There are so many debt myths if you read them all your socks would be blown off and your head may very well explode! As a result, I’ve limited the debt myths to 10, it’s just safer this way.
As many of you know, i’ve been bankrupt before. Not something I’m proud of but I’ve lived and learned like many others. The beauty is I’ve learned the truth about debt in the UK. I can see debt for what it is and not what it’s largely perceived to be.
Predominantly, people in the UK are raised from children to believe that stealing is wrong, that we should not borrow something without giving it back and that being in debt is bad but have an excellent credit file is good. This is all despite the fact that to get a good credit file you need to get into debt and repay the money on time every time. The more money we borrow and show we can repay on time, the better our credit file.
However, debt problems shouldn’t define who we are. Hundreds of thousands of people have been in the most serious debt problems and there are routes to become debt free again. Free debt charities can help here!
Myths About Personal Debt
Myth #1: Debt is forever: Rarely is anything forever these days. It’s the same with debt. You can become debt free again and there will be ways to make this happen. If you’re ever in a debt solution for 10+ years, or it’s forecast to last this long, seek help. You can be debt free quicker!
Myth #2: My family will have to pay for my debt: I always think it’s funny how I thought my family would be punished for my debt problems. Debt is personal and it dies when a person dies. It cannot be transferred to other people. Family members are not liable for your debt unless it’s a joint liability.
Myth #3: I’ll go to prison: Again, this is a myth. Creditors often play this card very hard, but it’s a lie. You cannot go to jail for not paying a debt. The only time you can go to jail is when a court order says you must make a certain payment towards the debt each month e.g. £10 and you continually fail to do this. The court may decide you are deliberately failing to make the payment and as such you could go to jail for failing to abide by a court order, but not directly for being in debt.
If you could go to jail for being in debt and not making the minimum payments the judicial system would collapse under the weight of so many people being in debt!
Myth #4: I’ll lose my job: You cannot lose your job for being in debt and not being able to pay money towards your debt. For many people it’s not possible to go bankrupt because of their contract of employment. If you’re worried about your job, check your contract of employment to see if there are any issues with going bankrupt or speak to your HR manager. Usually people can enter bankruptcy and still keep their jobs.
Myth #5: I’ll lose my house: When debt problems hit the dark clouds hang over and we’re simply waiting for the downpour to start. It’s for this reason it’s difficult to realise the truth. Your house will not be taken away from you because you are in debt. In the most extreme circumstances, such as bankruptcy, your house will be reviewed to understand if there is any equity. They only want the equity, not your house.
As a result, when i went bankrupt my house was in negative equity so I could keep my house and continue to pay the mortgage. Remember, secured debt is different from unsecured debt!
Myth #6: Bailiffs can force their way into my house: Bailiffs are the spawn of Satan and I say this despite having a very good friend who does this as a job! Many Bailiffs are pleasant and friendly but they do have a job to do. This job is to get money back which is owed.
Myth #7: People will find out about my debt: This is very unlikely, unless you tell them. It’s a general myth. Debt is personal between you and the credit reference agency. The only time your name is published is if you go bankrupt and that’s in a trade journal read by banks and financial institutions.
Myth #8: My house will get blacklisted: Houses and other property cannot be blacklisted, for two reasons. Reason 1 is that blacklisting doesn’t exist and reason 2 is that debt is personal to you. A credit file records your credit history and will provide a number. With Experian it’s between 0 (poor) and 999 (excellent).
If you live with somebody else who has a debt problem then your credit rating may be impacted because of their debt problem if you are associated together. So, for instance, if you have a joint mortgage. Well, then you may find that because you are associated to somebody with a negative credit rating that your ability to get credit is impaired. It’s a simple fix. The 3 credit referencing agencies in the UK are Call Credit, Experian and Equifax. Give them a call and ask to submit a notice of disassociation. This will improve your credit file.
Myth #9: My credit rating will never improve again: Many people think we only get one shot at a credit rating and that’s it. This is inaccurate. A default on a credit file lasts 6 years then it’s removed. I know people who have gone bankrupt two or three times so it’s definitely possible to get credit in the future and improve your file.
Myth #10: You have to deal with debt alone: There are various ways to deal with debt but none of them should be alone. Speak to friends, family or even strangers who know how to resolve debts for advice and support. Debt can make people feel alone, scared and vulnerable. It’s at this time people need to be actively seeking help and advice.
There are plenty more myths which I’m sure i’ll touch on in the future but the lies and deception around debt must stop. People take their lives every year because of their debt problem. I mean suicide over debt?! What’s happened to the world.
It’s time to wake up and start having a sensible discussion about what debt is, what it does to our society and why so many people seem to fall into the inevitable unsecured debt trap.
Seek professional debt advice if you are in debt. I’m not a qualified debt advisor. I don’t have a consumer credit licence to provide debt advice but charities who offer free advice do. They can, scrap that, they will make a difference if you are in debt and need help!