Basic Debt. Guidance for conversations on basic debt issues. Trainers Notes for basic debt with clients. Citizens Advice financial capability

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1 Basic Debt Guidance for conversations on basic debt issues Trainers Notes for basic debt with clients 1

2 This session pack has been produced as part of Citizens Advice Financial Skills for Life. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, Citizens Advice assumes no responsibility. The user of the information agrees that the information is subject to change without notice. To the extent permitted by law, Citizens Advice excludes all liability for any claim, loss, demands or damages of any kind whatsoever (whether such claims, loss, demands or damages were foreseeable, known or otherwise) arising out of or in connection with the drafting, accuracy and/or its interpretation, including without limitation, indirect or consequential loss or damage and whether arising in tort (including negligence), contract or otherwise. Copyright 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the express written permission of Citizens Advice. Citizens Advice is an operating name of the National Association of Citizens Advice Bureaux, Charity registration number , VAT number , Company Limited by Guarantee, Registered number England. Registered office: Citizens Advice, 3 rd Floor North, 200 Aldersgate Street, London, EC1A 4HD Citizens Advice Basic debt trainer notes/sep16/v2

3 Basic Debt The aim of this session is to help advisers to provide a session to clients that helps them understand the basics they need to prevent and avoid simple debt issues in the future. This session is specifically aimed at those clients who may be coming from an actual debt intervention and are being encouraged to prevent their problem recurring in the future. Objectives are that by the end of this session clients will be able to: Understand what are priority and non-priority debts Understand basic steps to take control of their debts Keep appropriate paperwork in future to help any debt interventions General Guidance Notes on delivering a group financial capability session are available elsewhere on the Citizens Advice website. These notes are for the trainers use only. A separate handout pack should be used with every client in the group, which will include signposts for further information and guidance. Trainers are encouraged to feedback to the Financial Skills for Life team with any feedback about training materials or resources. If you have any comments, please contact: financial.skills@citizensadcvice.org.uk 3

4 Contents Session Specific Guidance 5 Lesson Plan 7 1. Debt emergency cards 8 2. Non-priority debtors Priority & non-priority debts (quick ref) Tips for dealing with debt What paperwork will help me deal with debt? What else will help? 14 Evaluation Guidance 15 Trainers notes 17 4

5 Session specific guidance Subject information Trainers do not need to have specialist debt advice knowledge or experience but must have a basic understanding of the different types of debt and be able to signpost learners to sources of further advice and information. The pack contains all the key information for the topics covered. Any additional information that is given should be taken from an up to date and accurate source such as: the debt section of the Money Advice Service at This session aims to help learners understand the basis they need to prevent simple debt issues from recurring. For further information, learners should be referred to their local Citizens Advice or other advice agency. Materials Blank flip chart paper Marker pens Note paper and pens for learners Blu tack Calculators Prepared cut-outs for word-matching activity Manage expectations Make it clear to clients that the session is a brief overview of debt, and the most essential elements of financial capability that relate to it. As a one-off session, there will not be the time to explore any single element in any great detail. Signpost and empower Ensure that clients are aware that after the session they will have a clear idea where to go to answer outstanding queries and to get further assistance. 5

6 Top tips 6

7 Lesson Plan Adult Financial Capability Framework references: 1 B (c) 2 2 B (g) 3 3 B (g) 3 4 B (g) 5 5 D (g) This session is intended to take at most 45 minutes to deliver. Although Activity Three is one of the shortest, it is very important, if only to provide the client the Quick Reference guide to take away with them. 6 Red activities Are essential to any session on this topic Amber activities Are highly recommended but not essential Green activities Are optional activities, if time allows The size of the bubble indicates roughly how much time, relative to the session, to spend on an activity. 7

8 Activity: Debt Emergency cards AIC 20 D S T Use the debt emergency flash cards to ask the client what they would do in the debt emergencies. The first sheet can be cut up into cards, we recommend that advisers laminate a set so that they can be re-used, but there is no reason it can t just be printed out and clients can just number them in order of priority. Answers are provided in handout DA1 and should be provided to clients for their reference. If this was useful, why not try Debt - priority and non-priority debts (quick reference) 8

