Debt Relief Order clients

Transcription

Debt Relief Order
clients
Financial capability
toolkit
This toolkit has been produced as part of Citizens Advice
Financial Skills for Life.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, Citizens Advice assumes no
responsibility. The user of the information agrees that the information is
subject to change without notice. To the extent permitted by law, Citizens
Advice excludes all liability for any claim, loss, demands or damages of any
kind whatsoever (whether such claims, loss, demands or damages were
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drafting, accuracy and/or its interpretation, including without limitation,
indirect or consequential loss or damage and whether arising in tort
(including negligence), contract or otherwise.
Copyright © 2015 Citizens Advice All rights reserved. Any reproduction of part or all
of the contents in any form is prohibited except with the express written
permission of Citizens Advice.
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Company Limited by Guarantee, Registered number 1436945 England.
Registered office: Citizens Advice, 3rd Floor North, 200 Aldersgate Street, London,
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2
©2015 Citizens Advice
Debt relief order clients toolkit/Sep16/v3
Citizens Advice financial capability
Providing financial capability for Debt Relief Order clients
Introduction
These notes and accompanying handouts are designed to help advisers
integrate financial capability into debt sessions, once a client has been identified
as suitable for a Debt Relief Order (DRO) and potentially referred to a specific
DRO intermediary or unit.
Subject information
Advisers do not need to have specialist money advice knowledge or experience
but must have a basic understanding of the money advice process, priority/non
priority debts and their consequences, and be able to signpost learners to
sources of further advice and information.
This toolkit contains all the key information for the topics covered. Any
additional information that is given should be taken from an up-to-date and
accurate source such as:
• the debt and money section of the Citizens Advice website.
• the Money Advice Service website.
This session aims to help prevent clients from re-entering a debt cycle by
learning how to harden themselves against the financial shock that led to their
current debt situation.
The final page also contains a tear off slip that advisers can use to refer clients
to local financial capability resources, where they are available.
Trainers are encouraged to feedback to the Financial Skills for
Life team with any feedback about training materials or
resources.
If you have any comments, please contact:
[email protected]
3
Contents
Recording financial capability – for Citizens Advice advisers
5
Enhancing financial capability – for all advisers
5
My DRO, my fresh start – for clients
6
1. Sudden unemployment
7
2. Multiple hire purchase agreements
8
3. Council tax arrears
9
4. Payday loans and doorstep lenders
10
5. Separating from a partner
11
6. Changes in benefits
12
7. Overpaid tax credits
13
8. Keeping paperwork
14
9. Life after a DRO
15
Signposts and further help
16
Evaluation Guidance
17
Appendix – Petra codes
19
4
Citizens Advice advisers use only
Recording financial capability
It is critical that advisers become familiar with the E20 advice issue codes (AIC) on
Petra.
For many advisers, they already provide financial capability within their existing
debt advice model, this needs to be identified and recorded.
To keep it simple, some advisable AIC codes are on the side of the resources,
however, you don’t have to just use these (see appendix).
Enhancing financial capability (All Users)
Once it is confirmed that the client is suitable for the DRO pilot, the adviser needs
to select an appropriate resource to discuss with them.
If the clients gateway has identified a clear cause for their debt, then choose a
suitable resource from 1-7.
If an identified cause does not have a matching resource, or if there is no clear
identified cause, then use either resource 8 or 9.
Resources are designed to harden the client in the instance of the debt cycle reoccurring for the same reasons after the DRO period has expired.
Advisers are encouraged to make certain that the clients understand that, the
DRO lasts 12 months. If, after that, they end up in the same position, then they
can’t go for another DRO for six years. They can’t do this a second time, they’d
have to go for bankruptcy.
The adviser can then offer information on the cause of the client’s debt situation,
and also help the client prevent the same thing happening in future when a DRO
is no longer an option.
The selection of the resource, and following discussion, should be recorded on
PETRA via an E20 AIC.
5
My DRO, my fresh start
A Debt Relief Order (often called a DRO) is a way of managing debts that have
become very severe. Your adviser will have found out whether you can get a DRO,
and will be able to put you in touch with an expert who can do this for you.
However, a DRO isn’t a magic wand. You need to follow some rules to make sure
the DRO is not cancelled. Your adviser can provide detailed information on these
rules, but they include:
•
•
•
•
You can't borrow £500 or more without telling the creditor about the DRO.
You can’t have savings or property over £1,000 (although one vehicle worth
less than £1,000 is ignored as property).
You must be honest about all your debts in the application.
