Keep it real

Many years ago, Private Eye, the UK satirical magazine featured an amusing cartoon where a mother was explaining to her young child how a piggy bank worked. The mother explained that to get money out of a piggy bank, you first have to put money in. When the child objected to putting money into the piggy bank the mother replied “but darling, this is a real bank”.

Another user of the word “real” was the TV and film character Ali G, a fictitious rapper, played by the very talented comedian, Sacha Baron Cohen, who initiated a witty catch phrase “keep it real”.

Real, as in reality and realise are words that have eluded many of us in recent years.

Right now in the UK (and just about everywhere else) reality has kicked in with a frightening thud.

Years ago, both my parents and grandparents lived in the real world of pay as you go. My lovely departed Grandmother would remind me in my young years “pay as you go: if you can’t pay, you can’t go”.

As this recession begins to hurt even more, we would do well to reflect how our grandparents lived in the good old days of no credit cards, no loans, very few mortgages (as everybody rented) and no embarrassing letters from the bank or finance company.

I recently made a TV programme on debt management (I can send the web link or DVD if you would like a copy) and the interviewer was somewhat surprised to hear me give lessons on how to save money.

The only money that counts at the moment is cash, or real money.

The problem for some people in this current climate is that they are genuinely flummoxed about money management. They seemed to have lived a life of card swiping and funds transfer, with very little, if any, contact with actual real money.

As we journey along this recession, it is worth bearing in mind the silly cartoon about the piggy bank, only it is not a joke and the money in the piggy bank is real.

10 Myths about bankruptcy

Myth 1 You are blacklisted forever

Not at all.

Firstly there is no such thing as a national black list.

Bankruptcy in the UK lasts for 12 months, providing you follow the rules. The credit reference agencies are informed by the court service that you are a bankrupt, along with any other information that may be in the credit domain, like county court judgements and loan defaults.

Loan defaults, county court judgements and bankruptcy will potentially stay on your credit record for up to 6 years. However credit references agencies simply provide references, they do not make the rules.

Myth 2 I won’t be able to work

Not at all.

You will still be able to work and find employment, although many employers are asking at the job application stage if you have ever been a bankrupt.

There are some jobs you may not be able to continue with, as an example being a company director, a senior manager or employment in financial services.

Ordinarily being a bankrupt shouldn’t and generally doesn’t affect your employment status. However should an employer decide to dismiss you because you have been made a bankrupt, they need to inform you why they have done so: they could be leaving themselves open to an unfair dismissal action if they do.

In the scheme of things, bankruptcy shouldn’t affect your day job or your terms/conditions of employment

Myth 3 Everyone will know I’m a bankrupt

Not at all.

Although it depends who you classify as everyone. Once you have been declared bankrupt, either by your own petition or by someone making you bankrupt, it will appear on the back pages of the classified advertising section in the local press.

However, here’s a question for you. When was the last time you looked in the local press to find the list of recent bankrupts? Exactly. Unless you are a celebrity or public figure, it is extremely unlikely the bankrupt list will ever be noticed, unless you tell everyone you are on it.

Myth 4 I can keep some assets.

Not at all

Anything you own will be taken by the official receiver (OR) and sold/auctioned to pay your creditors, however there are exceptions.

Your personal effects like clothes, furniture, electrical goods are normally left alone.

If you own a high value car which is paid out, you could lose it as it will be worth something at auction: you can still keep a low value car.

Any other assets, like property, land and business interests will be taken over by the OR and sold/auctioned to pay off your creditors.

A matrimonial home is also at risk from disposal by the OR. In some circumstances, where one partner of the marriage has been made bankrupt, but the other has not, and the house is in joint names, then you need a lawyer to put a case together to save the matrimonial home. There is no fixed rules about saving the matrimonial home, ultimately it is an asset and if it has value, then it could well be realized.