9 Debt emergency flash cards Littlewoods catalogue 90 4 weekly payments behind, reminder letters have been sent. Water charges 80 Second half of the year s bill is owed. County Court action threatened by letter. Credit card 500 Payments have been missed regularly. Charges are being added and the bank have sent a letter threatening court action if they are not brought up to date. Provident weekly payments behind, the collector says that if the amount due is not paid then it will be sent to their head office. Mobile phone 60 Phone bill has not been paid for the last two months. They will disconnect this week. Electricity 90 Last quarterly bill outstanding, they will disconnect tomorrow. Magistrates Court Fine 120 First installment is due this week, but there is no money to pay it. Council Tax 450 Payments have been missed. A bailiff has been to the house and posted a letter to say he will return tomorrow. Bank overdraft 250 Bank manager threatening court action in a letter. Rent 350 Payments have been missed, letters requesting payments have been sent. No notice seeking possession has yet been issued. 9

10 Activity: What a non-priority creditor can do AIC 20 T This activity is discussion-based. Give out handout DA2 and read through, clarifying and dealing with any questions as you go. You should cover most of the following: Creditors may agree to low repayments, such as 1 per month. Credit rating goes down if debts or late payments exist. This means that credit may be harder to get and could cost more. They can use debt collectors. They may still accept token payments at this stage though (such as 1 a month). They do not have court powers. All they can do is put pressure on you to repay the debt. If pressure does not work, the debt can be taken to county court for a county court judgment (CCJ). They can go to county court to enforce repayment of debts with a county court judgement (CCJ). This will affect a client s credit rating more. If clients reply to court papers, they are more likely to get realistic repayments set. If clients miss repayments on a CCJ, this can affect credit rating more. If a CCJ is not repaid it can be enforced, for example through bailiffs seizing goods (with a court order) or a regular deduction from wages. If this was useful, why not try Debt priority and non-priority debts (quick reference) 10

11 Priority/Non-priority debts Quick reference sheet AIC 20 S T Provide clients with handout DA3. Priority Debt Priority debts are ones where serious action can be taken against a person if the debt is not paid, such as losing one s home, being disconnected for energy supplies or going to prison. The most important debts are not necessarily the biggest ones. Non-priority debts You can't be sent to prison for not paying non-priority debts. But if an offer to pay is not made without an explanation, the creditors may take that person to court. If the debt is not paid when the court has ordered it, the creditors can take further action. For example, the creditors can get another court order which allows them to send bailiffs round to take items, such as washing machines, away. This will be sold to cover the debts. Please see the examples below. Priority debts usually include things like: Mortgage Repayments Secured Loans Rent Council Tax Utility Bills (not including water) Court Fines Taxes Non-priority debts include things like: Credit card and Store card Payments Bank Loans Overdrafts Catalogue Repayments Home-collected credit, like a Provident loan where the agent collects payments weekly Money you've borrowed from family or friends* Water Bills * You may not realise it but friends and family aren t allowed to charge you interest on money they lend you or else they would actually need a credit licence. 11

12 Tips for dealing with debt AIC 20 S T Don t ignore the problem it won t go away. The longer you leave it, the worse it gets. Make the most of your income check you are claiming all the benefits and tax credits you can. If you ve lost your job, or are off work because you re ill, check if any debts are covered by payment protection insurance. Tackle your priority debts first for example, debts that could mean losing your home, or having your gas or electricity cut off. Work out your personal budget show it to your creditors when you contact them. Get in touch with your creditors straight away and explain your situation. Contact all of your creditors. If you arrange to pay some but not others, you may get into difficulty again. You do not need to offer payment straight away. Work out a reasonable offer for each creditor. Don t worry if the offer seems small. Creditors prefer a regular small amount more than an offer you can t afford. Don t give up trying to agree an offer, even if creditors are difficult. If the first person you speak to is unhelpful, ask to speak to someone more senior. They may be able to agree to what you want. Always keep copies of letters and papers you send or get. Don t borrow money to pay off your bills without thinking carefully. Get advice first. This kind of borrowing could lead to you losing your home. Get advice from your local Citizens Advice or other independent advice service. If you get taken to court, do this urgently. Fill in reply forms to court papers, and let the court have all the facts. Always go to court hearings and take your personal budget with you. 12

