Debt Myths: it’s time to separate fact from fiction

The Most Common Debt Myths: Explained

Majority of us will have some sort of debt at one point or another. This could be from using an overdraft, credit card or from a mortgage. Either way, the thought of debt can be quite daunting. However, debt can be even more daunting if you don’t know the facts from the fiction.

Here are some of the most common debt myths:

“If I miss payments on my debts, I’ll be blacklisted”

The ‘blacklist’ has been a common scaremonger for quite some years. Many people often believe that if they miss payments on their debts, they will no longer be allowed to take credit out in the future. The truth of the matter is that whenever you apply for credit, the credit lenders will then check your credit file and determine whether or not they will choose to approve your application.

If you do miss on your payments, this will be documented on your credit file. Likewise, any payments that you do end up making towards your debt will also be documented. Once you have successfully paid off your debt this will also be documented.

“If I get married, I’ll take on my partners debt”

If you get married, you won’t be accountable for any debts that you partner had previous to the marriage. If your partner decides to take out any debt or credit products in their own name whilst you are married, you will also not be accountable.

However, if you take out a joint loan, mortgage or open a bank account under both names, you will then be responsible and accountable for these debts. If you live in either England or Wales, you are equally responsible for any council tax debt or any water rates that are owed on the property, regardless of who pays the bills.

“If I leave the UK, my debts will eventually disappear”

Although relocating to another country would make it more difficult for UK-based creditors to find you, this won’t guarantee that they will stop chasing you. In fact, there is a growing number of organisations that will chase consumer debt internationally.

Whilst away, creditors can take court action against you. This means that if you choose to return to the UK, your debt will still need to be dealt with.

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“I could be sent to prison for my debts”

Although you can technically be sent to prison for debt, this is extremely rare and only viable with these debts:

  • Criminal Fines
  • Council tax
  • Business rates
  • TV Licences
  • Child maintenance arrears owed to the CSA or CMS

Even then, there are plenty more methods and steps that are usually tried before a prison sentence is given.

“When I die, my family will have to pay off any debt that I owe”

If a person dies and leaves behind debts, these are in their name only. The unpaid balance will have to be settled with any available money in their property. This can be from a house, savings or investments.

Oftentimes, unsecured creditors will only pursue a deceased persons debt if they left behind a large estate, such as a house that is owned outright with lots of value. If the deceased person had no possessions, any debts that are owed in their name will be wiped clean. If they leave behind a joint debt that has not yet been paid off, the surviving person will then be responsible for the full balance.

“If the person who has previously lived at my address was in debt, this will affect me too”

Nowadays, credit files are based on the individual and not the address. When a creditor asks you for your address, this is so that they can confirm who you are and how long you have been living at your current address.

The only way that you can be liable to another person financially is if you take out a joint loan with them.

“Creditors can send bailiffs to my house to collect payments”

Only the courts have the authority to instruct bailiffs to visit your property. Creditors are allowed to send collection agents but they are not allowed to force entry into your home and seize goods. Bailiffs can only enter your property if you have allowed them to enter on a previous visit and you’ve signed a ‘controlled goods agreement’.

The only exception to when a bailiff can force entrance into your property is if they are collecting unpaid magistrates’ files or debts that are owed to HMRC. If this is the case, forced entry is possible but only rarely carried out.

“Bailiffs can take anything that they want from my property”

There are strict rules which determine what bailiffs can and can’t yield from your home. They prefer to take goods that will sell for a reasonable price at public auction so their main targets will be:

  • Vehicles
  • Furniture
  • Electronic goods
  • Jewellery

They are required to leave you with basic items, such as:

  • A washing machine, fridge and cooking appliance
  • Enough bedding for everyone in the house
  • Lighting appliances
  • Medical or care equipment
  • Landline or mobile phone
  • A dining table and enough chairs for everyone in the house
  • Heating appliances

Some goods are not allowed to be collected by bailiffs. These are:

  • Goods that belong solely to someone else
  • Tools and equipment that you need for your job or study, up to a value of £1,350
  • Fixtures in your property, such as fitted wardrobes or fitted kitchen units
  • Pets or assistance dogs

“My bank can’t help me with my debt problems”

If you are struggling to keep up with repaying your debt, tell your creditor as soon as possible. Sometimes, they may agree to freeze the interest on your repayments, temporarily reduce them or even give you a break from them altogether. Try your best to talk to your creditor about your problems as soon as possible because that way, you will be able to find a solution sooner.

“Once bankrupt, always bankrupt”

If you decide to file for bankruptcy, it will usually last for one year, during which you will be labelled as an undischarged bankrupt. The bankruptcy will then be logged on your credit file for six years. Your ability to access credit will be affected during that time and in some cases, beyond. However, it is still not the case that once you are bankrupt, you will be logged that way forever.

“Debt advice is too expensive”

If you feel overwhelmed by your debt situation and you feel unable to deal with your debts, do not be afraid to seek professional advice. At Money Support Group we offer free debt advice from our financial specialists to help you get closer to being debt free.

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