give 14 days notice of the bailiff attending. The bailiff can only seize the goods of the person(s) assessed to pay council tax. If a levy of distress is completed by the sale of property but does not recover sufficient funds to discharge the debt under the liability order, the local authority can levy a second or subsequent distress. A person aggrieved by the

levy of, or an attempt to levy, a distress may appeal to a magistrates' court. If the bailiff believes there is insufficient goods to clear the debt, or that there is no prospect of peaceful entry to the property, they will send a Nulla Bona (no goods) certificate to the Local Authority who will consider alternative recovery options. Child Maintenance Under the Child Support Act 1991, section 35, the CSA can recover any unpaid child support maintenance by distraint after obtaining a liability order in the magistrates court. A seven day warning letter is sent to the debtor prior to referring the debt to bailiffs. Private Bailiffs will normally levy the distraint. There is no required minimum period before sale, though probably at least 5 days will generally be allowed for the debtor to pay the arrears of maintenance plus the costs of distress. If arrears of maintenance remain unpaid, a warrant will be issued by the Secretary of State for the Department for Work and Pensions to recover from benefits. Magistrates Court Orders The Magistrates court may fine a person for committing a driving offence, not paying a fixed penalty notice, not having a television licence or many other criminal offences. They can also order payment of compensation to any injured party and award any costs against. The fine may be set at an initial hearing or as a result of a fixed penalty notice. After someone has been fined, the court will make a collection order that contains details of how the fine should be paid. If the person fined has not provided details of their financial situation then it is likely that the court will request payment in full within 10 days. The debtor can request to make changes to the instalments or request an attachment of earnings order or deduction from benefits. If you are what the court calls an existing defaulter, an attachment of earnings order or deduction from benefits order must be made. If payments are missed the fines officer must make an attachment of earnings order or a deduction from benefits order. If neither of these orders is possible then the fines officer may take further steps which will usually mean that a warrant of distraint will be issued. Most courts now use private firms of bailiffs to collect fines by taking goods. Since July 2005 bailiffs collecting fines have had the power to break in to the home and other premises to take goods even if they have not been into the debtors home before. The new rules say this is power should only be used if it is reasonable to do so. It is not likely that bailiffs will use force to break in but it is possible under the rules. They are more likely to gain entry by peaceful means such as by getting through an open door or window or by the debtor letting them in. If they do enter the property they will usually use walking possession to secure the goods. Arrangements to pay will then need to be made with the bailiffs but the debtor does not have a great deal of bargaining power at this point. If for some reason the bailiffs are unable to gain entry or take goods then the fine will eventually go back to the court to take further action at which point a summons would be issued requiring attendance at court. A Magistrates court can only enforce a fine not the bailiffs fees which are usually written off if the matter is returned to the court. Further action from the Magistrates may be to issue a committal warrant which private bailiffs can make arrest and bring the person to court. All of the following information will depend to some extent on the type of debt being enforced but there are general similarities Bailiff Fees

Costs chargeable by bailiffs are regulated by scales found in various statutes and cover items such as "reasonable" costs of removal, storage and fees for levy based on a percentage of the debt and so costs should be proportionate. The NSEA requires bailiffs to leave a notice detailing both the charges made to date (including the one for that visit) and the fees which will be incurred if further action becomes necessary. Costs can be challenged (taxed) at the County Court with the exception of Magistrates Court bailiffs fees. Goods How goods are levied All bailiffs can seize and sell debtors goods to cover the amount owed but first a bailiff may try to contact the debtor by telephone or by letter to give them opportunity to pay the debt. If there is no response or an agreement cannot be reached, the bailiff will visit premises to collect payment or to place a levy on goods which are owned by the debtor. An agreement can still be made to pay the debt by instalments at this stage. The bailiff cannot use force to gain initial entry to a property. However, walking through an unlocked door or climbing in through a window without causing damage is considered to be a peaceful means of entry. The debtors goods may be impounded on or off their premises. If the assets are too large or heavy to remove and have to remain on the premises walking possession will be taken. Walking possession is a process whereby the debtor or a responsible person acting on their behalf, has to give an undertaking (usually in writing and signed) that:
the goods will remain on his/her premises and will not be sold; to advise appropriate third parties of the distress; to pay the bailiff a small daily fee; and to permit re-entry for the removal of the goods if this is later considered necessary by the creditor or the bailiff acting on his behalf.

The purpose of walking possession is to provide breathing space during which arrangements to pay the debt can be explored. The walking possession agreement identifies which of the goods have been levied upon and will be removed. Where no agreement is made the goods will be removed and sold. The bailiff is under a duty to obtain the best price for the goods if s/he is selling them at public auction. This price includes the fees that bailiffs are entitled to charge, the cost of removing the goods and the cost of selling them. Goods which can be taken: There are rules about what the Bailiffs can take and these rules depend to some extent on what the debt was for. Items which are generally taken include things like microwaves, audio-visual equipment, DVD players which can be taken away. Bailiffs might, in some circumstances, clamp a car or take it away. The basic rule is that bailiffs can only take away things that belong to the person who owes money. But they could take away goods that are jointly-owned by you and someone else. In the case of rent arrears Bailiffs can also distraint goods on premises; whoever the goods belong to. What a bailiff cant take

There are some general exceptions to what a Bailiff can take: Such clothing, bedding, furniture, household equipment or provisions as are necessary for satisfying the basic domestic needs of the debtor and his/her family and such tools, books, vehicles, and other items of employment as are necessary to the debtor for use personally in their employment, business and vocation. However if the debtor is a trader; for the purposes of Income Tax or VAT then trade material including stock can be taken from the business premises or the debtors home. The bailiff is not normally able to seize:
Items which belong to someone else Rented goods Goods subject to hire purchase or conditional sale agreements Fixtures and fittings Third parties With the exception of rent arrears, warrants only allow the bailiff to take goods owned solely or jointly by the debtor. Children Property belonging to a child is protected Vulnerable people Some of the people who are potentially vulnerable are; older people, lone parents, people with a disability or learning difficulty, recently bereaved or seriously ill. Bailiffs will have procedures in place to deal with these types of people and will need to consider whether enforcement is appropriate.

People who are protected from bailiffs

Complaints and disputes about bailiffs It is useful to refer to the National Standards for Enforcement Agencies before making a complaint. Disputing the debt If the client thinks that they do not owe the amount stated then contact must be made to the organisation who is claiming the money e.g. the local authority, child support agency, the magistrates' courts. The organisation concerned has made a request to the bailiff to recover this money, so it is not up to the bailiff to decide what is owed. Disputing the Bailiff fees If after considering the chargeable fees it is felt that the fees charged by the certificated or private bailiff are too high, an application can be made to the court for the fees to be taxed. This means that a district judge will decide whether the fees that have been charged are reasonable or not. There is a fee for this application to have the bailiff's fees taxed and so it is important to consider whether the application is likely to be successful. Problems with Bailiffs If a bailiff's behaviour has been aggressive, rude or threatening: A bailiff has no right to force his/her way into a premises in order to gain entry to enforce the collection of money due under court orders. However, where there is a walking possession agreement and the bailiff is refused access he/she is entitled to re-enter a premise by force to remove the levied goods for sale at auction. If a bailiff has levied illegally on goods which cannot be seized:

A bailiff has no right to seize or levy on goods that do not belong to the debtor including items in which are rented, hired, leased, or belong to another person. If the bailiff has seized goods which do not belong to the debtor, the rightful owner can apply to the court for the goods to be returned. This is known as an Interpleader. A bailiff also has no right to levy on goods which are necessary for the employment, or for satisfying the basic domestic needs of the debtor and their family (for example any clothing, bedding furniture, household equipment). A bailiff has levied irregularly: If the correct goods have been seized, but the events following the seizure are not correct e.g. the bailiff sells the goods after payment has been made. It is important for debtors to stay in touch with the bailiff while they are waiting for resolution. A bailiff has levied excessively: If the value of the goods seized is more than the amount of the debt, or if a debtor has paid an excessive amount to the bailiff the balance should be returned to the debtor. Claiming damages Proceedings can be issued for an action for damages where the levy is illegal, irregular, excessive, or if another person has a claim to the goods that have been seized. An application can be made to the court for Replevin. This means that the debtor believes that the bailiff has taken goods wrongfully or unlawfully. The applicant may be required to lodge security for the value of goods and costs of the court case into court before the hearing. Preventing a levy An application can be made to the County Court for an injunction preventing a bailiff from seizing goods. This is only granted in exceptional circumstances. Complaining about a Bailiff If a debtor wishes to complain about a Bailiff enforcing a magistrates' court fine, council tax, or non-domestic rates contact should be made to the magistrates' court that issued the enforcement order. County Court Bailiffs Complaints against a county court Bailiff must be made in writing to the Court Manager of the county court concerned. Details must be given about the complainant, the case and about the complaint itself. The Court Manager will then investigate the complaint and write back informing of what action is to be taken. Certificated Bailiffs Complaints against a Certificated Bailiff must be made to the Bailiff Trade Associations who are responsible for promoting higher standards in the bailiff industry i.e. the Certificated Bailiffs Association, or the Association of Civil Enforcement Agencies (ACEA). The Bailiff Trade Associations will investigate your complaint. Information about the complaints procedure can also be obtained. A copy of the debtors correspondence will be sent to the certificated bailiff who has to respond in writing within a certain time. If no reply is received within the time limit, or the judge is not

satisfied with the bailiff's response, the bailiff will be summoned to appear before the judge. A hearing will be scheduled which can be attended by the complainant or a statement can be presented if preferred. The judge can order compensation to be paid to the complainant, cancel the certificated bailiff's certificate or dismiss the complaint. Private Bailiffs A complaint can be made about a private bailiff by telephoning or writing to the firm that the bailiff works for. Some of these organisations e.g. Inland Revenue, Customs and Excise, Local Authorities have their own complaints procedures in place and information on how to complain can be obtained from their local office.

Further Study
Many of you will already have seen the ITV1 documentary "Exposure: Bailiffs" which aired on 31st October 2011. This programme gives an insight into the worst exceses of some bailiff's behaviour. Although clearly not all private bailiffs behave in the way depicted, the programme highlights why greater regulation of bailiffs is so urgently needed. If you missed the programme and would like to watch it, you can stream the programme to your computer via the Box of Broadcasts Service (BoB). a link to the programme is provided separately in this section of the module. You might like to consider how many breaches of codes of practice for example you can identify in the programme and whether in light of this the certification process is in any way effective.

Organisational Aims, Policies and Procedures You should read through this section carefully, some parts will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Aims DEMSA has a Code of Conduct which outlines its aims and objectives and plays an important role in setting standards and expectations of its members. Your Company may also have its own internal standards and objectives, which should be aligned to the Code as well as any other appropriate Guidance or Codes within the debt advice and management sector; for example OFT Debt Management Guidance, OFT Debt Collection Guidance, Lending Standards Code. The IMA also sets objectives and expectations for its members, however only individuals are entitled to become IMA members; so whilst these requirements arent imposed on your Company, it is still helpful to have awareness of the IMAs approach to debt advice and good practice, as much of this will be aligned to your Companys own objectives. The aims reflect the IMA definition of Money Advice, which contains the following key elements about Money Advice services: Providing access to justice in the form of transparent advice encompassing all the strategies, legal protection and options available to people experiencing financial problems Providing a service which is impartial, confidential and independent

Ensuring that the individual, and their family and household, experiencing problems related to over-indebtedness are the principle in the organisations negotiations with credit providers and their agents Offering holistic information and advice about clients rights and responsibilities so that they are equipped to make informed choices about their debt situation

Providing a good service will help clients to identify their priorities so that they will be able to maintain their home, essential services and avoid prosecution. This will provide a direct benefit back to the bigger society by helping people with financial difficulties to become better able to manage their affairs and therefore better payers. Organisational Procedures Organisational Procedures are vital to help the smooth running of a busy organisation and will also help to ensure a quality and consistent service. Money Advisers will need to work within their organisational procedures whilst carrying on activities such as opening, progressing and closing debt case files. Organisational Procedures are normally set out in detail in an Office Manual which is accessible to all workers either in paper or electronically. These procedures will be dictated by the organisational aims and policies, client bases, service delivery and funding requirements. Some of the policies will appear elsewhere as well, such as a complaints procedure which might be on display in leaflet format for service users. Administrative Procedures and Systems The use of standard systems, forms and resources for advice giving makes casework consistent, easier to manage and assess. These include ICT packages, checklists and standard resources but are likely to differ across organisations. Many may require a specific numbering system for allocating files; case notes may need to be written up or recorded on a case recording system. Cases may need to be diarised with Key Dates and diary dates for case management tasks (specific actions to take place on the file) on an organisations systems so there will be a mechanism for tracking progress, identifying dates for review and follow up. i.e. an electronic diary system. Supervision Procedures Each organisation will have a chain of line management and supervision so that each worker is clear about who they report to and who will monitor the quality of their work. Supervision procedures will usually include regular and formal scheduled internal activities such as team meetings, training, performance and file reviews. The IMA has developed a File Review Form (which can be downloaded later in this section) for organisations who want to use it. Your Company will already have monitoring and compliance checks and controls in place and will no doubt already be ensuring each of the areas highlighted within the IMA checklist are evident in your Companys day to day practices and engrained in your business cultures. It is however helpful to familiarise yourself with the checklist to ensure this is the case. Supervisors will use these procedures to help advisers to identify training needs. Smaller organisations can co-ordinate supervision and peer reviews with counterparts from other similar organisations. Periodically organisations will be subject to external audits which will test the quality of advice including these supervision procedures. In the case of DEMSA member firms such as your own, DEMSA are required to complete an independent annual audit, to demonstrate your Companys compliance with their Code and any other relevant Codes or Guidance. In addition to the audit, DEMSA member firms are subject to periodic mystery shopping, customer satisfaction surveys and auditing of their marketing material.

