The debts
Note the following details about the client’s debts.
•Age of debt. Find out when any credit was first granted. The length of time the agreement has run or a bill has been unpaid can be a factor in negotiation (and might even be grounds for challenging the debt). For instance, a creditor is more likely to be sympathetic if payments have been made for some time than if a new agreement is breached. The legal position on some agreements depends on when they were made. See here for credit agreements made before 6 April 2007. An old debt may also be ’statute-barred’ – ie, unenforceable through the courts (see here). •Reason for debt. It is important to ask the reason for the debt – eg, to refute suggestions that the debt was unreasonably incurred.
•Priority of the debt. Note whether the debt is a priority or a non-priority. Chapter 8 explains the criteria for making this decision. If possible, check any documents or agreements to confirm this information, as clients can be unsure or may describe debts incorrectly – eg, ’hire purchase’ is often used to mean ’credit sale agreement’, and ’parking fine’ is often used to mean ’parking charge’, but they have different legal consequences (see Chapter 5).
•The written agreement. Check whether the debt is based on a written agreement and, if so, whether or not the client has seen it and if it has been photocopied for future reference. Ensure agreements are checked for defects that may affect their enforceability. Obtain a copy from the creditor if necessary. If there is no written agreement, it might be unenforceable. See Chapters 6 and 10 for more information.
•Liability. Check whether the client is responsible for the debt. Note in whose name(s) agreements were made and/or whose name(s) is/are on the bill (although this is not necessarily conclusive). This may either be the client alone, the client and a partner, or a friend or relative who acted as a guarantor. This ensures that all debts listed can be challenged where appropriate. See Chapter 6 for more information.
•Payments. Note:
◦the amount currently owing. State whether the figure is approximate or exact;
◦contractual payments under any original agreement and any subsequent amendment to them;
◦the existence of arrears in payments, although initially these need only be approximate;
◦the payment method.
The client may need advice about coping with doorstep collectors, changing or cancelling standing orders, direct debit arrangements or continuous payment authorities, or opening a new bank or building society account (see here) if the current bank or building society is one of the client’s creditors. However, a client should not be advised to stop or reduce contractual payments to creditors before a repayment arrangement is agreed with them, unless it is clearly in her/his best interests to do so – eg, if s/he has insufficient available income after meeting essential expenditure and/or making payments to priority creditors (see Chapter 8). When deciding what expenditure, goods and services are ’essential’, you should always consider the client’s personal circumstances. The date and amount of the last payment made are needed, especially for priority debts, to assess the urgency of any action. •Insurance cover. Many people take out insurance (known as payment protection insurance) with a mortgage or credit agreement – eg, against sickness, death and redundancy. Sometimes, such insurance is given by the creditor as part of the contract. Always check whether a particular debt is insured and that the insurance has been correctly sold, so that this important way of minimising the debt is not overlooked (see here).