You must tell the official receiver of any increase in income during the 12
months of the DRO. If this leads to you having over £50 spare income a
month the DRO could be cancelled. Similarly, you have to inform the official
receiver if you acquire any property during the 12 month period as this
could also lead to the DRO being cancelled.
After the 12 months of the DRO, you will have a fresh start without any debt,
however, if you find yourself in the same sort of debt problem again, then there is
no way to do a second DRO until at least six years have passed.
Normally, people tend to get into debt through no fault of their own. Something
can drop in on them out of the blue, and cause a shock to their finances that is
just impossible to recover from.
Let’s consider what got you into this position, and let’s see if we can stop the same
thing happening again in your new start after the DRO.
Remember, the DRO is a one time thing. We need to work together to make sure
your fresh start stays that way.
Top tip
Make sure you put in for any refund of miss-sold PPI or unfair bank charges
before applying for your DRO: if you get a lump sum from miss-sold PPI or
unfair bank charges during your DRO, it could be cancelled and you’ll still
have all your debts!
6
AIC 20 – J
KMN
Sudden unemployment
Remember that these tips are for guidance after your 12 month DRO has
finished. During your DRO you should go by you adviser’s
recommendations.
Suddenly ending your paid employment is something that can happen to any of
us. It could be due to lots of different reasons, companies can close down or lay
off staff, or contracts that are ‘zero-hours’ can stop offering you paid work.
It’s impossible to predict how and when you could find yourself without work, so
the best way to make sure that losing your job suddenly doesn’t send you into a
debt spiral is to prepare for it, and know what to do if it happens.
We’ve all heard that we should have three months of savings set aside in case of
something like this, but in the real world this just isn’t something most of us can
do. Instead, try thinking about ways that you can manage without being paid for
three months, which is a bit different.
Thinking about things this way can make it easier to decide what steps to take to
make sure that, if you are out of work in the future, you don’t develop the same
debt solution.
•
•
•
•
•
•
•
Try to save up a rainy day fund, even small amounts can add up. If
you pick a type of coin, 50p’s, or maybe £1’s, and make a decision not
to spend them but to save them in a jar at home, you’ll find that you’ll
build up a savings pot of a few hundred pounds in a year without
even realising it.
Are you entitled to a tax rebate? Check this with HMRC.
Join a union, they can help you with your options when you’re facing
redundancy.
Make sure you claim all the benefits you’re entitled to straight away.
Cut back on non-essentials, for example, do you really need that gym
membership?
Check for any insurances you may have that cover being out of work.
If you have one, it could pay out and cover you.
Now you have more time, there are ways you can make money
around the house. Could you sell things on Gumtree or eBay?
7
AIC 20 – B
CE
Multiple hire purchase agreements
It can be easy to take out more types of finance than we can handle, often
without even noticing. Finance can be used to buy anything, not just cars,
furniture, TV’s and white goods are all easy to buy on finance. The problem is
that finance can be easy to misunderstand, the numbers and rates do a good
job of hiding what you’ll actually end up paying.
There are two things to keep in mind when you are tempted by finance in the
future:
1. Do you really need it?
Don’t skip asking yourself this, it’s really important. Think about the things that
you’ve bought before on finance, and think about the session today. If you could
go back and get them again, would you? Did you really need them? Often, once
you realise how serious debt problems can be, those essential things seem a lot
less essential!
2. How much does it actually cost?
Let’s look at the table below outlining what the numbers behind a finance
agreement can actually mean.
Let’s say that I buy a TV on finance. It sounds like a good deal at £26 a week for
the latest 55-inch curved SMART TV. In three years, it’ll be paid off. But what
does this mean?
The TV costs…
APR (%)
Weekly cost
Total cost
£2113.26
£2113.26
64.7
Up front
£26.00
£0
£4056
£2113.26
If I put £26 aside every week instead, I would be able to buy the TV outright in
half the time, and half the cost.
Top tip
Beware of 0% finance deals; they tend to have confusing small print and it
can be easy to mess up your side of things. That means you can get hit with
much more interest than even this example!
8
AIC 20 – D
EM
Council tax arrears
Council tax debts can build up slowly over time, and by the time people come to
see us, it’s normally become quite a serious situation.
Getting on top of any missed payments straightaway can seem complicated, but
actually there are a few things you can do to handle problems you may have
with your council tax payments early on:
•
•
•
•
Make sure you have any deductions or council tax support that you are
entitled to, for example, living alone gives you 25% off straightaway.
Council tax bills are sent out in April. You can make 10 monthly payments
over the year, or sometimes 12 payments, some councils even let you pay
weekly or fortnightly, and there can sometimes even be a reduction if you
can pay it all in one lump sum.