Using a Case Management System This is usually a piece of software for case recording and inputting details of the file. Most organisations will have a database upon which most files are entered, this ensures that files are centrally accessible, so that files can be continually updated and, data captured across client groups can be recorded, so that conflict of interest checks can take place and also to allow the location of files for supervision and audits purposes. Policies Advice agencies will also have a collection of Policies which guide workers in dealing with specific issues. The following policies are common to most advice agencies but advisers should access their agencies own policies to ensure that they are familiar with them: Confidentiality policies Confidentiality is a fundamental principle of any advice service. The principle of confidentiality is that nothing learned during the course of dealing with a client (including the fact that an enquiry has been made) will be passed to anyone outside the service without the client's express permission (other than in exceptional circumstances such as to comply with AML regulations). Advisers will usually sign a confidentiality agreement with their agency, they need to comply with this policy and will need to understand when confidentiality might need to be breached e.g. a request for information from enforcement agencies, such as the police. Advisers should always consult their agency (or their companys policy) before taking steps to breach confidentiality; this might be where there is evidence that someone is at risk, the information is required by law or if a potential conflict of interest exists. Conflict of interest checks will need to be conducted so as to ensure that this policy is being adhered to and that no conflict of interest arises (i.e. the same organisation advising the two opposing parties; an example may be a landlord and tenant dispute with both parties coming to the same advice agency for advice). Many agencies would have a policy of helping just one of these parties and not both. However, what is important is the level of help being given to a client. The agency needs to consider whether there is really any potential for a conflict in the eyes of the client if it is giving only information and advice to one or both parties rather than acting on their behalf. In some situations the clients confidentiality can be breached in so far as a client has to be told that the other party to the dispute has already consulted the agency. It is recognised that this could potentially be problematic, for instance in a domestic violence situation. Data Protection Policies for clients as required under the law; all agencies taking personal information from individuals must obtain permission to hold that information. There are eight Principles identified in the Data Protection Act. Guidance on the Act can be obtained from the Information Commissioners Office: www.ico.gov.uk In order for a company to act on behalf of a client, written authorisation under the Data Protection Act will be required. In practice though the adviser should "actively communicate" a privacy notice that the agency will collect and store certain personal information about the client. If it is the case that any of this information is to be shared with another party then this needs to be communicated to the client. The IOC website says about the communication method: " .... can be by a number of ways; verbally to the client, in writing (direct to the client) public poster or otherwise." If it is deemed necessary to provide information in writing then a form giving permission can be used requiring for clients to sign and return. However if another method is more suitable then the information can be adapted or incorporated into another piece of literature for the client; possibly an Information about the Service leaflet or the confirmation of advice to client letter.

Other Policies which your organisation might have in place to protect workers and service users might relate to: Vulnerable customers Clients interests Anti Money Laundering Dealing with Complaints

ESTABLISHING THE CASE FILE What following is an outline and therefore you should read the contents and reflect upon the current practice and procedure adopted within your own organisation. Open a clients case file, using your Companys Procedures In order to ensure quality and consistency DEMSA members must adhere to their own internal procedures; DEMSAs Code of Conduct, The Office of Fair Tradings Debt Management Guidance, as well as any other relevant industry codes and guidance. The following procedures are outlined within DEMSAs Code but your company may have their own specific policies. Establish and agree the desired case outcomes and milestones This will help to manage the expectations of the client. This will be achieved by the following, but it is important to remember that you will not necessarily gather all of this information during initial contact with the client. A case may be established with a relatively small amount of information but will soon contain the information below:
Explore and confirm the background, facts and particular needs of the client investigating what has caused their financial difficulties, identifying all the debts they have, both priority and non priority as well as any actual or threatened legal or recovery action. After diagnosing the situation presented by the client, provide the client with an overview of their debt solution process, then: Address any outstanding legal issues, and explain how these will be dealt with. Ensure that the client understands the importance of prioritising debts such as mortgage, rent, council tax and utility payments and any arrears, and ensuring that appropriate allowances are made for each of these payments within any Debt Management Plan. Ensure the client understands that they need to maintain these payments separately from their Debt Management Plan

Provide appropriate legal options available to the client, assessing limitations and consequences of each of these in light of the clients specific circumstances Agreeing and confirming how the case is likely to proceed and ensuring the client understands potential consequences as well as benefits. Where possible time scales and relevant deadlines should be communicated. e.g. when the debt management company will be communicating with the clients creditors or when a DRO application will be made Providing information about the service the client can expect to receive, along with actions to be completed by them and the Company

The above information should be confirmed in writing using plain language and avoiding jargon. Information letters, leaflets or booklets should also be supplied where and when appropriate for example company terms and conditions, explanation of fees payable, cancellation rights etc The client should also be provided with details of the Companys Complaints Procedure, the relevant person to whom complaints about the service should be addressed and the escalation process for DEMSA and the Financial Ombudsman. Each Company will have their own Complaints Procedure, which should be sent out with the terms and conditions, prior to the client commencing a service or making a payment.

Ensure the client is aware of your Companys fees by: Providing information about all initial or upfront costs and any ongoing management fees - this must be clear, easy to understand and confirmed in writing as soon as possible. Debt Management Company fees should be explained to the client as follows:
It must be made clear that administration and/or management fees will be payable and details of all such costs must be provided. If any payments go to the Company and not to the clients creditors, they must be warned that they will go into arrears or further into arrears with their creditors. The client must be advised that he/she will be given the opportunity to withdraw from the contract, the procedures for withdrawal, the circumstances in which any costs might be incurred and, if they are, what they are likely to be. The nature of the service to be provided by the Company: the total cost to the client of the service including any initial or fixed charge fees or deposit, the periodic management fee to be paid to the Company multiplied by the estimated length of the contract; the total amount to be repaid; and the likely duration of the contract. Where it is not possible to establish the cost or duration of a contract at the outset, a best estimate of the total cost to the client (of the service) must be given. Estimates must be realistic and must be accompanied by a clear warning that it is an estimate and the assumptions on which it is based. If the proposal is covered by the Financial Services (Distant Marketing) Regulations 2004, then the relevant information prescribed by those Regulations, including Cancellation Rights must be provided to the client i.e. cooling off period Information should be provided to the client about their other options and other service providers, if they can no longer afford the help from a fee charging Company, for example Information about how to access help free of charge or Providing the client with a copy of, or access to, The Insolvency Services In debt? Dealing with your creditors guide.

Progressing and managing the clients case You should read through this section carefully, some will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Take timely steps to initiate and progress agreed actions on behalf of the client

Once a likely timescale for action has been provided, a diary system should be operated on every file to ensure accounts are managed diligently and in a satisfactory manner. Computerised central diaries should be used to review the file on diary dates and to ensure actions are followed up prior to any key dates. Members must ensure that appropriate records are kept for all cases and that adequate electronic means of storage, capable of retrieval, are in place. Appropriate records will include the desired outcomes, all relevant details about the action that needs to be and has been taken, what the next steps are, when these will be taken and whose responsibility it is to take them. Ensure that the client is kept informed at all stages of the case of progression against milestone and outcomes It is important to ensure that the client is advised of any developments in their case. It is good practice to send, where appropriate, copies of letters sent and received from third parties in the case. Where major developments occur, that are likely to change the agreed outcomes or milestones, this will need to be communicated to the client in writing and or verbally and where appropriate, a review of the continued suitability of their debt solution should be undertaken. DEMSA members must maintain accurate, up to date client records that detail the clients payment history as well as any written and oral communication with the client and their creditors. This information may need to be made available to a third party either through an audit or complaint and records should therefore be retained with this in mind. Ensure all deadlines and Key dates are met Key dates are dates relevant to the individual case which need to be met. Examples of key dates are; deadlines for responding to court forms, court hearing dates, file review dates, courtesy call dates, limitations periods etc. For best practice
Case management and central diaries should be checked on a daily basis to ensure that files are being managed in a satisfactory manner, with reasonable skill and care. Key actions should have diary dates one or two weeks prior to allow time for the adviser to undertake the relevant actions on the clients account Diaries with key dates should be accessible to co-workers or supervisors in case of the absence of an adviser. This will allow others to take action in the cases where it is necessary

Ensure the case file is maintained accurately and is up to date DEMSA member firms will all have mechanisms in place to ensure that cases are maintained accurately and are up to date. This will often be done using a variety of staff to collectively carry out the ongoing management of a clients case and to accurately record, monitor and review cases:
Advice staff: are familiar with the format required for case recording Team leaders: oversee work of their team and team meetings will address support needs or issues raised by advisers Supervisors and managers: are responsible for regular reviews for the quality and consistency of the service provision including records

Audit or Compliance Team: Compliance checks, which are likely to include monitoring recorded phone conversations, are carried out on a percentage of cases, depending on experience and expertise levels of workers or on a random basis to ensure quality and compliance standards are maintained.. That case details are recorded accurately. That any periods of inactivity on a clients case is identified, this could include, for example, the failure to contact a client over a number of attempts Any outstanding action required, or non payment of their Debt Management Plan is identified Any mitigating explanations are detailed on the file record where required activity has not been carried out or diary dates have not been observed.

These regular reviews and monitoring procedures will ensure:

DEMSA members should follow their own internal Company Procedures to ensure that poor recording, missed actions or non payment of a Debt Management Plan are addressed and likelihood of re-occurrence reduced as far as possible. Where failings are identified, reviews should be carried out and, where appropriate, remedial action should be undertaken or procedural changes introduced, to prevent recurrence. Make best use of available resources in managing the clients account Use of legal resource materials is essential to ensure that advice given is appropriate, accurate and up to date. This may include:
Internal company resources Liaising with colleagues and supervisors or managers Attending regular training updates Use of practitioner text books for example, CPAG Debt Advice Handbook and industry magazines, this could include trade press such as Credit and/or Insolvency Today as well as Quarterly Account/Adviser/ Arian Use of internet resources i.e. IMA website and the section providing internet based resources

The Further Reading section of this module contains more information about reference books and other resources relevant to Money Advice. Quarterly account is available in the module for students to use whilst studying. Review and evaluate progress against milestones and outcomes By reviewing and evaluating case progression against the desired milestones and outcomes your Company will be able to maintain an efficient and effective service, learning from experience and making improvements along the way. It can also be useful to provide a list of steps necessary to further the case. This enables both the adviser and the client to check against this list to chart the progression of the case/how far along in the process the case is. If there is no action required by the adviser and no contact from the client over a long period of time, despite attempts to encourage this (three months is usually sufficiently long) and the client has stopped making payments, then the case should (usually) be closed, the up-to-date creditor

information provided in writing to the client and the creditors informed that representation has ceased.

CLOSING THE CASE You should read through this section carefully, some will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Closing a clients case You should read through this section carefully, some parts will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Follow your Company procedures for closing the clients account. When closing a clients account it is important to check that there are no outstanding actions that need to be dealt with prior to closure. Ensure that the client is aware of any further actions they can take to deal with their debts. This will include: Advising the client of any relevant actions they may need to take after closure and relevant time limits in their case. E.g. the timely response to a claim form Where there are any income maximisation or benefit issues the client should be clear on how they can proceed or where they can gain any further help or direct any future enquiries. It is good practice on closure of a Debt Management Plan to provide the client with an up-to-date position of their accounts and any relevant history and to ensure all important documentation is returned to them e.g. P60 Where appropriate, and in cases of hardship advisers should refer or signpost clients to not for profit advice centres. Relevant self help material if it is appropriate for the client, including an up to date financial statement that may be re used at review periods or up dated when the clients financial situation changes.

It is more likely that a case will be closed at the clients request, perhaps because their circumstances have improved or because they feel confident enough to self manage their finances. However, where the Debt Management Company chooses to close an account, for example because of non-payment, it is important that the client is advised of this and is provided with all necessary information to enable them to manage their debts themselves or to pass accurate and up-to-date details to another organisation. The adviser should therefore explain the reasons and procedures for closing the case and check client understands The adviser should: Provide the client with a clear, jargon free closing letter at the time of closure outlining actions taken and reasons for closure. This may be more appropriate to discuss with the client by telephone, however it is important to provide the client with an up-to-date

written position of their accounts, including balances, creditor contact details, account numbers, current organisation collecting, last agreed repayment amount (and where appropriate the expiry of this arrangement), current position in relation to interest and charges and methods and dates of expected future payments, including, where appropriate, creditor bank account details. This information should also outline where necessary the outcomes achieved and advice about the how the client should proceed after closure of the case

Reasons for closing a case A case might be closed for a variety of reasons but the most commonly: Following instruction from the client Following persistent non-communication or non-payment from the client When agreed objectives have been achieved and or there is no value to continuing Where agreed objectives have failed to be achieved and the company is unable to correct this Where it is more appropriate to signpost or refer a client to access help elsewhere for example For free advice or self help To an IVA provider To an organisation providing DRO applications

Where the client has been materially dishonest Where the client has failed in their responsibility to the company such as taking out further debt Where the client has behaved badly or abusively to members of staff

Agree with the client arrangements for case closure and close the case using Company procedures To achieve this the Company will: Have actioned any steps in the case that were agreed or remain outstanding. Make the client aware of when the case is coming to an end Ensure that the adviser closes files in accordance with their Company procedures. This could include: closing the clients account on the client management systems write to the clients creditors informing them that their representation has come to an end ensuring that all administrative procedures are adhered to If a client withdraws from a Debt Management Plan, members must refund any monies held for disbursement - and not charge any further fees, except those which have been agreed at the outset and defined within their terms and conditions.