13 Activity: What paperwork will help me deal with debt? AIC 20 B D S T Using handout DA5 this activity is ideally used in conjunction with, and following, a previous budgeting activity. Using a previous budgeting sheet, either a template one or their own from a previous activity, ask the client to consider the questions on the attached handout. The goal is to ensure that the client leaves with a list of all the bills, paperwork and information that they should take to see a money adviser in order to budget more effectively whilst also handling their debt issues. Guidance answers to what information is needed: The most up to date information on all their unpaid bills and debts such as the most recent letters from creditors, court papers, etc. Information on all sources of income including any benefits they are receiving, maintenance payments, etc. Information on all their outgoings including rent/mortgage payments, the most recent gas, electricity and phone bills, etc. Information on all other things that they spend their money on. Guidance answers to where to get this info: Bank statements Recent bills A spending diary to show the less visible items of expenditure A personal budget If this was useful, why not try Budgeting How long should I keep my paperwork? 13

14 Activity: What else will help? Using the DA6 handout to ask the client to pick which topics they think will help them improve their budgeting skills. Reassure the clients that all these topics are options that they can cover with their local Citizens Advice if they want to. Make sure you take the sheets in from the clients; these can then be kept on their records. They also provide valuable feedback for the Financial Skills for Life team and copies should be returned with the session s feedback forms. If the client finds the following interest, why not try Having cheaper bills Budgeting Maximise income reduce outgoings Energy and Water Saving energy in the home Understanding how to budget Budgeting Budget building guide Knowing where to get the cheapest gas and electricity Energy and Water How to switch energy companies Understanding payslips and job-related paperwork Jobs and Employment Payslips Knowing the best ways to save and to borrow Credit Ten credit tips factsheet 14

15 Evaluation Guidance Areas that underpin client financial capability These are the Citizens Advice Financial Capability Areas that were carefully researched and developed by The Impact Team at Citizens Advice to help local offices measure client financial capability robustly and consistently across services. They were developed in line with the MAS UK Financial Capability Strategy Adult Outcomes Framework. Sample questions and scales can be found overleaf. An Impact Tool is available in Petra for recording responses and progress. Keeping track of money Keep track of money going out, money coming in and calculate what's left over. Check my current balance and keep my papers in order. Having enough money to live Have enough money to cover the basics I need to live like food, housing and electricity. Looking for the best deals Look at different options and buying the best deal for things like food, clothes, large items or services like phone, electricity or insurance. Get different opinions on what I am buying, like from reviews and comparison websites. Controlled spending Spend or save only what I can afford after covering the basics I need to live, like food, housing and electricity. Planning ahead with money Know when my bills and payments are due and keep on top of priority bills, like for electricity, loans and council tax. Put some money aside for big or unexpected costs. Staying informed about money services Read the main information about money services I get like banking, benefits and loans. Stay on top of changes to these or get help when I don t understand. Mindset Confidence about taking action on my money matters. Copyright 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the express written permission of Citizens Advice. Please note these areas, questions and scales are owned by Citizens Advice and subject to copyright restrictions so reproduction must include the relevant copyright statement above and no changes to its wording, response categories or layout must be made. For further information please contact Satdeep Grewal on satdeep.grewal@citizensadvice.org.uk or

16 Sample questions and scales for measuring client financial capability These questions can be used to ascertain how good someone s financial capability is and so, what their level of need is. They also allow you to track progress by being used to follow-up with how someone is getting on after you have helped them. Score 1 to 3 Score 4 Score 5 to 7 Low financial capability Average financial capability Advanced financial capability High need Medium need Low need Keeping track of money Calculate money going out, money coming in and what's left over. Check my current balance and keep my papers in order. Rate your knowledge about the above How often do you do the above? No No to some Some Some to Good knowledge knowledge knowledge good knowledge knowledge Good to Excellent Don t know excellent knowledge knowledge Never Never to Sometimes Sometimes Often Often to Very often Don t know sometimes to often very often Staying informed about money services Read the main information about money services I get like banking, benefits and loans. Stay on top of changes to these or get help when I don t understand. Rate your knowledge about the above: How often do you do the above? No No to some Some Some to Good knowledge knowledge knowledge good knowledge knowledge Good to Excellent Don t know excellent knowledge knowledge Never Never to Sometimes Sometimes Often Often to Very often Don t know sometimes to often very often Mindset How much confidence do you have about taking action on your money matters? No No to some Some Some to good Good Good to high High Don t know confidence confidence confidence confidence confidence confidence confidence Copyright 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the express written permission of Citizens Advice. Please note these areas, questions and scales are owned by Citizens Advice and subject to copyright restrictions so reproduction must include the relevant copyright statement above and no changes to its wording, response categories or layout must be made. For further information please contact Satdeep Grewal on satdeep.grewal@citizensadvice.org.uk or

17 Trainer notes 17