You have to start paying within 28 days of the bill’s date, if you are late on
this three times, you can lose the right to pay in instalments. In fact, you
can lose the right to pay by instalments after one missed payment if you
do not clear the arrears on receipt of a reminder notice. The council may
even issue a magistrates court summons.
If the summons fails to produce full payment, including the council’s court
costs, they can get a liability order, which could lead to action by bailiffs
and further costs.
If you still find you have problems keeping up with payments, contact your
local Citizens Advice. The best time to do this is before any court summons
is issued, because this can add further charges.
Top tip
If you miss one council tax payment, but make the payment when you
receive the reminder notice, and then miss a second council tax payment,
this means you’re now getting close to losing your option to pay in
instalments. That will only make things more difficult, so we recommend
you seek professional advice from your local Citizens Advice as soon as you
can.
9
AIC 20 – A
CE
Payday loans and doorstep lenders
Payday and doorstep lenders charge high rates of interest if you don't pay back
the loan on time. If you've got this kind of loan and you're struggling to pay it back:
•
•
•
Don't be tempted to borrow more, these lenders aren't allowed to
pressure you to take out another loan or to 'roll over' your existing one
more than twice.
Stop the payment, your bank or card provider should stop it if you ask in
time.
Contact the lender, offer to pay a regular amount you can afford.
There are other ways to borrow that aren’t as risky:
•
Ask for a pay advance. Sometimes even Jobcentre Plus can offer you
an advance on your benefits, which can be deducted from future
benefits later.
•
Get an authorised overdraft, the key is not to exceed the limit as this
will then mean you’ll be in a very expensive unauthorised overdraft.
•
Borrowing from a credit union is a great idea as long as you already
have an account and meet their criteria.
•
Borrow from friends and family, but be careful with this as money can
put a strain on things. Make sure that you talk openly about how you
plan to repay the loan, and put things in writing.
•
Using a credit card might be expensive, but it can be far cheaper than
a payday loans. As long as you keep making the minimum payments,
then the interest is normally not too high. Remember that this is a
short-term fix only though, the credit card will need to be paid off.
•
Local welfare assistance schemes could help you with food, furniture,
or pre-payment vouchers. Don’t be afraid to ask!
10
AIC 20 – B
EJ
Separating from a partner
Separation from a partner can be a very upsetting experience, no matter when
or how it happens. At a time like this, it can be difficult to stop and take stock of
your financial situation, however, it is crucial to do it, or else it can lead to a debt
spiral.
Follow our checklist of steps to take to ensure that you don’t fall into the same
debt situation in the future, take each step one at a time and don’t rush.
•
Get to grips with your budget again. You would have got used to budgeting
jointly, and it’s easy to forget how deeply that affected everything in your life.
Sit down with a pen and paper, and plan out a budget for yourself as soon as
you feel up to it. Weigh up what is going in, and what’s going out. Remember,
there are great Budget Planning tools on the Citizens Advice website.
•
Start cutting costs. With two incomes, it is easier to relax about the things you
spend money on. Now with only one income it’s time to review things like
your energy bills, transport costs, broadband deals, and even where you
shop for food.
•
Getting through the first few months is a key indication of how your new
financial situation is. If things seem to balance smoothly, great! However, if
you see debts starting to rise again, you might need to think about bigger
changes, remember, a DRO is no longer an option for six years!
•
Maybe it’s time to move, this could mean renting somewhere more
affordable, or even selling your house and ‘down-sizing’.
•
You might need to increase your income, this could mean working more
hours, getting a second job, or renting a spare room. It’s always a good idea
to de-clutter, as selling unwanted items regularly can help boost your
income.
11
AIC 20 – D
EJM
Changes in benefits
Benefits have already changed a great deal, but there is much more still to
come. These future benefit changes could lead to even more pressures on
budgets and it’s very important to stay ahead of them. Failing to do this could
lead to another serious debt solution, remember that a DRO is a one time thing.
Let’s look at some simple tips that could help soften the pressures that come
with changes in benefits:
Housing Benefit
Act quickly, contact your landlord or housing association if you have any
concerns about paying rent. This is especially important as soon as you fall into
arrears, there are often options available for payment plans or top up schemes.
Council tax reduction
You may have to pay an increasing proportion of this as benefits continue to
change. Make sure you have qualified for any discounts that apply as well as
council tax support, and contact the council to discuss an easier payment plan
(such as twelve payments in the year instead of ten). You may also be able to
apply for council tax reductions on the ground of hardship, but this is up to the
council.