RECORD AND MAINTAIN CASE NOTES

You should read through this section carefully, some will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Record key information about each case The type of information that should be held about each debt case is listed below. It might not always seem relevant to record all of the details below but we have added some explanations for why this information should be recorded: Name, address and contact details for clients Case or client reference number Health problems can impact on the debt situation, the financial statement and debt relief option available. The existence of health problems can be an indication that the client might need to apply for benefits or request additional support or be referred to another more appropriate organisation. Ethnicity and or immigration status companies often gather information about client demographics to ensure that they are not discriminating in the provision of the service also a clients immigration status can have implications for the of debt relief options available National insurance number for identification Date of birth Relationship status Household make up; dependants and non dependants living in household will impact on the financial statement Housing status; type of tenancy, freehold, leasehold, shared accommodation Deadlines; Key dates diary for management of the file Options for clients including the outcome of any discussions so that anyone reading the case will be able to see how a goal has been arrived at Agreed actions and desired outcomes Steps to be taken to achieve agreed outcomes Income information; wages, benefits, contributions and pensions Full list of Expenditure items and day to day living costs Creditor details: Priority or non Priority, Name, address, account references, current balances, contractual payments, charges (for example late payment charges, or interest charges including APR rates), recovery or enforcement stage, statements and possibly original contractual agreements; where appropriate.

The information below is required to produce the financial statement:

Assets (equity in property or, for example, any savings)

You can find out more about the CFS by reviewing the contents of the CFS website CFS or by reading this BBA and MAT (2005) CFS Report. The common financial statement is discussed elsewhere in the module. Record all actions being undertaken for clients Actions agreed to be undertaken for clients should be confirmed in writing. This information should also be recorded on the clients account. This information should be legible and retrievable Notes should clearly state what action is going to take place Time periods and deadlines for that action should also be recorded and stated to the client Your Company may require a log of the time taken conducting specific tasks on the clients account

Ensure case notes are accurate and an appropriate amount of detail is included Account notes should be in a standardised format as it is essential that anyone taking over the account should have enough information and history on previous actions completed and any actions outstanding to do so effectively and efficiently. When updating client account information, the following should be included: details of the action taken, people communicated with during the action, contact details for third parties involved in action, dates of actions outcomes of actions Creditor contact details Agreed dates for follow up or review As stated above it may be necessary to record the length of time taken conducting the relevant action

Ensure cases notes are structured in a way that provides a clear account history Case notes on the file should all be dated. The notes should be set out in an easily accessible manner and in either ascending or descending order as deemed appropriate by your Company. Advisers must utilise computer systems to record account notes as dictated by your Company. All DEMSA member firms must ensure that client acount notes are legible and clear so that it is easy to follow a trail of actions and so that they can easily be independently audited. Comply with all relevant legislation, codes of practice, guidance and ethical requirements Codes of practice come from a number of sources (these are discussed in more detail later in the module) and DEMSA member firms will also have their own internal procedures to adhere to; these could include: National Occupational Standards for Legal Advice

Company Policies and Ethics Equality and Diversity Policy as it relates to clients Competences and responsibilities as laid out in Job description/work plans/appraisals DEMSAs code of conduct OFT(366) Debt Management Guidance 2001 and Debt Management (and Credit Repair) Guidance 2012

More information about these are contained in the Aims, Policies & Procedures section and also Code of Conduct section

REVIEW PERSONAL CASELOAD

You should read through this section carefully, some parts will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. A caseload refers to the group of cases which any individual worker is responsible for. This section is about ensuring that the caseload is being managed effectively and systematically. Review all relevant information on the personal caseload Each adviser will need to be able to access information about cases they are responsible for, in order to monitor their caseload for deadlines, key dates and actions required, so that they can progress each cases as and when necessary. Different companies will use different systems to monitor and review caseloads to check that they are being managed correctly and the task might fall to the owner of the caseload or to another worker, team leader or supervisor. Whatever system is used, the following components are likely to be involved: Utilising computer systems; highlight deadlines, actions required and key dates. Create work queues or task lists which show what actions need to be taken such as an annual review or deal with the expiry of an arrangement Reviewing work queues, task lists and deadlines to ensure that work is up to date Progress checks, courtesy calls, file reviews, compliance audits and case monitoring procedures which will be happening on a regular basis At least once annually completion of a full review of the clients current circumstances Assessing the general management of a clients case to check all deadlines are being met, if not why not and what the consequences of this might be for the client. Reviewing case inactivity and consider whether inactivity is due to lack of adviser input, the clients failure to contact or lack of payment or another reason.

Monitor the progress in achieving the required outcomes for the cases In order to do this you will need to check the outcomes and expectations set initially:

Look at initial outcomes set at the onset of the case and assess on a periodic basis which objectives have been met. Where objectives have not been met; assess what the reasons are for this. Check whether progress been communicated to the client Consider whether there are ways of achieving outcomes more quickly and efficiently. Consider, where outcomes have not been met, whether the DMP (or other solution) is still the most appropriate one for the client. Whether a payment arrangement has been set up with their creditors. Whether interest and charges have been stopped on each account. Whether a catalogue debt that is unenforceable has been appropriately challenged Whether all priority debts have current arrangements that have been maintained Whether an application for a DRO or bankruptcy has been made

Examples of achieving a required outcome may be:

Identify any obstacles in achieving the required outcomes for the cases If a case has not reached the desired outcome, it is good practice for an adviser to assess what possible obstacles might have contributed, things to consider could be: Whether there have been language or communication difficulties Whether creditors actions or their internal policies have reduced the advisers ability to negotiate Whether an internal company procedure has affected the advisers ability to progress the case Whether the clients chosen option was appropriate Whether there has been a lack of contact from the client or an unwillingness from them to engage in the advice process or make payments Whether there has been a lack of relevant advisers action on the case Whether the adviser might have lacked expertise in one area in which advice is based Whether there was a missed opportunity to refer the client to an alternative service or a lack of relevant places to refer the client to

Identify any improvements that can be made to the management of the case Things to bear in mind: Timely management of matters on the clients account Clear communication of actions to be taken by the adviser and also any actions to be taken by the client Use of systems to plan future actions required Diarising any pre-work required in order to meet deadlines for key dates Use your previous experiences and that of those around you to assist you in successful account management

Exchange information on the cases according to the procedures of the service Advisers will need to be aware of referral systems and procedures to be followed where clients are to be referred, either internally or externally. An example of an internal referral may be where the client has an issue requiring the assistance of a specialist. E.g. a creditor petitioning for their bankruptcy An example of a referral to an external service provider could be: Where a client is potentially entitled to benefits that are currently unclaimed Where a client needs to access a Debt Relief Order, which your Company may be unable to provide. Where court representation might be needed E.g. Time Order on a secured loan You are correctly identifying when a client needs to be referred or signposted. Ensure that if a client needs to be referred either internally or externally that the appropriate systems are in place to ensure that these are effective, for example that the appropriate consent has been obtained to transfer their data. Ensure that the account is managed and organised in a manner that allows the next adviser or company to understand exactly what has happened and what needs to be done to meet the objectives as set out for the client Ensure that the client is kept informed of your intended actions or that of other colleagues or companies and that a smooth transition is maintained throughout this process paying attention to the customer journey

Advisers will have to adhere to their Company procedures that:

Section 1.1.1 contains more information about making and receiving referrals. Monitoring the size of caseloads The size of caseloads will generally be determined and overseen by a supervisor or manager and will depend on an advisers experience and ability to ensure that they have the capacity to manage the workload. Advisers should also monitor their own caseload in terms of the number of cases which are open. Advisers should discuss any concerns about the manageability of their caseload with their relevant superiors. Identify any factors that might affect the structure or content of the case load The structure and content of a caseload will be affected by various factors. Inevitably caseload content will be affected by the profile of the client base and the types of services provided by your Company. The client-base will be determined by the services and range of solutions offered by a member firm and possibly how and where these are advertised. For example a telephone based debt management company is more likely to attract clients working full time, with available income and is less likely to attract clients who need face to face support with very limited means. The content of a workers caseload or types of cases allocated to them will also depend on their expertise, specialism or role within the Company and the type of work they do. Some workers will be specialist in certain areas and will therefore receive certain kinds of cases; these might include cases involving DROs, IVAs, court procedures, mortgages or priority debts.

The potential structure and complexity of a caseload should be taken into account when allocating cases and determining the size of appropriate caseloads.

Establish Priorities for dealing with client cases

You should read through this section carefully, some parts will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Establish criteria for setting priorities for cases This will be set by your own Company and many of you will be following your Companys Procedures; but it may also be appropriate to use individual discretion when managing clients accounts. The factors that need to be taken into consideration are: Type of debts whether it is a priority or non priority debt. It is important to bear in mind that clients circumstances will often dictate when debts are considered to be priority i.e. a Hire Purchase Agreement for a vehicle which the client needs to get to and from work; a mobile phone bill where the phone is essential for the client to conduct their work. Clients priorities may also be subjective, for example repayments of loans from family members. Do deadlines exist that require urgent action? Clients and advisers need to understand why this date is a priority. What are the consequences for the client if those key dates deadline are not adhered to? Is the client in need of referral on a specific issue for the clients case to be dealt with properly? When did the client first contact your Company for advice? Is the client vulnerable? (this will depend on whether your Company has a clear definition of who are vulnerable clients or the client shares information enabling you to identify more obvious concerns)

Assess against specified criteria Depending on the type of case the adviser would need to assess the case against specified criteria in order to assess how it should be dealt with. When assessing a clients case it is important to have a benchmark demonstrating how files should be dealt with. Things to bear in mind are: Company Policies and Procedures OFT Guidelines Criteria as stated in one to one meetings or team meetings Office manuals (or a computerised Decision Tree) may set out criteria to adhere to.

Advisers should use various codes of practice to assess creditor conduct against industry standards.

Examples include: Local Authority recovering Council tax arrears via bankruptcy Has the council adhered to council tax recovery policies? Most recovery procedures should state that bankruptcy is a last resort, does this specific case follow their own recovery policy? Mortgage lender recovering Mortgage arrears via County Court Possession hearing Has the mortgage lender adhered to relevant Protocols such as the Mortgage Conduct of Business Rules and the Civil Procedure Rules Pre action Protocol for possession claims based on Mortgage arrears of residential property? Identify any immediate action required to meet deadlines. The adviser will need to identify immediately what actions are needed to meet a key date deadline and this information about actions required should be evident on the file. Dates should be in case notes and in event diaries and must be in letters to clients where they are required to take action to deal with an issue themselves. In such circumstances the letter would need to clearly state exactly what needs to be done and the time scale for those actions to take place. It should also explain the consequence for failing to do the specified action in the required time. An example would be where a client has approached your Company because they have a possession hearing in 3 weeks time; for arrears on a secured loan. In such cases, if the client wants to defend this action, because they disagree with the arrears or feel they have mitigating circumstances; their defence should be submitted to the court 2 weeks prior to the hearing. Failure to do so may mean that any evidence submitted by the client on the hearing date may have less weight and the Judge may be more likely to make an order that takes little consideration of the clients defence. There may also be possible cost implications later on in the case. The client would need to understand the immediate action required; which would be the completion of their defence and that where possible it would need to be sent to the court within the next 7 days. Specify clearly the accounts that require highest priority Accounts requiring highest priority will be those cases that have key dates for actions needed to progress matters. An example would be a client who is an Assured Tenant and has received an Eviction Notice to take effect in 4 days time. This client has a physical disability affecting her mobility and preventing her from walking, she is a single parent with two dependent children aged 5 and 7. The reason for the breach of the Suspended Possession Order is due to a benefit assessment error; stopping payment of the clients housing benefit. Actions in the case would be to: submit an N244 application requesting a hearing to either stay, suspend or set aside the warrant for eviction contact the landlord explaining the clients situation and requesting their cooperation in allowing you time to deal with issues in resolving the matter contact the benefits department to deal with the assessment error requesting a review or appeal of any decision or a closer examination of the benefit assessment

Such as case would require high priority for the following reasons: The client is a vulnerable person due to their physical disability and the fact of having two young children The client and her family are at risk of losing their home if an eviction warrant is executed The court hearing is in 4 days time; therefore requiring immediate action if your Company aims to assist with the court proceedings.

Such an account would be likely to take priority over another client who comes to your Company a day later, seeking advice on how to negotiate with a credit card company after they have registered a Default Notice. The order of priority in cases will be similar across the board but may differ slightly across individual Companies. This information should be available to advisers through office Policies and Procedures or from direction from Managers and Supervisors. Information about the level of priority should be evident on the file in case notes and office diaries.

Courts and Jurisdiction (England and Wales) The County Court There are over 200 County Courts handling claims in contract and in tort (a body of law which relates to civil wrongs which are not established in contract). The majority of claims dealt with in the County Court concern the recovery and collection of debt, recovery of land and personal injury. County courts also handle family proceedings, such as divorce, domestic violence and matters affecting children. County Courts are spread around the country and cases are heard by district judges and circuit judges, in addition some decisions are delegated to court officials. Civil justice in England and Wales is administered mainly by the County Court and the High Court, the latter handling the more substantial and complex cases. Jurisdiction Claims for possession of property which do not relate to trespassers must start in the nearest county court to the defendant. The County Court can transfer the case to the High Court if it is particularly complex. Claims up to a value of 15,000 have to be dealt with in the County Court. Claims over 15,000 can be dealt with in the High Court or the County Court. If, the creditor believes that the claim should be dealt with by a High Court Judge, then the following should be taken into account when deciding: The financial value of the claim The complexity of the facts, legal issues, remedies or procedures The importance of the outcome to the public

All regulated Consumer Credit Act 1974 claims have to be dealt with in the County Court, if: the amount of the credit is 25,000 or below (agreements on or after 1/5/98) it is to an individual

The vast majority of unsecured loan agreements will be regulated. The claimant does not have to issue a claim in the defendants local court (apart from claims for possession), but if a hearing is generated due to a defence or application for a redetermination for example, the case will be transferred. Some county courts have bankruptcy jurisdiction. These are known as the District Registries. Many of the larger county courts act as the District Registry for other, smaller county courts. Internet based claims If the claim has been issued electronically in the name of Northampton County Court the client may respond to the court using the Money Claim Online (MCOL) internet service. MCOL is designed to be easy to use. If the Internet is used to respond to the claim this must still be done within 14 days of the date received. The High Court Due to the above County Court jurisdiction rules advisers will rarely encounter the High Court. Procedures and paperwork have now been streamlined so that matters can be dealt with generally in the county court system. The High Court still handles the more substantial and complex cases. The High Court has three divisions: The Queen's Bench Division: This deals with disputes relating to contracts, general commercial matters (in a specialist Commercial Court), and breaches of duty known as 'liability in tort' covering claims of negligence, nuisance or defamation. The Administrative Court deals with applications for judicial review of the actions of public bodies, and has the power to declare the action of an individual, department or public body unlawful The Chancery Division: This division deals with disputes relating to land, wills, companies and insolvency. The Family Division: This division deals with matrimonial matters, including divorce, and the welfare of children. Magistrates Court The Magistrates' courts have limited civil jurisdiction; in family matters (when they sit as a Family Proceedings Court) and in miscellaneous civil orders. See separate section for the Magistrates Court. Appeals Appeals in most civil cases were reformed by the Access to Justice Act 1999. The general principle is that appeal 'lies' to the next level of judge in the court hierarchy. A county court appeal lies from a District Judge to a Circuit Judge and from a Circuit Judge to a High Court judge.

