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12 | Debt management
text of an overall household account, they can
The answer in almost all debt cases
drag the whole ship down with them. The Debt
Advice Bureau is a charity, staffed by volunteers
is early and honest communication
and there is a fair chance that if your clients will
turn to them at some point should they reach a
point of no return. Additionally, if your clients'
but lenders are now seen as some-
situation is such that you are unable or unquali-
fied to offer any help then you should be aware
of the options available via this channel.
how unapproachable. This situation
Debt Consolidation Loans
is certainly exacerbated by the suc-
www.debtadvicebureau.org.uk/debt_consolida-
tion_loans/
Debt Consolidation Loans are an option for
cess of the intermediary sector over
clients to consolidate their existing debts into one
smaller monthly repayment. Although some-
recent years where professional
times thought of as a quick fix, if the underlying
debt problem is not solved then relief will only
be temporary.
advisers have removed the majority No Fees Debt Management Plans
http://debtadvicebureau.org.uk/debt_manage-
of the borrower/lender relationship
ment/
Adjudged by the Debt Advice Bureau to be the
sensible alternative to consolidation loans or
IVAs. Debt management plans are created by a
situation. This seems even more likely when it's staff in dealing with arrears. debt manager who, after assessing the clients'
fairly well documented that many borrowers suf- As a broker there are perhaps some things that financial situation negotiates with their creditors
fering debt problems tend to bury their heads in you can do proactively to support your client, to allow for affordable and sustainable repay-
the sand (unlike ostriches according to a book on although this can be a balancing act as you don't ments to be made each month.
facts I received for Christmas!). want to accuse or suggest to a client that they
might be having problems - a difficult conversa- Individual Voluntary
Communication tion to initiate. Are you able to look back at the Arrangements
This can also logically lead us to assume that if mortgages that you arranged and in particular www.debtadvicebureau.org.uk/individual_vol-
the borrower is not talking to their broker, they the ones that are self cert. or have a particularly untary_arrangement/
are probably not talking to their lender either. high LTV or high income multiples? Can you IVAs are seen as a less restrictive alternative to
The answer in almost all debt cases is early and identify those clients who did not take out rele- Bankruptcy which can be juts as effective. An
honest communication but lenders are now seen vant insurances? Might these be the start point IVA is arranged between the debtor and his/her
as somehow unapproachable. This situation is for a friendly letter suggesting a "no obligation", creditors to repay a percentage of the debt over
certainly exacerbated by the success of the inter- annual review of their arrangements? How well the life of the IVA, usually 5 years. This is to be
mediary sector over recent years where profes- organised is your client database? Have you listed done under the supervision of an insolvency
sional advisers have removed the majority of the clients' professions or perhaps even their practitioner and t the end of the IVA any out-
borrower/lender relationship. If statistics are to employer? If they are working for Woolworths standing debt is usually written off.
be believed, then 60 per cent of borrowers (and then perhaps a call to discuss their finances
certainly a higher percentage in the sub-prime might be prudent?! A Trust Deed
sector) have had a broker manage the relation- Whether the borrower is in financial trouble For those borrowers in Scotland, a Trust Deed is
ship with the lender on their behalf during the or not, there is little doubt that they will have a legally binding voluntary arrangement which
application process. Borrowers do not have a some concerns or questions about the daily offers debtors an alternative to bankruptcy
poor relationship with their lender; they just headlines in the papers and on the television. (sequestration).
don't have a relationship at all. Now is a time for advisers to really step up to the
In years gone by, the mortgage would have plate and add tremendous value. Get a client Administration Orders
been arranged with branch managers who, in meeting organised and get some communication An Administration Order is a court order which
addition to their local knowledge and personal flowing. covers outstanding debts. Under it clients would
accountability of the account, were available for a make a monthly payment to the court, who will
chat should problems arise. This structure had Type of advice then distribute that money on a pro rata basis
the power to address problems more quickly and One of the crucial things for brokers is to under- amongst their creditors. They should be aware
offer solutions which were timelier. This is not to stand the type of advice that consumers will be that for administering the order, the court takes
say that there was always a solution, as if a bor- getting elsewhere and the type of products and 10 per cent of the payment as handling fees to
rower is three months in arrears then something services that they might be able to perform cover their costs, which they will deduct directly
fairly substantial has to happen to stop them themselves. Irrespective if these are products that from your monthly payments.
going four, five or six months into arrears. The you can offer yourself it is beneficial for advisers
situation now is that not every lender has a to be aware of the options in the market. Bankruptcy
branch network and for those that do, there is For many in debt it is the unsecured loans that www.debtadvicebureau.org.uk/bankruptcy
understandably a lack of experience amongst the are crippling the family budget and in the con- Bankruptcy is still seen by many as the last
February 20 Mortgage Introducer www.mortgageintroducer.com
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