Benefit sanctions
If you have been sanctioned you can always appeal this. This may take some
time though and you shouldn’t just cross your fingers and wait for the result of
your appeal. Instead, apply for hardship payments from the Job Centre. It’s
worth finding your local welfare scheme too, for food bank vouchers and other
help.
Top tip
Even if you’re appealing a sanction, or getting hardship payments, don’t get
relaxed about things. Make sure you are still budgeting well, and not
wasting money anywhere, as the rainy day money you can save will always
be useful!
12
AIC 20 – D
EM
Overpaid tax credits
Tax Credits can seem complicated, but there are a few simple rules to keep
in mind that will, hopefully, make it much less likely that you’ll be overpaid
tax credits in the future.
Tax credits are worked out on a yearly basis, in line with the tax year (April
to April). Your tax credit award is initially based on your income from the
previous tax year. At the end of the next year, once all the information
about your income and circumstances is available, HMRC will compare your
actual tax credit entitlement with what they have paid you. If they think that
they have paid you more than you are entitled to, this is an overpayment
that they will expect you to pay back.
Reasons why you may have been overpaid include:
• You delayed telling them about a change in circumstances
• HMRC delayed recording a change in circumstances
• Your income for this year is over £5,000 more than it was in the
previous year.
Overpayments that occur because you separated from your partner or
started living with a new partner
If you have been overpaid because you separated from your partner or
started living with a new partner and reported this change late, your
overpayment may be reduced (HMRC may only charge you for half of the
overpayment) or even written off. This is because, in most cases, HMRC will
work out what you would have been paid if you had reported the change on
time and will offset the overpayment against this amount. However, it still
needs you to report it.
Top tip
The key is to always keep HMRC updated about your income, living
arrangements, etc. Always keep a record of times you called, who you spoke
to and what was said; this can be really helpful in case of an appeal.
13
AIC 20 – D
Keeping paperwork
We all find it difficult to manage debts sometimes. Bills and emails that come
through can seem overwhelming, and it can be tempting not to open letters for
a little while. Sometimes, even opening them doesn’t help as they just add to a
growing pile of things to deal with.
However, opening post and knowing your situation can be the most important,
and simplest, way of keeping on top of your debt situation. For most of our
clients, had they come in to see us sooner or even just had a fuller picture of
their debts, they could have been saved the stress of being in serious financial
difficulties.
It’s always easier said than done, but here are some tips to stick to. If you can
keep to this, then your fresh start is much more likely to stay that way.
•
Throw out junk mail and circulars first.
•
Make a rule to open your letter the day it arrives, even if that just means
opening the envelope and laying it out on the kitchen table.
•
Set aside some time once a week, Sunday afternoons are great for this, to
go through the mail and see what it actually is.
•
Sort your bills into piles, for priorities and non-priorities. You should be
getting less bills during your 12 month DRO, so you should start building
up the good habits now when it’s easier.
•
Keep a file for your bills, you can pick up a cheap ringbinder and a hole
punch from a charity shop, or even a big envelope will do.
•
File them in groups, council tax together, gas together, water together,
and put them in date order.
•
Use this file to help you budget. If you still need help, you can now see a
debt adviser with everything clear and organised so they can assist you
quickly.
14
AIC 20 – A
BC
Life after a DRO
After your 12 month DRO period finally comes to an end, you’re ready to get
back to normal. Or are you?
After a DRO your debts included in the DRO are written off (apart from any
debts that were incurred through fraud, that is, because you acted
dishonestly). Any interest or charges that have been added since the date of
the DRO are also written off. This means that even if you haven’t paid them
back, then they are now wiped out by the lenders and you no longer owe
them anything. But, you now have a record of a DRO on your credit rating
that will last for six years.
This could make it difficult for you to get a credit card or loan, or even a
mortgage. With many landlords running credit checks on possible tenants, it
could be hard to even rent somewhere to live.
How to fix your credit rating
There are credit-builder credit cards that you can use. Try searching online
for them by typing in ‘Credit Builder Credit Cards’. You can also register on
the electoral roll, meaning you will be counted on to vote. This really helps
your credit rating.
But is credit the way to go?
If you’re here today because of credit card bills or loans that you couldn’t
afford, then maybe you can take the chance of your new start to really look
at your spending habits.
Try a search online for the Money Saving Expert Demotivator. This is a great
way to show you where you might be wasting money on things without
realising it.
Top tip
There are lots of places online where you can find help with your budget.
These can be places to get money-off vouchers or find out about special
offers.
15
Where next?