Leapfrog appeals are occasionally permitted (usually to the Supreme Court from the High Court, bypassing the Court of Appeal) but normally require an agreement by both parties as well as the judge granting leave to appeal. Appeals are expensive and require a lot of work on the part of the advocate, so will normally require a referral to a solicitor and an application for a Legal Aid certificate. If a party is unhappy with a decision given by a judge, he or she can ask for leave to appeal at the hearing. This will normally be refused. The next step is to complete an Appellants Notice within 21 days of the original decision. This means a lot of paperwork and obtaining a transcript of the original hearing. The court will then either decide to grant or refuse leave to appeal on paper, or list a hearing to hear the grounds for appeal. Some hearings are to appeal a decision about leave to appeal! If the appeal is allowed, the higher court will decide the appeal at the permission hearing or list the case for a further hearing. The appeal will then be upheld or dismissed. In order to appeal, the appellant must identify grounds. This will usually be that the judge in the original hearing got either the facts or the law wrong. It is not usually sufficient to say that the outcome was not fair judges are permitted to exercise discretion in many cases. The same party can only appeal a decision twice, so if an appeal from the county court to the High Court is unsuccessful, it is open to apply to the Court of Appeal (although it is likely the appellant would not get leave to appeal if the first appeal had been dismissed), but it is not possible for the same appellant to appeal to the Supreme Court if the decision remains unsatisfactory. Court decisions are binding on lower courts and on themselves in some cases. Differences for Northern Ireland In Northern Ireland if the debtor refuses to pay, in order to obtain a court order or judgment, you must go through: The Small Claims Court for debts less than 3,000. The County Court for debts of 2,000 to 15,000. The High Court for debts in excess of 15,000. The Magistrates Court can decide on money only claims where no more the debt is no more than 100 or is the balance of an account that does not exceed 250. In Northern Ireland all bankruptcy hearings are held at Belfast High Court Chancery Division. Additionally the Northern Ireland Courts and Tribunals Service has produced a table outlining the hierarchy of courts which may be helpful to NI debt advisers, along with "Who we are" introducing the service its aims and giving background information to the service.

Using the County Court Following Lord Woolf's review of the civil legal system on 26th April 1999, the Lord Chancellor Department/Court Service brought together the existing rules of the County Court and the High Court. This was as a result of Lord Wolf's ' Access to Justice ' report. The introduction of the Civil Procedure rules establishes that the use of the Courts should always be a last resort. One of the tasks of an adviser is to help the client to consider whether it is possible to resolve matters without using the court.

Most civil disputes do not go to court at all, and most of those which do, do not reach a trial. Many are dealt with through statutory or voluntary complaints mechanisms, or through mediation and negotiation. Arbitration is common in commercial and building disputes. Ombudsmen have the power to determine complaints in the public sector and, on a voluntary basis, in some private sector activities (for example, banking, insurance and pensions). A large number of tribunals also exist to determine disputes. Most deal with cases that involve the rights of private citizens against decisions of the State in areas such as social security, income tax, mental health and employment. In all, there are some 80 tribunals in England and Wales, which deal with over one million cases a year. Legal Aid Reform is subject to continuous flux. The link is to the website which will help to keep you up to date with developments. The County Court Procedures There are now three special types of court rules: The Civil Procedure Act 1997 The Civil Procedure Rules Practice Directions The Civil Procedure rules include pre-action protocols which are codes of practice that each party is expected to follow before starting court action. There are no protocols for most debt cases but they do exist for both rent and mortgage possession cases, see www.justice.gov.uk . Regardless of whether there is a protocol for a particular type of debt, all parties are expected to have acted reasonably in their pre-action conduct in attempting to avoid the necessity of court proceedings including exchanging the relevant information and documentation. The rules apply to any proceedings, which were commenced on or after the 26th April 1999. In essence these rules include: Numbered rules - these deal with the principles, whereas the practice directions explain how to put the rules into practice. The Civil Procedure Rules set out the way in which a case should be handled when it is going through the civil courts. The rules and the practice directions are of equal importance and authority. Practice directions - these explain how to put the rules into practice. The rules and Practice Directions are of equal importance and authority. A new Practice Direction on pre-action conduct came into force on 6th April 2009, replacing the Practice Direction on Protocols; it describes the conduct the court requires of all parties prior to the case beginning. Schedules - these contain the orders of the Supreme Court and the County Court. Pre - action protocols - in essence codes of practice. There are a number of such protocols and they have been added to over the years. Advisers are most likely to come across these in relation to rent and mortgage possession cases. There is a relevant article which explains the Pre Action Protocol in The Adviser magazine (November/December 2009 - Issue 136) which you should consider reading. Outside of all of the above there is an unwritten assumption that parties to action will take all reasonable efforts to avoid litigation and will also act reasonably in relation to the exchange of information.

Alternative Dispute Resolution ADR The Woolf report also encouraged court users to make use of Alternative Dispute Resolution [ADR] for example mediation or arbitration or make use of policies and practices run by industry bodies such as the OFT or the Financial Ombudsman Service. Some courts have their own mediation schemes; at present these tend to relate to family proceedings. Following the Woolf report, the Civil Procedure Rules were changed to encourage people using courts to consider trying Alternative Dispute Resolution (ADR) to resolve their dispute before making an application to court. They also gave courts powers to impose cost penalties on parties who refused to do this. More detailed information is to be found at ADR One of the most important pieces of case law on the subject of ADR is that of Halsey . This and a few other cases established two important principles: 1. Compulsion - ADR would be regarded as an unacceptable constraint on the right of access to the court and, therefore, a violation of article 6 of the European Convention on Human Rights 2. That the court can decide to deprive successful parties of some or all of their costs on the grounds that they have refused to agree to ADR, but that it must be borne in mind that such an order is an exception to the general rule that costs should follow the event. The burden to justify a departure from the general rule is on the unsuccessful party to show that the successful party acted unreasonably in refusing to agree to ADR As a result some important guidelines were established; a) Courts do have a duty to encourage the parties to use ADR where it is considered appropriate. b) Courts should proceed on the basis that there are many disputes which are suitable for mediation, an approach which is underpinned by the Woolf reforms. Mediation has a number of advantages over the court process, including the fact that it is generally cheaper, and has a wider range of solutions than litigation c) "All members of the legal profession who conduct litigation should now routinely consider with their clients whether disputes are suitable for ADR" d) Mediation and ADR processes have disadvantages as well as advantages, and are not suitable for every case, so there should not therefore be a presumption in favour of mediation. In terms of costs - The Civil Procedure Rules (CPR 44.3(2)) set out the general rule that the unsuccessful party should pay the costs of the successful party. Rule 44.3(5) allows costs to be varied by the court, taking into account the behaviour of the parties both before and during the proceedings, including their attempts to resolve the dispute, and whether or not they have followed any pre-action protocol. Civil Procedure Rules require courts to actively manage cases, rather than simply hear cases which come before them. Active case management means that courts need to look at what the parties do before coming to court, as well as during the court process, and can take this into account when deciding about costs. ADR schemes are not meant to replace the courts, but they can have advantages over going to court. The advantages include: Being more flexible

Solving your problem faster Being less stressful Costing you less money

Money Only Claims

A reminder of the different types of court claims: Money-only claims: For example the outstanding amount due from a loan or credit card. There is a separate section on this type of claim. Claims relating to land: For example the creditor is seeking possession of a house by a mortgage provider. Also see rent and mortgage sections in Part One. Consumer Credit Act Claims: All claims regarding regulated Consumer Credit Act agreements excluding the above categories (money only, land). Where the claim is not money only it might be for the possession of goods relating to a Hire Purchase agreement for example. Also see Hire Purchase and Conditional Sale agreements in Part One. All other claims: This might be a claim for the return of goods supplied in an agreement not regulated by the CCA or a claim for personal injury. The 'money-only' claims procedure starts when the creditor (the 'Claimant') asks the court to send a 'claim form' to the 'defendant'. The client ('defendant') is being sued by creditor ('claimant') for non-payment of money due under a contract - e.g. credit card, bank loan, and catalogue. Proceedings are commenced when the Court issues a 'claim form' (N1) (all county court forms can be identified by a letter and number reference in the bottom left hand corner of the form) at the request of the claimant. The claim form is in a prescribed format and should contain: and where the claimant is making a claim for money, a 'statement of value', this states the amount of the claim and whether s/he expects to recover: Not more than 5000 More than 5000, but not more than 15,000, or More than 15,000. This amount claimed will include any fee paid by the creditor to issue the claim and if a solicitor has been instructed, the costs. There may also be a claim for interest (see later section) A concise statement of the nature of the claim

and A statement of truth which states that the facts detailed in the particulars of the claim are true

Service of the Claim Once issued, the claim form must be served on the defendant within four months. Particulars of the claim can be included in the claim form itself, or served separately within a further 14 days. If a 'particulars of claim' is included (as is often the case) it must also have with it:

A response pack, including a form for acknowledging service of the claim (N9) A form admitting the claim (N9A) A form defending or counter claiming (N9B) Defendants notes for guidance (N9C) A copy of any written agreement should also be attached unless the proceedings were issued by the Central Production Centre (CPC), Northampton.

If particulars are served separately, the forms above must be served with the particulars. This may be important because the defendant's time to respond starts from the date of service of the particulars. Service is deemed to take place 5 days after issue if issued from the CPC or County Court Bulk Centre. In all other cases service is deemed to take place on the second business day after it was posted. At this stage the defendant has three choices: 1. Ignoring the claim 2. Responding and defending the claim 3. Responding and admitting the claim Ignoring the Claim If, within 14 days, the defendant fails to file a defence, an acknowledgement of service, or file an admission together with an offer to pay, the claimant can request that a default judgment is entered. The defendant will receive a judgment for claimant in default (N30). This may specify a date by which the whole debt is to be paid or the time and rate of instalment payments; otherwise the total balance will be due. Default Judgment If the defendant does not reply or the reply on an admission form from the debtor to the claim is a 'no' or 'nil' offer, then the creditor can request the court to enter a default judgment. However such a judgment will not be possible where there has been a defence, an acknowledgement of service or an admission filed, together with a request for some time to pay. The creditor specifies the date by which the whole amount should be paid or the rate at which it is to be paid by instalments. If a judgment has been entered then the adviser can apply to vary it, set it aside or apply to have it re-determined where these options are appropriate (see Enforcing a Judgment section). Responding to the claim The defendant must respond by either: Filing a defence or counterclaim within 14 days of service of the claim form or the particulars if served later. The N9B is sent to the Court. Filing an acknowledgement of service within the 14 days where he/she is unable to file a defence within that time. The defendant will automatically receive a further 14 days to file a defence (28 days in total). The N9 is sent to the Court. Admit whole of the claim and send the N9A to the creditor

Admit part of the claim and send to N9A and N9B to the Court

Defending the Claim Using form N9B the defendant has the opportunity to set out the facts of any dispute and where relevant an explanation of the events or circumstances leading up to the claim. The details presented on a defence form must be clear and sufficiently detailed in order to present the case. A defence might be that the amount owed has already been paid. It is not a defence to say that they cannot afford to pay the debt. The defendant can refer to evidence which they might have to support their case. If more time is needed to file the defence form then the defendant can return the Acknowledgement of Service form which will give an extra 14 days. If the defendant thinks that they have lost money because the claimant has failed to carry out their legal obligations they can make a counterclaim. The client may need specialist legal help with completion of defence and counterclaim forms. If the defendant disagrees with the amount owed they will need to complete both a defence form to defend part of the debt and an admission form to set payment level for the amount they admit. This might be the case if they are defending costs; more often where creditors have had full case facts yet still proceeded to claim despite there being no reason to. Tracks When a claim is defended, the court will send a form to each of the parties called the Allocation Questionnaire. The information provided in the allocation questionnaire will help the Judge decide the route that the case will follow. The route that the case follows is decided by the judge and is based on the value of the claim and how complex the case is. It affects everything from how a case should be prepared, to the length of the hearing and even the type of judge. Cases in the County Court are assigned to one of three tracks: The Small Claims Track generally for lower value and less complex claims with a value of up to 5,000 although there are some exceptions. The system for handling smaller claims in the small claims track is designed to be quick, cheap and easy to use. But it will usually only apply to claims for 5,000 or less (or 1,000 or less if the claim is for personal injury or housing disrepair), against a person, firm or company in England and Wales. Courts in Scotland have their own legal system. The Fast Track claims with a value of between 5,000 and 25,000 The Multi Track very complex claims with a value of 25,000 or more Claims of more than 5,000 are generally dealt with differently in either the fast track or the multi-track. Neither of the procedures for these tracks are straightforward and both will usually lead to a formal trial in open court which members of the public can attend. Leaflets which explain more about the allocation of claims to the small claims track, the fast track and the multi-track and how they are handled, are available free from any County Court office or from the HM Court Service Summary Disposal Civil Procedure Rules require courts to actively manage cases, rather than simply hear cases which come before them. Active case management means that courts need to look at what the

parties do before coming to court, as well as during the court process, and can take this into account when deciding about costs. Clients and advisers need to ensure that they clearly set out the facts of the case and the reason when disputing a claim. This is because courts now have greater scope and can act on its own initiative, for example they can strike out the particulars of claim or defence if: The court forms do not present reasonable grounds for bringing or defending the claim. This might be that insufficient or vague information is used It is considered to be an abuse of the courts process; for example it might raise issues which could have been dealt with in a previous case involving the same parties The court is satisfied that the case has no real prospects of success on the facts; or is bound to fail or succeed on a point of law; and there is no other compelling reason for it to go to court