In addition, it is your responsibility to inform the OR during your bankruptcy period, should you inherit money, win the lottery or receive money or gifts. Remember, although a bankrupt, your creditors can still get paid by the sale of any of your assets, or from any cash you have been given and it must be declared to the OR.

Even your income must be declared: a proportion of any surplus after your living expenses will be required to be given to the OR to pay your creditors.

Myth 5 I’ll never be able to borrow again

Not at all

After you are discharged from bankruptcy (normally after 12 months in the UK) you can start building up your credit record. It may take a while, perhaps a few years before you are eligible to successfully borrow from banks and loan companies again.

But here’s the thing.

While you are a bankrupt you’ll be living a debt free life, because you will not be able to borrow: STAY THAT WAY!

Promise yourself you will live your life without borrowing. Pay cash for everything and start saving. Remember you went bankrupt because you borrowed and spent everything.

From here on in, pay cash, don’t spend and save, you’ll be amazed how quickly your savings will grow.

Myth 6 I’ll lose my friends

Not at all.

Your real friends will stick with you, anyone else who starts slagging you off and putting you down, well quite simply you are best without them. If you think you had friends when you had money, you’ll find your real friends when you don’t have money.

Myth 7 I can’t travel abroad

Not at all

However you should inform the OR if you are moving abroad, or have been offered work abroad. It is extremely unlikely that your day to day life (apart from having little money) will change. None the less, keep yourself right and keep the OR informed of any changes in your circumstances.

Myth 8 I won’t be able to get a bank account

Not at all.

Despite being a bankrupt, and despite many banks not accepting bankrupts on their books, there are online banks that will offer accounts to bankrupts.

Myth 9 I can’t have a credit card

Not at all.

Although it won’t be a credit card with a credit limit, it can be a “top up” credit card. This is where you prepay cash amounts into your credit card.

Myth 10 I’ll not be able to start a business

Not at all.

You can start a business even when you are a bankrupt, but you must inform the OR what is going on. Remember a business is an asset and any income or profits, after you have taken reasonable living expenses, will be managed by the OR to repay people you owe money to.

You’ll be surprised how many successful business people have gone bankrupt, and flourished in business at a later time.


In conclusion, bankruptcy is a form of protection for you to stop your creditors pursuing you for money you can’t repay. Bankruptcy is a serious business and is not a procedure where you can pick and choose the rules.

If you decide to go bankrupt, get professional legal advice about your assets and finances.

In reality, if you owe more money than you can pay back and your assets are worth less than you paid for them, bankruptcy may well be your only option.

Offline banking

I never was a fan of telephone banking. Apart from its impersonal approach and pseudo customer care mantras, it really is an insult to right thinking people.

Those of you who continue with telephone banking may wish to reflect on who you are actually talking to at the end of your phone, if you get talking to someone at all.

Many telephone banking organisations screen your call with various (and irritating) options menus: some utilise voice recognition responses and some with keypad tones.

Eventually should you get through to someone, you’ll be asked to identify yourself with responses to security questions: this can be awkward if you are in a public place.

Finally, as you discuss your finances with your telephone banker, don’t be surprised if the conversation is side tracked to selling you something, like credit card insurance or travel insurance.

What may surprise you is that it’s extremely unlikely that you’ve spoken to your bank at all; you’ve more likely been connected to a call centre, either in the UK or somewhere else in the world.

Call centre staff are not banking staff, but that’s who is dealing with your money: if you want proper banking staff dealing with your money then stop dealing with them over the phone and start seeing them at your local branch.

It’s only when you take a view from afar regarding how banks have changed their approach to customers (that’s you) do you realise how much of an awkwardness you are to them.

Despite the increase in online commerce, the supermarkets have increased the number of their stores, even though they offer an online order and delivery service.

Recently Nat West have started to open their branches on a Saturday morning, a direct response to customer demand, which goes to show that if you put enough pressure on a bank, you can get a result.

My advice is simple, quit telephone banking altogether and demand that you see your bank at its branch. If shops can open late in the evening and Saturdays, then so can your bank, or move to another bank that does.