Encourage the client to continue to access financial capability material
throughout their DRO period. This can be via:
www.citizensadvice.org.uk
www.moneyadviceservice.org.uk
www.moneysavingexpert.com
Advisers are asked to recommend, if possible, any local financial capability or
digital inclusion initiatives in the local area.
If advisers wish to give any feedback on these resources and materials, please
contact [email protected]
If you’d like to learn a bit
more about tips and
tricks to manage your
money – and remember
that you only have a
twelve-month window to
do this! – Then you might
find the following
sessions interesting.
They’re offered at no
cost, and are all nearby.
16
Evaluation Guidance
Areas that underpin client financial capability
These are the Citizens Advice Financial Capability Areas that were carefully
researched and developed by The Impact Team at Citizens Advice to help local offices measure
client financial capability robustly and consistently across services. They were developed in line
with the MAS UK Financial Capability Strategy Adult Outcomes Framework. Sample questions
and scales can be found overleaf. An Impact Tool is available in Petra for recording responses
and progress.
Keeping track of money
Controlled spending
◉Keep track of money going
out, money coming in and
calculate what's left over.
◉Check my current balance
and keep my papers in order.
◉Spend or save only what I can
afford after covering the basics I
need to live, like food, housing
and electricity.
Having enough money to live
Planning ahead with money
◉Have enough money to cover
the basics I need to live like
food, housing and electricity.
Looking for the best deals
◉Know when my bills and
payments are due and keep on
top of priority bills, like for
electricity, loans and council tax.
◉Put some money aside for big or
unexpected costs.
Staying informed about money services
◉Look at different options and
buying the best deal for things
like food, clothes, large items or
services like phone, electricity
or insurance.
◉Get different opinions on
what I am buying, like from
reviews and comparison
websites.
◉Read the main information
about money services I get like
banking, benefits and loans.
◉Stay on top of changes to these
or get help when I don’t
understand.
Mindset
◉Confidence about taking action on my money matters.
Copyright © 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the
express written permission of Citizens Advice.
Please note these areas, questions and scales are owned by Citizens Advice and subject to
copyright restrictions so reproduction must include the relevant copyright statement above and no changes to its wording, response
categories or layout must be made. For further information please contact Satdeep Grewal on
[email protected]
or

03000 231 608.
Sample questions and scales for measuring
client financial capability
These questions can be used to ascertain how good someone’s financial capability is and so,
what their level of need is. They also allow you to track progress by being used to follow-up with
how someone is getting on after you have helped them.
Score 1 to 3
Score 4
Score 5 to 7
Low financial capability
Average financial capability
Advanced financial capability
High need
Medium need
Low need
Keeping track of money ◉
Calculate money going out, money coming in and what's left over. ◉
Check my current balance and keep my papers in order. Rate your knowledge about the above How often do you do the above? No knowledge 1 Never 1 No to some Some knowledge knowledge 2 Some to good knowledge Good knowledge Good to excellent knowledge Excellent knowledge Don’t know 4 5 6 7 ▢ 3 Never to Sometimes Sometimes sometimes to often 2 3 4 Often Often to Very often very often 5 6 Don’t know 7 ▢ Staying informed about money services ◉
Read the main information about money services I get like banking, benefits and loans. ◉
Stay on top of changes to these or get help when I don’t understand. Rate your knowledge about the above: How often do you do the above? No No to some Some knowledge knowledge knowledge 1 2 3 Never Never to sometimes 1 2 Some to good knowledge Good knowledge Good to excellent knowledge Excellent knowledge Don’t know 4 5 6 7 ▢ Often Often to very often Very often Don’t know 5 6 7 ▢ Sometimes Sometimes to often 3 4 Mindset How much confidence do you have about taking action on your money matters? No confidence No to some confidence Some confidence Some to good confidence Good confidence Good to high confidence High confidence Don’t know 1 2 3 4 5 6 7 ▢ Copyright © 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the
express written permission of Citizens Advice.
Please note these areas, questions and scales are owned by Citizens Advice and subject to
copyright restrictions so reproduction must include the relevant copyright statement above and no changes to its wording, response
categories or layout must be made. For further information please contact Satdeep Grewal on
[email protected]
or

03000 231 608.
Citizens Advice advisers use only
Appendix – Petra codes
Current Petra codes look like this, and it’s here that you need to log any financial
capability that you do.
Here is the first stage of
advice issue codes (AIC) on
Petra
Here is the second stage of codes.
Note that code 20 is the critical one
that we must use to record
financial capability
Within code 20 are the
following AIC codes. Please
use as many as you feel
reflect the advice given to the
client.
19