To have a real prospect of success the case must be convincing not just arguable. A case is more likely to succeed where there is evidence available to support the case. It would not be appropriate to apply a summary disposal where there are considerable factual issues between the parties. Admitting the Claim The completion of the N9A is the most typical response which advisers will encounter. The defendant (or their adviser) fills in the form N9A with details of his/her family, housing and employment circumstances, details of their income, expenditure, debts and the offer of payment. This is sent to the creditor. The completed N9A contains vital information. It will often be the only information on which the court will make its decision, if the creditor does not accept the offer made by the client. Responding to the claim The defendant must respond by either; Submitting an acknowledgement of service along with a defence: 14 days + 14 days (as a result of submitting the acknowledgement of service) + 5 days (service) = 33 days Submitting a defence without an acknowledgment of service: 14 days + 5 days (service) = 19 days Full or part admission without acknowledgement of service: 14 days + 5 days (service) = 19 days Full or part admission after submitting with an acknowledgement of service: 14 days + 14 days (as a result of submitting an acknowledgement of service) + 5 days (service) = 33 days The use of a Financial Statement

Courts are often prepared to accept a financial statement attached to the N9A, this is permitted by the County Court Rules and often saves a considerable amount of time. However advisers should always check with their local court. The response of the creditor When they receive the completed N9A the creditor will decide whether to accept the offer or not. If the claimant accepts the offer of payment then the claimant will notify the court to enter judgment (N205A/225) and the court will send the defendant a copy of the judgment N30(1). Judgment will be entered for payment at the time and rate requested by the defendant. The claimant is not obliged to send the N9A to the court so in these circumstances they will have no information about the defendants ability to pay. The defendant will receive a judgment for claimant (acceptance) N30(1). The court will order the defendant to pay in one of a variety of ways; Monthly instalment payments One payment with 14 or 28 days Immediately (Forthwith)

If the defendant doesn't comply with the judgment and doesn't take any steps to alter its terms, then the creditor can decide whether to use another method of enforcement in order to obtain payment. Certain creditors ask for immediate payment judgments simply so that they can move to the enforcement stage earlier. If the creditor rejects the offer then the court must be informed and reasons for the refusal supplied and a copy of the N9A sent. The court will then enter judgment for the amount admitted and 'determine' the rate of payment. After judgment has been entered liability cannot be denied unless the defendant appeals or applies for the judgment to be set aside Determination of payment It is not sufficient for the claimant to argue that the amount is too low; they should rather be pointing out inaccuracies relating to income and expenditure details or identifying areas within the expenditure where they feel it is excessive. The court will then enter the judgment and determine the rate of payment. If the amount is less than 50,000 the rate of payment is likely to be determined by a court officer without a hearing. The Court Service provides the court with guidance on how to do this. This process incorporates a determination of means calculation and court officers are also advised to apply common sense. The Court Officer may refer the matter to a District Judge who does not have to follow the guidelines. When the court has decided the rate of payment they will notify both the claimant and the defendant. When making its decision the court must take into account: The defendant's statement of means The claimant's objections Any other relevant factors

The court then enters judgment. The defendant will receive a judgment for claimant (determination without a hearing) N30 (2). Either party may apply to the court for a reconsideration of this decision, known as redetermination.

Redetermination by a District Judge If the rate of payment was determined without a hearing, either the claimant or the defendant can apply within 14 days of service of the judgment to have the decision redetermined by a District Judge, (there is no fee for this). If a Court Officer made the original determination the redetermination can take place with or without a hearing; however this will often result in a hearing be arranged. If a District Judge made the original determination, there must be a hearing, unless both parties agree otherwise. If there is a hearing the case will be automatically transferred to the defendant's local court. The application may be in writing or on form N244, (there is no fee to pay). The defendant will receive a judgment for claimant (after redetermination), N30 (3). Redetermination is final. The rate of payment can only be varied if the defendant has a change of circumstances. The creditor in some instances can submit an N244 and attempt to vary the set payment themselves. Interest after Judgment Some judgments attract statutory interest by virtue of the County Courts (Interest on Judgment Debts) Order 1991. If the amount of the judgment exceeds 5000, interest at 8% on the outstanding balance can (and often will) be added to the judgment debt. If the debt is payable forthwith, the interest will be charged on the whole balance. If the judgment is to be paid in instalments, interest will be charged on any instalments which are unpaid. However this statutory post judgment interest cannot be claimed: On a regulated consumer credit agreement Where payment by instalments is ordered and they are up to date On judgments once an Administration Order or Attachment of Earnings Order has been made.

This covers the majority of cases, which you are likely to encounter as a debt adviser, so you shouldn't encounter interest being claimed on many occasions. However obviously there are occasions where it will be claimed, this is discussed in more detail in the Consumer Credit part of the modules. In these instances you will need to refer an experienced adviser, as this is an area which is constantly developing and where challenges are being made. There is a relevant article written by Peter Madge entitled 'Interesting after Judgment' in The Adviser magazine (January/February 2009 - Issue 131). This article covers the issue of 'interest after judgment, sometimes referred to as 'post-judgment contractual interest'. The Office of Fair Trading does have some guidance which relates to post contract information which you can access via: Office of Fair Trading

After a Judgment
Judgment is the formal term for the courts decision on a case. After judgment liability cannot be denied unless the defendant appeals or applies to get the judgment set aside (see also interest after judgment, Money Only Claims).

After judgment if the full amount is not paid within one month then details are entered in the Register of County Court Judgments. This is amongst the information used by Credit Reference Agencies when credit checks are conducted and is stored for six calendar years. Paying a Judgment The judgment specifies the date by which the whole amount should be paid or the rate at which it is to be paid by instalments. The order will either be for monthly instalments, in one instalment within 14 or 28 days or forthwith, which means immediately. Once a judgment has been made the client must keep up with payments as ordered. The debtor needs to establish the method of payment with the creditor as soon as possible after an order has been made. It is vital that the client keeps up with payments according to the order and a record is maintained of all payments made. Defaulting on a Judgment If payment/s have not been received by the date specified on the order then the terms of the judgment will have been defaulted upon. Even where defendants pay a lump sum in advance and miss a following payment it will be considered as defaulting on a judgment because a payment has been missed. This allows the claimant to enforce payment or take enforcement action through the court. Stays Where a judgment has been entered but the defendant is unable to make any payments it may be appropriate to request that the judgment is stayed. This would usually be until a certain date for example following a new employment or the processing of a benefit claim when the client is able to make a payment. Applications for a stay are made where there are exceptional circumstances or compelling reasons. This application would be made on form N244. The case would not automatically be transferred to a local court and therefore the adviser can request that this happens by referring to rule 30.2 (1) Civil Procedure Rules. Transferring the case to the client's local court will make it easier and less costly for them to attend a hearing. Setting Aside an Order If a judgment has been entered in default then the adviser can apply to set it aside if there is a valid reason why the defendant could not respond to the claim. Setting an order aside literally cancels the effect of the judgment and puts the parties back to the position prior to the judgment. This therefore has the effect of cancelling any enforcement action taken. It is not a ground in itself for the defendant to claim that they were not aware of the judgment until after it was made providing that the claim was served in accordance with the CPR, to the debtors relevant, (usual or last known) address. See Debt Advice Handbook for details of how the creditor should establish the debtors address for service. There needs to be a good reason why the defendant wants to set the judgment aside (which is usually because they want to defend some or all of it). When applying for a judgment to be set aside the onus is on the defendant to present a convincing defence argument based on fact or law relating to the case. Whilst not essentially required by the CPR the defendant should explain why s/he failed to respond originally to the claim. Whist failure to receive the claim is not a ground in itself to set aside it presents a valid reason for failing to respond. This defence should be submitted on an N244 .

There are some mandatory grounds for setting aside a judgment made in default: Judgment was entered before the appropriate time limit for responding had expired The debtor served an admission on the creditor with a request for more time before judgment was entered The debtor paid the full amount (including interest /costs) before judgment was entered The defendant has a real prospect of success in the claim The court is satisfied that there is some other good reason why the judgment should be set aside or the client allowed to defend the claim There has been an error of procedure, which might be a failure to comply with a rule or practice direction

The court also has discretionary grounds where they can choose to set aside an order where:

Redetermination of an order If the rate of payment was decided without a hearing then the defendant (or the claimant) can ask for the payment amount to be redetermined by the court within 14 days of the service, without paying a fee. The defendant can request a redetermination regardless of whether the original determination was made by a court officer or a district judge. It is usually better to request a hearing especially where the clients circumstances are not straight forward. Varying an Order If the client cannot make payments as ordered they will need further advice and could apply to vary an order. Once an order for payment has been made either in default or by the claimant accepting the defendants offer of payment the client can make an application on form N245 to vary the order at any time. This application is particularly important when judgment has been made in default as it is often an indication that the claimant will take swift enforcement action. Compliance with a varied order will stave off enforcement action. The application must have an offer of payment. T he process for completing an N245 is similar to that of completing an N9A. Usually this would be because of a change in circumstances but this does not have to be the case. The court will send the application to the claimant for their consideration and if the creditor does not agree after having considered the determination of means guidance then a hearing can be arranged at the defendants local court. If the creditor feels that the defendant can pay more than they are offering they can make an application on an N244, which will also lead to a hearing at the defendants local court. Enforcement Action Once a judgment has been made it then becomes the responsibility of the creditor to collect payments or otherwise enforce the judgment. In reality failure to pay by the client, is most likely to lead to further action. If a payment is not received according to the order the claimant can pursue any available method of enforcement. The claimant can use more than one method consecutively or concurrently with the exception of an attachment of earnings order.

Warrant of execution The claimant can apply to the court to issue a Warrant of Execution allowing a County Court Bailiff to levy seize and sell the defendant's goods to the value of the judgment plus fees and costs. The warrant can be for either the full amount of the outstanding judgment or just the arrears if they are above 50. The court will notify the defendant that the warrant has been issued and specify a date after which bailiffs can call. Unless the amount indicated on the warrant including fees are paid then goods can be taken. There are some goods which cannot be taken by bailiffs. More information about this and other rules relating to bailiff powers and seizure are described in the section on bailiffs. Suspending a Warrant of Execution The client can apply to the court to suspend a warrant of execution by submitting form N245 with an offer of payment to the court. The defendant can also use the N245 to ask the court to vary (generally reduce) the instalment order to a rate which they can afford. This must be supported by completing the income / expenditure section. Where necessary the instalments can be varied to a token payment but a payment must be offered in order to suspend a warrant. When the court receives the N245 they will send it to the creditor who has 14 days to accept or decline the request. If the request is not agreed then there will be a hearing scheduled at the defendant's local court. In some circumstances (for example where the client has very poor health and this method of enforcement is not appropriate) the adviser can write to the creditor to ask that the debt be written off explaining the exceptional circumstances behind the request. Advisers can also consider this action if the client has no goods which could be seized and the creditor has no other option for enforcement. Charging Order The Charging Orders Act 1979 provides that if a judgment debt is unpaid the creditor can apply to court on a form N379 for an order securing the debt, usually on the client s home. Prior to 1st October 2012, if an instalment order had been made for repayment of the judgment and the client had adhered to the terms of the order, the court could not grant a charging order; only if a judgment was made forthwith, or if it was payable by instalments and the client has missed or made a late payment, could the creditor to apply for an interim charging order. This is done without a hearing, and it means that the creditors stake in the property is protected. The interim order is registered with the Land Registry to stop the debtor selling the property or securing any more debts on it until a final decision is made by the court. However from 1st October 2012, the law has changed; s93 Tribunals, Courts and Enforcement Act 2007 (which amends the Charging Orders Act 1979) provides that for judgments entered after 1st October 2012, where a debtor is required by a County Court or High Court order to pay a sum by instalments, a Charging Order may be made even though there has been no default in payment. The charging order final hearing is where the court decides whether to allow the interim order to be made final or discharge it completely. The judge at the hearing has discretion about whether to allow the charging order to be made final, and so it is worth raising objections such as whether a charging order is proportionate, the prejudice to other creditors or the risk of enforcement by

way of an order for sale, although the creditors interests will generally prevail. There are a number of defences to charging orders, as follows: The judgment debt is payable by instalments which are up to date A bankruptcy order, administration order or IVA has been made, or in some cases is about to be made The original judgment has been set aside, or an application to set aside is listed with the court

Additonally where the court is execising its new power under to make a Charging Order where there has been no default on instalments, the court must take this fact into consideration when deciding whether to make the Charging Order. Additionally the charge cannot be enforced (i.e. by way of an order for sale) unless there has been a default in the payment of an instalment under the Instalment Order. Often, there will be no defence to a charging order, and in these circumstances it is better to concentrate on having an instalment order made at an affordable rate to run alongside the charging order to prevent enforcement. Other conditions can be attached to a charging order, such as no order for sale until the youngest child reaches 18. Although a charging order is often problematic for the client, it can have advantages. It prevents a creditor taking more draconian enforcement action such as petitioning for the client s bankruptcy, and it often means that the creditor ceases to actively take steps to recover the debt. However a Charging Order will attract Statutory Interest of 8% per annum and non-payment or payment at a rate less than the accruing interest will cause the debt to increase, which this needs to be borne in mind. Order for Sale An order for sale is a way for a charging order creditor to get the money that is secured by applying to court to force the sale of the property. These are still relatively rare, although anecdotal evidence suggests that they are becoming more common. Once a creditor has secured the debt by way of a charging order, they can apply to court on a "part 8" claim form for an order for sale. The procedure is contained in CPR 73.10. Whether the order is granted or not will depend on the clients circumstances. If the client is a joint owner, the court will have to take into account the provisions of s15 of the Trusts of Land and Appointment of Trustees Act (TOLATA). This means that the judge should weigh up the interests of everyone in the property, including any children, against the interests of the creditors. The judge can take into account the client's employment, childrens education and the likelihood of being suitably re-housed when deciding whether to allow the creditor to force the sale of the property. A sole owner does not have the protection of TOLATA. They would need to show the court that their circumstances were exceptional before the court could dismiss the creditors application. Exceptional circumstances have been held to include living in a property which has been adapted for a disabled child, caring for a terminally ill spouse who cannot be moved and an ability to repay the debt in full in a reasonably short time. Exceptional circumstances do not include having children and/or nowhere else to go.

