Five Debt Destroying Actions to Take Prior to Choosing your Debt Solution Part II

by admin on 5 September 2007

This is the second part of two posts on the actions you need to take prior to choosing your debt solution. The first part is here

Action No. 4: Claim Back Bank Charges
About a year ago there was a court case which revealed that people were legally entitled to reclaim bank charges from the past 6 years. Many people have been reclaiming bank charges since and doing it themselves with template letters downloaded from internet sites (see the resources section for links). The process can be broken down into 3 main steps

  1. Calculating how much you are owed, either by examining old statements or, if you don’t have them, requesting old statements from the banks;
  2. Requesting that the bank refund the money
  3. Replying to any obfuscation by the bank and taking them to court if necessary.

IVAs and Bankcharges
Whichever solution you are interested in I would suggest trying to reclaim your bank charges right away. However, if you are considering pursuing the IVA solution, there are some important points to bear in mind.

Remember, for an IVA proposal to be accepted 75% of your creditors have to vote for your proposal; therefore it might not be prudent to upset them with a court case. But perhaps you might want to start the process and just request the charges back – you can decide later, should they refuse you, whether you wish to pursue court action. Ideally the court action stage would be taken after your IVA has been agreed. And you would need to take in to account if the rewards really outweighed the costs; whether it was worth CCJ-ing your creditors given that any money you received back could be treated as a windfall and just used to reduce the total debt you owe.

By all means please do pursue to the fullest extent all your old creditors – those that you no longer have accounts with – and who, therefore, will not be voting on your IVA proposal. Depending on your financial history you could make a tidy sum from doing this – money that can be used to lessen your debt burden and make it more likely that your IVA proposal (if you are doing one is accepted)

Action No. 5: Understanding how you got into debt and avoiding it in the future.
In the past most people went bankrupt due to some calamity beyond their control such as a sickness or losing their job. Nowadays many bankruptcies are caused by poor spending habits and poor financial management. If you are in the latter category you probably need to invest some time thinking about the underlying causes of how you got into debt. You’ll need to examine your beliefs and “philosophy of life” as well as understand your bad spending habits to avoid falling into this problem again.

If your problem is due to profligate spending habits as opposed to some calamity (such as gambling, addiction, sickness, broken relationship etc.), then it is worth asking yourself some deeper questions:

  • Do you strive too much to “keep up with the Joneses”?
  • Do you value material success and status out of proportion to its value?
  • Do you place too much value on what people think of you?

Beware of the money trap

Materialist culture breeds debt slavery
If you answered “Yes” to any of the above questions then I would urge you to re-evaluate your values and belief systems. Really, it’s not worth succumbing to the materialist brainwashing that exists in our culture. The marketing and media industries encourage the false belief that we “need” the latest and greatest car/suit/shoes/consumer-goods to survive. We are preached a false religion whereby the status of someone is only based on what they have. But if your confidence is based on only the “stuff” that you have acquired then it is a shallow confidence and one that is easily shattered.

The proclivity towards consumerism and materialism in our culture is taken advantage of by the credit industry to encourage you into debt. Did you ever notice, for example, that when you make a big purchase on your credit card, your creditor entices you with some special offer encouraging you to borrow a bit more? This is a strategy designed to make you comfortable in, and, encourage the use of, credit. Once you have an easy credit facility, it is harder to discipline yourself and easier to acquire the bad spending habits that can lead to a kind of “enslavement”. So the question you need to ask is: which is preferable, slavery to your creditors, or not being able to instantly have everything that society says you must have? Your answer should be to stop simply living beyond your means and instead choose freedom today!

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