The Hammer at the House of Horrors

As a former bankrupt, I know what it is owe money to the Banks and be unable to pay it back. In 2001 I decided to go bankrupt because it was the only way I could take control of my situation after I lost a business.

It was not any easy decision, in fact it was the only decision that made sense, otherwise I’d have been receiving endless letters and phone calls reminding me how much I owed and asking when was I going to pay it.

Bankruptcy is a serious business and not to be entered to lightly, however it does establish a ground zero. Banking facilities can be awkward, but they still can be arranged, you’ll have no capacity to borrow and any surplus money you earn above living expenses will proportionately go (through the official receiver) to your creditors.

More importantly you’ll have no assets as the official receiver will take charge and dispose of them to pay creditors (this will include your car if it’s of marketable value).

Bankruptcy lasts for twelve months, providing you stick to the rules. Should you not stick to the rules, then it could last longer. Equally some people have come out of bankruptcy earlier because their circumstances were not of their making (customer’s not paying bills and forcing the closure of a business, as an example).

Obviously people’s circumstances will vary and the rules may vary from case to case. There are many resources on the web to further inform you about bankruptcy in the UK.

Why this opening paragraph about bankruptcy?

Simple, you know where you are. Unfortunately this can’t be said about the behaviour of the Banks when you owe them money that you are struggling to pay back.

Banks (through a worrying trend of almost blood thirsty fee driven lawyers) are using existing procedures, albeit seldom used until recently, to force people into house loss situations.

Charging orders are becoming rampant where people cannot pay back their unsecured debt such as credit card loans, store card loans and other forms of financing that was not secured on property, land or a business.

Other debt recovery instruments include attachment of earning orders, where you pay packet is automatically deducted by an amount each month to the creditor.

A charging order enables a creditor (in this case the Bank) to secure an interest on your main asset (normally your home). When your home is sold, part of the proceeds goes to pay the creditor out of the sales proceeds.

It gets worse. The creditor can actually force the sale of your home.

What will happen to all these house repossessions and forced sales? Why they’ll go under the hammer at auction to cash ready buyers.

What all of us need to be reminded is that Banks are a commercial business. They will do what is best for them, which is not always what is best for you.

Seizing assets (peoples homes) is a sure fire way of getting either money from you in cash or money from you in assets.

Of course, at all times we should pay back what we owe, or do our utmost when our circumstances are reduced.

Whatever your circumstances, find out where you are and what is the worst thing that can happen to you.

In some cases, it is possible to challenge the validity of a mortgage or loan. You can email me at info@helpwithdebtni.com for further help with this (it’s a free of charge service).

What they don't want to teach you in school...

"A GCSE in financial services is set to be dropped from schools in Northern Ireland, due to low uptake and "overlap" with other exams.”

The above is an excerpt from the BBC website on Wed 29th Oct 2008.

It does beg the question “will our young people leaving school at 16, 18 or 21 ever get to grips with understanding the fundamentals of how to manage money?

Sadly, I fear not.

This decision to drop financial services from the Northern Ireland schools curriculum is, I suggest likened to stopping spelling lessons, as MS Word has spell check, or even abandoning cooking lessons, as there are plenty of fast food outlets around.

The frightening thing about the Northern Ireland Education Ministers decision to drop the GCSE in financial services is that it is based on a low take up of the subject. The chair of a Northern Ireland Board of Local Governors said, quite rightly, the decision was disappointing.

It’s not the fault of the Education Minister; it’s the fault and therefore the responsibility of the parents of children who don’t receive a basic grounding of money and its value at home.

Being proficient at mathematics or economics, does mean proficiency with money.

Most students are broke for a good many years after college, paying of their student loans.

Many people are living weekly wage to weekly wage. There is even a loan firm called Payday loans to help the weekly paid bridge the gap from being broke until payday.