Orders for sale can be difficult to defend and can have very serious consequences for the client. Specialist advice should always be sought. Attachment of Earnings Attachment of Earnings Orders (AEO) are governed by the Attachment of Earnings Act 1971 and can be made by the Magistrates or County Courts. A creditor can request to the court that an attachment is made for any judgment in default of over 50 or an administration order in default. The client receives a notice ( form N55) and also a statement of means (form N56) which must be returned in 8 days. Failure to respond can lead to a summons to appear. Failure to comply with the summons can lead to imprisonment. The N56 is similar to an N9A admission where the client should provide details of their means, but the client also has an opportunity to suspend the AEO to allow them to come to an arrangement with the claimant. This might be particularly relevant if the making of an order might somehow jeopardise the clients employment. The court officer will use the protected earnings calculator to help determine the deduction rate which is usually set at between 50 and 66% of the clients disposable income. Disposable income is the difference between the client and any partners net earnings (having allowed for priority bills and reasonable living costs) and the protected earnings rate. While an attachment of earnings order is in place the claimant cannot use any other forms of enforcement without the leave of the court. Third Party Debt Order See Civil Procedure Rules Part 72. Formerly known as a garnishee order, a Third Party Debt Order is an order which instructs a third party who owes the client money (excluding the DWP) to pay instead direct to the claimant. There are two stages; an iInterim order and a final order. The application is made on an N349 and essentially prohibits the third party from reducing the amount owed in order to cease the order (interim order). Payments can still be made but will not affect the order. Following a hearing the final order is made unless the third party makes a successful objection submitted initially on a witness statement with any relevant evidence. The third party might be a bank, in which case they must identify and freeze all the client's accounts. Within 7 days of the order the bank must provide information to the court relating to the accounts and any debts owed to them. The bank can make a reasonable charge for this. If the freezing of accounts causes the client hardship the client can apply for a hardship order on an N244 to request that specified payments can be paid out of an account. Order to Obtain Information Civil Procedure Rules Part 71. This is not a method of enforcement but is as the title suggests a way in which the judgment creditor can gain information about the client's means, usually in order that they can decide the best way to enforce a judgment. Applications are made on a N316 requiring a debtor to attend a hearing. The client receives an N39 at least 14 days before a hearing date stipulating the documents which they must bring. If the client does not fully comply with the proceedings there is a possibly of arrest and committal to prison. See the section on Court Fees for the cost of court applications.

ENFORCEMENT of JUDGMENTS OFFICE The Enforcements of Judgments Office is governed by The Judgements Enforcements (NI) Order 1981 and the Judgments Enforcement Rules (NI) 1981. The Enforcements of Judgments Office (EJO) was established in 1971 and enforces judgements made in courts for the recovery of
Money Land Goods or a combination of these

The office will also enforce Charge Certificates which are issued in respect of unpaid parking fines. Road Service legislation means that the Road Service does not have to go to court for an order on a parking fine, instead a charge certificate is issued and can be enforced by the EJO.

THE EJO PROCESS

With the exception of charge certificates, the EJO cannot become involved in the recovery of a debt without a court judgment. When judgment is entered, the court will issue an Order setting out terms for repayment such as timescales or may simply state what is owed. If these terms are not met or the judgment is not paid the creditor can apply to the EJO. The EJO process follows a number of important steps. A good summary and overview of the EJO process is available on the nidirect.gov.uk website, however the basic process is as follows:
Judgment Obtained Creditor applies for Notice Of Intention to proceed, instructing EJO to enforce the debt. Interview with EJO Payment arrangement or further enforcement

Payment arrangements After the interview the EJO will seek to confirm information not substantiated at the interview. The Office can write to sources to supply information such as employers, banks, Social Security Agency etc. Once the relevant information has been obtained and clarified a mutually acceptable offer of payment is sought. If the debtor fully engages with the EJO, the office have given a commitment that they will favourably view the offers of payment madeif agreement is reached the EJO may not take any further action if the offer is acceptable. Even if the offer is accepted the EJO may award an Order Charging Land (the debtor does have the right to object to such an order being made). Acceptable Offers What the EJO considers to be an acceptable offer will largely be dependant on the debtors circumstances, the amount outstanding and how long it will take to pay. The EJO tries to have the judgment cleared in 2 years. Advisers should be aware that debts can be made part unenforceable at the Masters discretion if the amount of time it will take to repay the debt runs into a number of years. If the offer is unsuitable or if none made the EJO can put in place

various other enforcement orders. It is important to note that the EJO are legislatively bound to enforce debts without adding to any hardship experienced by the debtor (psychological or financial). When the EJO establish what they consider to be the client's protected earnings level they will usually take 50% of the clients disposable income. If the client has payment arrangements with other creditors and the EJO order makes these arrangements unaffordable, it could be argued that this is hardship. Although other debts cannot be enforced ahead of the Judgement the EJO is enforcing, it is unlikely that creditors will stop pursuing the client for repayment. This can have an impact on an individuals mental well being and if this is likely to be the case advisers should consider appealing to the Master for a lower repayment figure. ENFORCEMENT ORDERS The enforcement orders available to the EJO are not dissimilar to those available In England and Wales, although nomenclature and the legislative provision upon which enforcement is based differs. The NI Courts and Tribunal Service Website has a good summary of the enforcement orders available to the EJO which provides details of the legislative measures upon which such enforcement is based in the Northern Irish context (we have not reproduced the content of this for you in this document, we have provided the link as a better alternative primary source). Additional practical information with regard to some of these enforcement measures is provided below. Instalment Order (Article 30) This type of order can also be used for a member of Armed Forces or Merchant Navy as their income cannot be attached with an Attachment of Earnings Order. Failure to comply with the order allows the Creditor to apply for Committal Proceedings (Article 107) Judgment Enforcement NI Order 1981. As for attachment of earnings orders the debtor will be given the opportunity to object to an order being made. Order Charging Land (Article 48) A Notice of Intention to Make a Charge is issued to each party involved allowing any party to object to the issue of the Order. If no objection is made a Charge is made to secure the debt to some form of security (usually a house). If land/property is sold any equity should be paid to the charge owner (usually the creditor) and any excess is paid to the debtor. An Order Charging Land expires 12 years after the judgment date. A creditor wishing to sell property subject to a charge must apply for an Order for Sale through the Court. Such an order will only be granted if it can be justified. A charge is removed from a property by a certificate of satisfaction if the debt is repaid or satisfied. If the debt has not been paid in full (e.g. Interest not repaid) the creditor can object to the charge being removed. If an Order Charging Land has been issued, a creditor is entitled to claim statutory interest from the date the charge is registered until the judgment is paid in full, (this is the only order that allows for this). No arrangement is made by the EJO. However, if the interest is owed the creditor may refuse permission to issue a certificate of satisfaction until it is cleared.

Order Appointing Receiver (Article 67 & 68) This is an enforcement option that is not issued on notice, and must be served personally on the third party who must pay monies over to the EJO and not debtor. Attachment of Debt Order (Also known as a Garnishee Order) For an attachment of debt order to be made the account must be in the sole name of the debtor, and there must be funds available. All parties are notified of a Masters hearing (usually 2 weeks away), where he decides what happens to the funds. Emergency hearings can be requested to release funds if there are extenuating circumstances. Administration Orders The legislation covering administration Orders is the County Courts Act 1984. This piece of legislation was never introduced to Northern Ireland and therefore Administration Orders are not applicable in Northern Ireland. One has never been awarded in the courts or enforced by the EJO as there is no legal basis for them in Northern Ireland. Advisers may see clients who have an Administration Order from and England or Wales based court and should be familiar with their features (for more information see Administration Orders in Section 1.2.2 Insolvency). PREVENTING ENFORCEMENT Certificate of Unenforceability (Article 18 & 19) Where a debtor has no assets and the debt cannot be enforced with a reasonable timescale a Certificate of Unenforceability will be awarded. If a Certificate of Unenforceability is issued then no further action will be taken. No further applications will be accepted by EJO, with the exception of possession cases. If the debtors circumstances change then the Certificate of Unenforceability can be set aside. This must be made within 12 years from the date of the certificate. Objections All parties are free to object to any step in the enforcement process. All objections are heard by the Master in the EJO where clients and advisers can provide arguments why a certain order should not be used or why funds should be released. The most successful objections will provide alternative payment methods; however objections can also be upheld due to the perceived stress or hardship any order may cause. It is therefore important that advisers request a hearing if they believe an order is likely to cause the client distress. Stay Application At any point in the process a debtor may lodge a stay application if the debtor believes that the entire judgment is not due. A stay stops all enforcement action and allows the debtor time to return to court to try to overturn the originating judgment.

County Court Fees - England and Wales

Fees are established annually. There are certain people who based upon their circumstances will be exempt from a fee. Others who are not automatically exempt can apply for remission or reduction of the fee by applying on the basis of 'financial hardship' using the correct form . Advisers should always assist a client to complete the form and where necessary provide additional supporting information.

Usually applications are made together with the action; however it is possible to apply retrospectively so long as six months haven't passed since the fee was paid. Fee remission There are three concessions which apply to all court fees in England and Wales and use two distinct tests. The first test determines whether the applicant is entitled automatically to a full remission of the court fee (under concession 1 or 2). The second allows for a part remission. It is possible that the applicant may then have to pay a contribution towards the fee (concession 3). Concession One - Applies if the applicant is receiving certain means tested benefits. These applicants are exempt automatically. For full details of which applicants will qualify for exmption see EX160a Concession Two - If the applicant is not in receipt of the above but they can demonstrate that that their gross income is below the relevant threshold. Concession Three - This is the most complex as it is based around the applicants disposable income. Basically, the applicants net income is used, from which allowances (there are only in actual fact very few permitted expenses) are deducted leaving a purported disposable income. Here is a link the Court leaflet EX160a which contains more detail. Evidence also seems to be an issue, so advisers should check with the Court Manager. You will also find that the Direct.gov website carries some material and linkages concerning debt and the County Court, under Managing debt However, the following archived Direct.gov document provides a useful overview. This document is no longer updated by Direct.gov (as it is now available through the National Archives Service) but at present it remains accurate County Court Claims and County Court Judgments

County Court Fees - Northern Ireland

Similar provisions apply in Northern Ireland, but forms differ. Click here for the fee remission form to be used in Northern Ireland. Full details of all court fees (including Enforcement Judgment Office and Magistrates Court fees) in Northern Ireland are available from NI Courts and Tribunals Service

Researching your Case

Remember that one of the tasks for the adviser is to consider whether it is possible to avoid court action. Always review the case to ensure that the necessary negotiations have taken place at this point; as there may opportunity for the hearing to be withdrawn and a mutually agreeable arrangement reached. Whilst supporting your client in dealing with court action is a key skill for competent advisers, it is important to remember that following Lord Woolf's review of the civil legal system Access to Justice and the introduction of the Civil Procedure Rules, use of the Courts should always be a

last resort. Therefore, one of the tasks of an adviser is to help the client to resolve matters prior to court where possible. See also The Civil Procedure Rules Pre-Action Protocols Codes of Practice Alternative Dispute Resolution

Where a court hearing is imminent though, it is important to be prepared. Collecting the relevant information Initially you need to ensure you have collected all the relevant information in your client's case, the previous sections have given you procedural guidance on this. It may be useful for you to have a checklist to ensure you have covered everything. Clients contact details Copies of agreements Records of payments made / missed Financial Statement / Statement of assets Clients background circumstances (including reasons for missed payments) History of creditor contact Breakdown of negotiations made

Once you have collected all information relevant to your client's case you will need to look at any relevant case law and legislation. Caselaw and Legislation You will then need to apply the relevant case law and legislation to your client's case to identify the strengths and weaknesses of the case and the potential outcomes if the case goes any further. If you are using legislation you need to go to the statute [Act of Parliament] itself to ensure you have the correct wording. Your company may have a small library including periodicals which will keep you up to date with current developments in this field. The periodicals you could have access to are as follows: Quarterly Account The Adviser Legal Action The CPAG Debt Advice Handbook also identifies relevant case law within each section. You may have access to the Civil Procedure Rules which are printed in full in the Civil Court Practice book, published yearly and commonly referred to as the Green Book which contains the governing legislation for the County Courts with commentary

including the Pre-Action Protocols. You can also access up to date figures on costs . (You can access these through the Universitys Law Library here ) For more complex cases you may need to make use of legal databases to access the full text of relevant legislation and/or case law. These can be accessed through: Bailii ( British and Irish Legal Information Institute) is a free legal database which you can access directly. The others have subscription charges but are free via the University library; and UK legislation can also be accessed directly from Legislation.gov.uk

Deadlines You need to be aware of any deadlines for submitting forms or any other documents for the hearing; this should be dealt with as a priority. Forms should reach the court seven days prior to the hearing to allow the court time to send them out to all concerned parties. This would also form part of the 'key dates' that must be adhered to. There may be some instances where you have been notified of a hearing late and you are unable to meet the seven day deadline. In these instances you would need to notify the Court of the clients intention to attend the hearing and you will need to fax the Court a copy of the clients documentation. There may be some flexibility in the Courts approach in these circumstances but it may be helpful to speak with the Court directly regarding this. Legal Terms All cases are set out by the names of the parties involved e.g. Smith v Jones. The 'v' stands for versus which means against. After the case name you will find the year in which it was decided and an abbreviation of where it was reported. This information is known as the case citation. This information is best explained by an actual case example; Lockett v AM Charles Ltd [1938] 4 All ER 170 - this case was decided in 1938 and was reported in volume 4 of the All England Law reports of that year, the case can be found at p.170. For a breakdown of the abbreviations used in citations please follow this link Legal Precedent If you are using case law you need to be aware of the rules of 'legal precedent'; in essence decisions made in the higher courts e.g. The Supreme Court, the Court of Appeal which bind all the lower courts. This means the lower courts must follow their decisions. The particular part of the decision that creates the precedent is known as the 'ratio decidendi' [the reason for the decision] commonly known as the ratio. Unfortunately this is not specifically identified in the case; it is for the reader of the case to decide what the ratio is. It is important that the researcher reads the whole case not just the headnote (which may contain inaccuracies). The ratio is the law applied in making the decision on that case. Other statements made in the judgment are said to be 'obiter dictum' [a statement made by the way] and do not create a precedent.

