The top 10 debt myths

Watch out for these 10 debt myths....

Imagine going to prison for owing the baker £40: this happened to John, father of the author Charles Dickens, back in 1824.

Before the Bankruptcy Act of 1869, people were regularly thrown into prison for not being able to repay their debts. Sentences lasted for many years as debtors were imprisoned for as long as it took to repay.

To avoid the uncertainty of life outside jail, partners and children would often live there too (Charles Dickens didn’t, although the rest of his family did reside with John in Marshalsea debtor's prison in Southwark).

Thankfully, times have changed and if you fall upon hard times there are now many options available for you to consider – you won’t be thrown into the clink!

However, there are still a lot of misconceptions around about what can and can’t happen if you are unable to repay your debts, many of which we hear on a regular basis as if they’re the truth when they’re nothing of the kind.

Here are our top 10 debt myths:

1. Credit card companies are able to send bailiffs to collect debts

FALSE

Only courts have the authority to instruct bailiffs.

2. Loan companies can call at any time of night or day to collect debts

FALSE

As per the Debt collection guidelines from the Office of Fair Trading, calling at unreasonable times or intervals is classed as harassment.

3. A credit card company can enforce sale of a property to repay debts

FALSE

The Creditor would need to apply for a Charging Order to secure the debt against a property. It’s very rare for them to force a sale.

4. If you miss payments on your loan or credit card you will be blacklisted

FALSE

There is no such thing as a ‘blacklist’. If you default on your payments, this will be recorded on your credit file which lenders use to judge how risky or not you are to lend to.

5. If you miss debt repayments, your family’s credit score will be affected

FALSE

It used to be the case that people with the same surname living at the same address were connected, but since October 2004, credit files have been attached to the individual only. The exception is if you are financially associated – for example through joint debts.

6. If your house is repossessed you will automatically be eligible for a council property

FALSE

You may be eligible although this would depend on your situation. Repossession would not automatically qualify you.

7. You can go to prison for falling behind on your credit card bill

FALSE

You can only go to prison for refusing to pay council tax, licences or magistrates fines. This is seen as the absolute last resort however.

8. If you get a county court judgement you would have to attend a court hearing

FALSE

County court paperwork is sent through the post. You could be asked to attend court if you wanted to defend or vary the amount but attendance is optional.

9. Your credit file is checked every time you apply for a new job

FALSE

There are certain professions such as accountants, financial advisors and solicitors that may have to go through a credit check. However, the majority of these don’t.

10. My family will have to pay my debts if I die

FALSE

Debts are usually written off, although the creditors can claim on the estate if there is one.

If you’re worried about how missing payments could affect you, or if you’d like to learn more about the debt collection process, you can visit the CCCS website for debt help.

Have you heard any wild exaggerations or financial half-truths? Post them in the comments boxes below.