The frightening thing is this. In 10 or 20 years time, our teenage students will be running both government departments and commercial organisations; one wonders what sort of money management skills they will have acquired at school or college.

I said a few blogs ago that we have been here before: if we don’t ensure our young people get a solid grounding in money management and more importantly, how the world and money works, we could be here again.

When the going gets tough...

I felt more surprise than shock when I read two stories in The Sunday Times published on 26th Oct 2008.

One unfortunate chap had his house repossessed after missing just one mortgage payment. His house was valued at £400,000, although it was going through at auction on behalf of the lender at £260,000.

It also transpires that credit card companies (credit card debt is classed as unsecured) can now apply for a charging order against your assets, i.e. your home, if you do not maintain regular payments, or make good missed monthly payments.

Strictly speaking, these procedures have always been available to lenders, although it does smack of the sinister that someone could lose their house with one mortgage payment in arrears, and now the credit card companies can in practice apply for an interest in your home, or indeed repossess it if they wish to.

If anything, this proves more than ever that everyone should be better informed about their legal standing with a loan of any description. A typical credit card or store card agreement advertised as unsecured is no such thing if a charging order can be placed on your property.

Be sure of this.

As the credit crunch deepens, banks and lenders will become more ruthless and unrealistic. Anyone with a loan, no matter how well your financial standing, is in debt, which if not repaid or serviced, could have horrible consequences.

My advice is to clear any borrowing that you have. For many that will be unlikely. If you remain in debt, start finding out where you stand with your lender by asking them what is the worse case scenario if you are unable to maintain full or partial repayments of your loan.

Equally, you can start being tough with your lender.

Did you know you can challenge most mortgage agreements if they commenced before Oct 2004?

Did you know you can challenge most loans regulated by the consumer credit act if they started before March 2007?

Well, you do now

You can contact me through the help with debt website and I'll show how it's done (there's no fee, other than a £10 file retrieval charge payable to the lender)

When the going gets tough, the tough get going: that means you as well as the banks!

Greed is still here

One thing that is happening more and more at the minute is the number of lawyers, accountants and intermediaries charging fees to supposedly assist people and businesses in financial trouble. Greed is still here.

In just about every web page I click on that offers help with debt, inevitably the sales pitch becomes apparent, and it’s either:

Refinance your loans (which you can’t afford to pay already)

Consolidate your debt (usually against the equity of an asset: property or land)

Enter into an IVA (more refinancing)

DON’T DO IT.

I recently made an appointment to see a firm of insolvency lawyers to research my web site. Before the interview began, I was asked by the lawyer how long I would need, and was duly charged their hourly fee before I had asked one question.

You need to understand that people with knowledge about debt and money management are making huge amounts of money from people with little or no knowledge about debt and money.

If the banks have made money out of you before the credit crunch, the lawyers, accountants and intermediaries are making money out of you during the credit crunch.

Don’t pay fees.

We've been here before

There is a risk of talking about the current financial situation or passing comment on it, the risk is one could be accused of of talking people into a situation.

Yes it's true that it is possible to talk oneself into a recession, but the reality is the reality.

Nobody talks themselves into being overweight, they actually have done something to get overweight, usually eating and drinking too much and little or no excersise.

Those of us who remember the economically challenging times of the 1980's and 1990's will realise what hard work was to get out of hard times.

However just like the 1920's and 1930's, our current recession is gravitating around bank collapes and a lack of confidence in the markets.

Simply put, when a bank fails a large amount of money disappears from the economy, which has a depressing effect on prices and a stagnating effect on business activity. Depositors scramble for their money, business customers lose their money and cannot finance their activities; thus everyone linked to the bank or its customers becomes economically paralyzed in one way or another, including other banks.

The reality is, we have been here before and we'd all do well to read up on the 1920's. the 1930's and what was the great depression.

It's also a lesson for us.

Life and nature from time to time, check the balances. If something is too little, or too much, or not fair and even, then it corrects itself.

We have been here before.