Representation

You should read through this section carefully, some parts will be very familiar to you and some perhaps not. Wherever possible you should reflect and relate it to your own existing knowledge and experience. Again, you should take appropriate time to absorb its contents and to undertake your own further reading to reinforce your learning. Why should money advisers represent? It is important to maintain a client focussed approach where possible and recognise the benefits of accompanying a client to court. The crux of a court hearing is to bring the two sides of a disagreement before a judge who will apply the relevant law to decide an outcome. The role of the court is to arbitrate between the parties who have failed to reach an agreement through negotiation outside of court, so the hearing is listed to enable the court to reach a final resolution to the matter or allow ongoing action to be pursued. The hearing gives the parties the opportunity to present their case before the presiding Judge so he or she may decide how the matter should be closed or progressed further, usually incorporating a decision in the favour of one of the parties. Advisers have access to information and support to allow them to research the relevant law, build a case, identify the relevant evidence, present the information in a logical way and respond to questions raised during the hearing. Advisers can also bring skills and experience to the hearing which most clients do not have. This puts advisers in a position to add valuable support to a client facing a hearing. Where your Company procedures provide for representing a client in court, the following should be considered.

Advisers new to court, even if they are well prepared, will probably feel anxious about attending hearings, it goes without saying that this is magnified for the client. The advisers role is in ensuring that the case to be presented is organised and that all relevant information or documentation is available, as this will help the hearing progress smoothly. Representing a client may also help to persuade the judge that the outcome the client is hoping for has been carefully thought out, that the client will continue to be supported by their adviser and will be sustainable. Where no preparation was possible, for instance where clients have approached a court desk, advisers will be aware of the options for adjourning hearings to allow for further preparation or advice. Relationship with the Courts Many advisers will already regularly communicate with the courts or accompany their clients to court and may therefore already have established relationships with representatives and staff at the court or some local advice agencies. If this is not the case there are some measures you can take to start a relationship. These include: Court Information: Familiarise yourself with some of the court's leaflets and information points. Court Users Group: Many County Courts have regular Court Users Groups, where all issues relating to the court can be discussed. Contact your court to find out when these are held and ask to be put on the mailing list. Introduce yourself to the court: You can contact the court manager to introduce yourself and your company. You may be able to arrange a visit to the court to be shown around and possibly sit in on hearings. This is particularly relevant if you envisage being a frequent user. At Magistrates Court you can introduce yourself to the clerk who plays a significant part in the hearings.

Court Desks: Many courts have a regular adviser presence at the court to assist with scheduled hearings where clients have no representation. You can consider whether this is something your Company might get involved in or whether there is already a Court Desk Adviser who you may be able to refer cases to.

Your Rights to Represent Advisers have no right to represent clients in court unless a hearing has been allocated to the small claims court. However, many judges recognise that advisers play an important role and accept the benefits they bring to the smooth and effective running of the court. The judge will know, for instance, that an adviser will have already discussed the clients situation and will have given information and advice covering the workings of the court, the progression of the case and possible outcomes. Where representation in person is not an option; a good adviser will take the time to fully prepare the client in advance of the hearing. Good preparation, with help and direction from an adviser can make this experience more manageable for the client and will instil more confidence. Your client must be aware of the following before attending: What the Hearing is for Why it has been called Why they are attending The environment the hearing will take place in What will happen during the hearing How to address the Judge and general Court Protocol Realistically, what are their chances of success

Your client stands a much better chance of gaining a favourable outcome if they are properly prepared for the hearing and know what to expect. If your client understands what they are trying to achieve at the hearing, it will enhance their focus. Outside the hearing Upon arrival at the court check the hearings listed to ensure that you are in the correct place. Inform the usher who you are, where you are from and who you are hoping to represent at the hearing. You will need the permission of the judge to speak on the clients behalf. While you are in the waiting area you may well get an opportunity to speak to the solicitor or representative from the other party. The court clerk who registers your attendance will usually let you know if there is someone present. You may be able to come to an agreement prior to the hearing. The terms will then (usually) be endorsed by the court. If terms cannot be agreed outside the court room, then the judge will decide. Hearings Most hearings which advisers encounter are held in Chambers, meaning within the judges private office. The setting is much less formal than in open court, no wigs or gowns but a set protocol will still apply:

Before the hearing the adviser is obliged to share all of the information and documents they intend to use with the court (judge) and the other party (usually creditors). At the hearing the claimant (usually the creditor) is first to present the case to the judge. Then the other party (the defendant) has the opportunity to speak; the adviser can present a summary of the clients circumstances and a proposal for payment (where appropriate) which is usually supported by a financial statement The claimant will then have an opportunity to comment The judge will make an order

Presenting Your Case In civil cases, the claimant generally offers evidence first and the defence follows. The claimant will usually start with an introduction together with a statement of the claimants cause of action, an outline of the material facts and those facts which are in issue between the parties, an outline of the evidence and the relevant principles of law and case law and a statement of why the claimant should succeed on the facts which, it is hoped, will be proved. The defendant (usually the client) or their representative is required to respond. Generally speaking it is good practice to have a typed copy of your clients financial statement and copies for the District Judge and the other party.. The adviser may prefer to also have already prepared a short summary of the main points of the argument for the parties. This might include briefly the clients circumstances leading up to the claim, what has happened since then (in particular what efforts have been made to reach an amicable agreement), their current financial situation and what, if anything, is expected to change. It almost certainly will include an offer or strategy of repayment. The District Judge will appreciate clarity and logic, and a structure which assists them to understand and organise the issues. The basic requirements for structure are: Be prepared, have your arguments and back up plans ready; Be clear; Be logical; and Be responsive and persuasive

Remember clarity is vital. Your ultimate aim is to persuade and, to do that you must communicate accurately and articulately with the court. You are most likely to do that if everything you say and do is clear in its meaning. A clear structure is a good guarantee for that. Coupled with clarity is the need to be logical. When devising a structure for your argument, you should choose one that 'makes sense' to others too. The best general description of this is that individual points should flow clearly one to another, rather than appear as a motley collection of unrelated data. Finally, you need to respond to the other parties present. Even when there are only two of you (maybe an application where the claimant fails to attend) you may still be subject to questioning from the court. Deal with any questions as they arise, where possible. It is essential to respond to the other party's case and adapt your prepared case in the light of issues or evidence raised by the other parties. You may be able to identify inconsistencies or contradictions in the evidence

presented by the claimant. You should highlight these at an appropriate time and may need to follow these up with further questions for clarity. A script is almost useless in court for many reasons but here can hamper good advocacy by imposing a straightjacket on the advocate. You (or your client) must have a clear and logical structure, but you must never adhere to it just for its own sake. If there is no need to amend or adapt it while you are in court so much the better, but your planning should have enabled you to be flexible in your work. You should be alert to what the court or the other parties are saying, doing or thinking. They are communicating with you and each other either directly or indirectly and you cannot afford to ignore this. Questioning This section contains some basic questioning techniques relevant to all forms of advice work. The open question - this type of question does not limit the scope of the answer. This type of question is particularly useful when you want the claimant or for that matter the defendant (your client) to tell their part of the story in his or her own words. It can however allow the defendant too much scope for moving away from the pertinent points and therefore the overuse of open questions risks a loss of control over your client. The closed question - this type of question limits the scope of the answer. It is of particular use when you are trying to elicit a particular piece of information or detail. The transition - this is a means of moving from one piece of evidence or topic to another. They may take the form of a statement such as ' I want to turn now to....' or a question (either open or closed) transitions are a useful way of structuring, controlling or pruning irrelevant details at the same time. A 'Piggy back' question - this is a method of including in your question a fact which has already been elicited and is a useful technique for emphasising a point or obtaining greater detail. Leading question - this is a question that suggests or tends to suggest its own answer. It usually calls for a 'yes' or 'no' response. In conclusion, during the hearing, if you use too many open questions you run the risk of losing control and too much irrelevance may be brought to the table. If you use too many closed questions, you may leave the court with the impression that you have pre-programmed the client or may fail to share important details. Instead you should try to achieve a balance by combining these techniques for maximum effect. Useful Protocols for behaviour Upon entering Chambers, you should introduce yourself to the District Judge; who should be addressed as Sir or Madam. A good way to introduce yourself to the judge is: with your permission Sir / Madam, my name is (name) from (advice agency), I would like to represent (clients name). If you see the judge writing, you should pause. The judge may not have read all the papers beforehand so explain the background briefly if necessary. If there is something you do not understand, ask for an explanation. Further Reading

The Debt Advice Handbook (Latest Edition) - Court Representation Section. You might find the following Adviser Magazine articles useful (they are somewhat dated now, but nevertheless remain relevant): You may already have these on your shelves, but if not they are available via Wiseradviser website, resources section; you will need a username and a password for access. Advocacy for Money Advisers (1994 - Adviser 44) Advocacy for Lay Advisers (1993 - Adviser 37) Adviser article - Drafting Witness Statements (2005 issue 109) Adviser article - Keeping Track. (1999 issue 74) The Shelter website provides some additional useful information about Possession Hearings. NHAS document on supporting advisers with Repossession Hearings

Review the formal proceedings

Following a court hearing it is important to review different aspects of the case with the client. It is better that this happens immediately after the hearing where this is possible. When preparing your client for their hearing, you will have discussed the importance of you being able support them whatever the outcome of the hearing. This support can only take place once we understand what transpired at the hearing. During this discussion establish the outcome of the hearing, ensure that you clarify any legal points, complex issues or queries that the client may have. It is also vital to: Clarify the implications of the outcome Discuss any outstanding issues that have arisen Agree what further action needs to be taken (if any) Confirm the consequences of not keeping to arrangements/agreements Identify steps the client should take if their situation changes Identify anything that the client is unsure or worried about Ensure that the client understands that you are there to support them on an ongoing basis

If the desired outcome was not achieved you should advise the client on the merits of continuing the proceedings or appealing. You may find that to do this will require further research and it might be better to re-convene. The adviser will need to consider the range of options available that would allow the proceedings to continue and the types of further action available in different proceedings. Following the debriefing ensure that as soon as possible you make notes and update system records. In line with your company procedures, ensure that the account is flagged as being a priority for future payments. It might also be important to re-iterate the salient points of the discussion with the client in writing.

Success at hearings is not an exact science and so it is useful for the adviser to spend some time to review their own performance and the outcome of the hearing. This will allow for continued improvement in dealing with similar cases in the future.

What is Social Policy?

Social policy has been described as an attempt to change a given social order, which may involve the modification of market forces and the redistribution of resources. What we currently view as social policy has its origins in the development of the state welfare system in the 1940s, when William Beveridge identified the five pillars of the welfare state: the NHS state education the social security system state-funded housing the commitment to full employment.

For many who study and write about social policy, it is primarily concerned with the state provision of social welfare in the form of health and social care services, but government policy also impacts on other social aspects of modern life such as publicly funded housing and education, the provision of a minimum level of income, and employment and consumer legislation. The study of social policy focuses on the analysis of social problems, which need some form of intervention, for example, poverty, inequality in educational achievement, or homelessness. Often, problems are socially constructed, so that the cause of the problem can be traced to society rather than the individual. Social policy is concerned with citizens social rights (as opposed to other rights such as political, civil, legal rights etc); debates arise over whether, and to what extent, social policies should aim to guarantee rights to such things as healthcare, personal care, education, housing, and a basic level of income. Policy is informed by political ideologies. Governments and political parties differ in their views on the role of the state, as opposed to the private market or the family, in satisfying any or all of these needs. Left wing ideologies favour the public provision of welfare, with a focus on society, while right wing ideologies favour private provision with a focus on the individual. Social policy is also dominated by economics. There are different views on whether a government should intervene in the economy (Keynesian economics), or rely on market forces (monetarism). The UK is a mixed economy of welfare (or welfare pluralism). Policies will seek to balance the well-being of individuals with financial constraints (and the interests of the tax-payer). A current debate concerns welfare dependency: generous benefits may act as a disincentive to work, so benefits are kept low, and stringent conditions are imposed on claimants. Alongside this, the government has to consider its policy of eliminating poverty, particularly for families with children.

