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Coronavirus and Debt

In these uncertain times, one thing’s for sure – personal debt across Scotland and the UK is rising and set to worsen as the government employment retention/self-employment schemes come to an end, pushing up job losses.

Financial bodies have launched schemes to ease things for those in financial difficulties due to covid-19.  The Financial Conduct Authority (FCA) has urged banks and credit providers to work with customers on solutions suited to their personal circumstances.   For instance, customers have until 31st October 2020 to request payment holidays covering mortgages, credit cards, store cards, personal loans and overdrafts.

Since March, mortgage holders have been able to request a three months’ full or part payment holiday.  More than two million have been granted to date.  Their lender may grant this or other options depending on the customer’s circumstances.  However, it is important that if you can afford payments that you should restart them as soon as possible. The payment swill need to be made up and will result in more expensive repayments in the long term as missed payments get added on to the mortgage and interest is still charged.  But your lender should offer a range of options for how the missed payments will be repaid.  The holiday will not have a negative impact on your credit file.  After 31st October 2020, lenders have been advised to offer further short-term support for those who need it, with potential measures outlined including a more tailored payment break that could see reduced payments, extended repayment terms or loans restructured  

The FCA has also made it clear that house repossession actions should be halted until 31 October 2020 whether or not arrears are caused by the corona virus.

Customers with existing arranged overdrafts also have until 31 October 2020 to ask their current account provider for up to £500 of overdraft borrowing with no interest for three months and also ask for support above this amount if they need it.  If you have already accessed this, you can ask for another three months. Approaches vary between banks.

Those with mental health problems are three times more likely to be in debt than those without. They may struggle with budgeting, phoning and returning unwanted items.  It can also worsen mental health.The FCA has urged lenders to pay particular attention to vulnerable customers.

Longer term, mainstream solutions for dealing with debt are:-

(a) maximising income through benefits and other routes

(b) a voluntary arrangement with creditors

(c) if you are unable to pay your debts and have some disposable income, entering a trust deed that may protect your home.

(d) applying for bankruptcy if you are unable to pay to your debts.  Temporary changes introduced here include a change to the minimum debt threshold for a creditor to petition for bankruptcy against someone from £3,000 to £10,000 and increasing the maximum level of debt in a Minimal Asset Process (MAP) self-bankruptcy application from£17,000 to £25,000. Also reducing the bankruptcy fee for those not eligible fora full fee waiver (available if on benefits-based income) from £90 to £50 for MAP bankruptcy, and £200 to £150 for full administration.  

Contact CastlemilkLaw Centre on 0141 634 0313. We can also be reached by email at mail@castlemilklawcentre.co.ukfor any debt matter and assistance.

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