In other areas, a policy may need to balance the interests of different groups in society, for example, policies aimed at tackling anti-social behaviour must consider the circumstances of the perpetrator (and their family) as well as those of the victim. There are three elements to any social policy, and three questions to be asked: 1. The aim of the policy what social right or provision does it target? 2. How the policy is to be implemented by state, market or family? 3. The outcome or consequences of the policy who benefits, and who is disadvantaged? Generally, it is governments or public bodies that are the focus of attention, but local organisations, institutions and employers have policies which may need to be scrutinised, and may be the subject of government intervention, for example government initiatives to ensure adequate pensions, or to prevent home-owners becoming homeless. The evaluation of policies can reveal inconsistencies, for example where local authorities have discretion to provide services to certain groups only, or to charge for services. The implementation of policies may have unintended consequences. Further reading Hudson J, Kuhner S, Lowe S (2008) Short Guide to Social Policy, The Policy Press (a basic guide to social policy) Blakemore K, Griggs E (2007) Social policy: an introduction, Open University Press (a more in-depth text, covering theoretical perspectives)

Influencing Social Policy

Social policies will often be derived from evidence. For example statistics on take-up of benefit by pensioners may prompt changes in the way benefits are promoted to older people; bankruptcy statistics may prompt initiatives to enhance financial capability or regulation of financial services to prevent irresponsible lending. This evidence is gathered from a variety of sources including government and independent research projects, practitioner evidence and the opinions of other interested parties. All organisations which routinely advise members of the public regularly see people who are disadvantaged by a particular local or national policy. As such they are well placed not only to observe but to record the impact such policies have on their clients allowing them to contribute this evidence to the wider debate, recommending ways in which policies should be developed to reduce any disproportionate adverse impact identified. As any recommendations are based not on assumptions but on actual cases their value to policy makers is unquestionably high, and as such can be a powerful influence on the development of social policy. In the advice sector, work to influence local or national policies for the benefit of clients is often referred to by the shorthand term social policy work. Advice agencies routinely conduct social policy campaigns through coordinated evidence gathering and report writing to highlight the problems caused by a particular social policy. A well-documented example is the difficulties many people experienced with the Tax Credits system. The wealth of evidence provided by agencies forced the government department (HMRC) to make significant changes to the administration of Tax Credits, and, in particular, to the recovery of overpayments.

As well as highlighting issues which advice agencies believe are important, evidence gathered is also used in responses to government consultations and briefings to Ministers and Members of Parliament. Evidence is also submitted to Select Committee enquiries, and contributes to debates on Bills going through Parliament. In addition, All Party Parliamentary Groups are forums where MPs and Peers can discuss relevant issues and make recommendations to Government. Advice agencies and other interested organisations such as banks and related associations, are affiliate members of the All Parliamentary Group on Debt and Personal Finance, and are in a position to influence the debates. Here are some examples of well known national organisations which carry out social policy work: Age UK (an amalgamation of Age Concern and Help the Aged) campaigns for older people, . Armed with the experiences of older people, Age UK can lobby Government on issues such as pensioner poverty and fuel poverty. Bristol University is quite active in debt and social exclusion research. Child Poverty Action Group campaigns for the abolition of child poverty, and also on behalf of low income families. Visit their website for information about their aims and objectives, and about current issues (see, for example, Ending Child Poverty: a manifesto for success.) Campaign Newsletters (available on the website) give details of their latest campaigns. Citizens Advice campaigns widely on matters of social policy in accordance with the organisations aims. Visit their website for more information about their aims and objectives, campaigns and recent successes to Friends Provident Foundation who are very active in the commissioning of research projects and pilots which focus on improving services and reducing debt and poverty. The Joseph Rowntree Foundation has been carrying out research into the root cause of social problems since 1904. It describes itself as an organisation which seek[s] to understand the root causes of social problems, to identify ways of overcoming them, and to show how social needs can be met in practice. It continues to carry out research on poverty today, and these studies (among others) have been an important element of the governments policy to eliminate child poverty. Money Advice Service describes itself as the leading authority on understanding peoples understanding of money matters, and is destined to take responsibility for the Financial Inclusion Fund projects in April 2012. Visit their website for details of the many responses they have made to government consultations relating to money matters (see policy work under the About Us tab). The Money Advice Trust information hub is a great place to look out for new research and reports in the field. Shelter produces reports, factsheets, briefings and policy consultation responses, and provides invaluable information for politicians and policy-makers about housing-related issues. Shelter regularly undertakes or commissions research to underpin their policy and campaigning work. Identifying social policy issues and taking action A number of principles underpin successful social policy work:

The policy, law, or practice affects a substantial number of people The policy, law, or practice has a disproportionate effect on a small group of people, and they belong to a minority or oppressed group The policy, law, or practice is one that can be changed by campaigning (new or proposed changes in the law are particularly suitable for campaigning as politicians are more likely to listen to views) Evidence from real experiences is a sound basis for social policy work

If you are to contribute to social policy work you need to understand your company or trade body's policies and procedures with regard to social policy work, for example are there resources to support this work? Can you introduce some? Is there someone with particular responsibility for social policy work in your company? If your company carries out social policy work, what are the procedures? Are there particular forms on which to gather information? Would it be appropriate to involve clients, if agreeable? What is the policy around annonymity of clients? Are there other organisations you can work alongside? Do you attend meetings or forums where issues can be raised and information shared? What action can you take? You will need to consider what kind of action would be most appropriate. Actions include: Responding to consultation documents Lobbying MPs Starting an e-petition for a House of Commons debate Writing to local authority departments Publicising the issue in the local media Proviode evidence to support and exisitng campaign*

* The IMA website for example contains a link to a Social Policy Evidence Form that anyone can use to raise new issues or contribute to ongoing campaigns, so even if your organisation has limited scope to complete independent Social Policy work, you can still contribute through this mechanism. Stages that might be followed are: 1. Research to identify an area of policy, law or practice to focus on (is it a national or local issue? Is it a new or proposed change? Are there established methods of review that you can tap into? Is it of particular interest to your compnay or trade body?) 2. Understand the policy, law or practice, and know what peoples rights and entitlements are 3. Understand how the policy, law or practice may adversely impact on people 4. Identify what changes would remove the disadvantage you have identified 5. Identify what actions would best achieve the desired changes, is it desirable to work in partnership with other companies or agencies? 6. Gather and record evidence

7. Analyse the evidence: to what extent are people disadvantaged? Is it strong enough to be effective? 8. Take action 9. Review action

Social Policy in Action On 15 th October 2010 the government launched the consultation Managing Borrowing and Dealing with Debt. The consultation document and final report are an example of social policy in action across the debt advice sector. To further your understanding of influencing social policy you should complete the following reading: First read the consultation document, to understand the purpose of the consultation and its context, then Read the response document to see how evidence influenced the decisions of the government in the reform proposals contained in the review.

DRO and Pensions a Social Policy Case Study The Social Policy Issue When DROs came into force in April 2009 the rules stated that occupational and private pensions with a value of over 300, not yet in payment are treated as an asset. We started to receive feedback from our members that this rule was disadvantaging a specific group of people by precluding them from accessing a DRO who would otherwise have fitted the criteria. The Competent Authorities agreed that this represented a fundamental flaw in the rules and seemed wholly unfair and against the original intentions of the DRO legislation to treat a personal or occupational pension not in payment, as an asset when it cannot actually be realised at the time of application. We have raised this issue with the Insolvency Service who understood the need for legislation change. Testing the Water The IMA began a call for evidence in order to see whether this rule was affecting a significant proportion of people. The IMA circulated a survey to its members to identify numbers of people specifically excluded by this legislation. The responses showed that a considerable proportion of potential DRO applicants were excluded because of pensions. We also identified that of those who were excluded the vast majority had relatively small pensions (although over 300) and most people were a considerable number of years away from pensionable age. Taking it Further and Higher Most of the Competent Authorities including the IMA, joined forces and wrote to the then Business Minister Ian Lucas to express our concerns and we were invited to speak to him about

the problem. At our visit we laid out our request to scrap the rule and presented the following rationale: The debt relief order asset rules represents a distinct inconsistency with in comparison to bankruptcy It is unfair and against the original intentions of the DRO legislation to treat a personal or occupational pension not in payment, as an asset when it cannot actually be realised at the time of application The rule is inconsistent with the government encouragement for individuals to secure their own future pension provision

We presented our initial evidence which showed that some of the most impoverished and vulnerable of clients the very people debt relief orders were designed to help, were being excluded from using them because of the pension rule. Gathering Evidence The minister was persuaded by our argument but so that he would be able to take this further, he wanted some more robust and persuasive evidence relating to: numbers of people who are being excluded from DROs because of pensions an idea of the values of pensions we are talking about how far from realisation these pensions might be

In February 2010 Competent Authorities again teamed up to gather further evidence from their Intermediaries which were channelled through Citizens Advices Social Policy evidence system. The findings Overall information about 242 clients was received, all of which were ineligible for the debt relief order because they had pension funds of more than 300. The initial analysis of the findings shows that many of these people were young with relatively small amounts of money in their pension pots. 78% of people, who were excluded from DRO solely because of their pension, had a pension of less than 5,000. Of these, 42% were under 35 years of age, 69% were under 45. Qualitative data in the survey also suggests that many of the people affected by this rule ironically had pensions which they had built up when they worked in the public sector and therefore had government pensions (armed forces, civil service, NHS, local government). We presented this evidence to the Minister for his consideration. Consultation There are a series of steps which are taken before changes are made to legislation; one of these is usually that government will start a formal consultation process for relevant parties and stake holders to respond to. On 23 rd February 2010 Ian Lucas announced the Government plans to open a consultation on changing the debt relief order rules on pension funds. Ian Lucas said: Debt Relief Orders help people who would otherwise be trapped in poverty to get back on their feet. Following representations from independent money advisers, Im proposing a common

sense change to ensure that vulnerable people with a very small pension pot are treated fairly. The Government will consult on this change shortly. As part of the consultation we were able to make suggestions about what changes we would like them to make. Statutory Instrument The government consultation closed on 24 th June 2010, they collated the responses and reported that there were a good number of responses with a consensus for change. They announced that they will push forward a Statutory Instrument submission to the new minister, Edward Davey, (under Vince Cable minister for Business, Innovation and Skills) before summer recess. If this was to be accepted and go according to plan the submission would be included in changes for autumn 2010 or spring 2011. At the best of times these procedures are lengthy but our campaign coincided with a change of government which could have had grave implications for the work we had done up to this point. Pensions Reform Spring 2011 Fortunately the Statutory Instrument (SI) was finally laid before parliament on the 15 th March 2011 with a view to the legislation coming into force on the 6 th April 2011, Statutory Instrument 2011 No 85, www.legislation.gov.uk/uksi/2011/785/made . The SI contained a single provision for DROs: Amendments to Rule 5A.10 Rule 5A.10 (particular descriptions of property to be excluded for the purpose of determining the value of a persons property) is amended as follows. In paragraph (1) at the end of sub-paragraph (h) omit or; and after sub-paragraph (i) add and (j) any right of the debtor under an approved pension arrangement (as defined by section 11 of the Welfare Reform and Pensions Act 1999). . In Practice The effect of this is simple; an approved pension is now excluded as an asset when determining eligibility for a DRO. This relates solely to pensions that are not in payment and have not matured, therefore if a debtor has a pension that is currently being paid to them then the income from the pension should be recorded in the income and expenditure section of the DRO application and there is no necessity to record such pensions in payment in the assets section. The DRO Web Application and the intermediary guidance notes have been revised by the Insolvency Service to incorporate the changes.

They offer the following guidance: An approved pension arrangement are any occupational or personal pension schemes registered with the HM Revenue and Customs for tax purposes, all retirement annuity contracts plus stakeholder pensions. These are the most common pension arrangements in the UK. It will be rare for a debtor seeking a DRO to have rights in an unapproved scheme. In order to trace a pension or scheme you can refer to the Direct Gov facility for electronic or telephone help; Direct.gov Tracing Pensions

Some recent Citizens Advice Evidence Reports that you may have found Out of order: a report on the use of charging orders and orders for sale in debt collection. By obtaining a charging order in the county court, a creditor can turn an unsecured debt into one that is secured on a home-owners property, and the creditor can then apply for an order to sell the property. Citizens Advice is concerned about the increase in applications for charging orders, and the way that creditors are using them to persuade debtors to pay more than they can afford. Set up to fail highlighted the problems faced by low income families with mortgage and secured loan arrears. People are encouraged to become home-owners, but there has been a recent increase in the number of problems relating to mortgage and secured loan arrears, and in the number of repossession claims. The report found that a high proportion of people seeking help with mortgage and secured loan arrears were from low income households, and the lenders tended to be from the sub-prime market. These lenders are less likely to negotiate with their customers and more likely to take court action at an early stage. Citizens Advice recommends improvements to the regulation of all secured lending. Problems are compounded by the lack of payment protection insurance and the restrictions around ISMI, and the report makes recommendations here too. Citizens Advice also found an increase in problems with sale and rent back schemes, whereby people in difficulties are persuaded to sell their homes to firms which then let the property back to the former owner. The properties were often sold cheaply, and the tenancies were insecure (assured shorthold tenancies which only guarantee a minimum of 6 months). Out of pocket highlighted the impact of fee-charging cash machines. Since this report, many banks have ceased to charge for withdrawing cash from ATM machines in the UK. Read about the CAB campaign, and how a local CAB persuaded a bank to provide a free cash machine: http://www.citizensadvice.org.uk/index/campaigns/campaign_success/village_free_cash_ machine.htm

You can download the Citizens Advice social policy impact report, and see how social policy work can be successful in achieving change, both nationally and locally: http://www.citizensadvice.org.uk/index/publications/impact_social_policy.htm