Debt is something that affects many households within the UK. In fact, as of June of 2023, the average personal debt in the UK is around £34,597 for adults and £65,529 for households. It’s no wonder that there are so many common myths about debt, and so many debt related queries being searched every day by people desperately trying to find out the facts surrounding debt procedures and repayments.
Despite the number of people seeking information about their debt, there are still so many common myths about debt floating around that give false information to those seeking answers. As a result, I have partnered with Money Plus Advice to help those looking for genuine information about debt find the answers they need, and therefore to help them start their journey to financial wellness.
*This post is in collaboration with Money Plus Advice
5 Of The Most Common Myths About Debt – Are They True, Or False?
In this blog post, we’re going to be busting 5 of the most common myths about debt in the UK. We’ll be answering queries such as, “Can debt be inherited?”, “Are debt collectors legal?”, and “Will missing payments lead to you becoming ‘blacklisted’?”. So, grab yourself a cup of tea and let’s get myth busting!
1 When you die, your family needs to pay off your debts
One of the most commonly asked questions relating to debt is, can debt be inherited? Many people worry about their loved ones having to pay off their debts should they die, and there’s plenty of conflicting information flying around online.
This is one of those common myths about debt that isn’t strictly true. Creditors may require your family to settle an unpaid balance using money from your estate – including your house, savings, or investments. If you do not have savings or assets to sell off, your family does not need to pay off your debts when you die. Simply put, money owed will be taken from your estate, not your family.
It is, however, worth noting that if you have joint debt with someone and you die, this person will be liable for the full remaining balance.
2 Bailiffs can forcibly enter your home with or without your permission
Another of our common myths about debt is related to bailiffs. Many people want to know for definite: can debt collectors come to your house and force entry into your home? If bailiffs come to your home to collect debts that are owed to HMRC or relating to unpaid magistrates’ fines, then yes, they can force entry into your home. However, this is very rare.
If you’ve previously allowed bailiffs into your home and signed what’s called a ‘controlled goods agreement’ then they can, indeed, enter your property again.
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3 If you declare yourself bankrupt, you will lose your home
When it comes to common myths about debt, bankruptcy is not something you want to research lightly. Filing for bankruptcy does put your home and other assets that you own at risk. These assets can be sold to recoup the monies owed to your creditors, however, this does depend on several factors, including the type of bankruptcy, your mortgage payment status, and the equity in your home.
If your home has little equity and is unlikely to recover sufficient funds to recoup monies owed, it may not be worth selling. It’s vital that before you look at bankruptcy, you seek professional financial advice to ensure you fully understand the risks involved.
4 Missing payments can result in you being added to the ‘blacklist’
Many people worry that missing a payment will result in their name being blacklisted, and therefore prevented from taking out credit in the future. Although this is one of those common myths about debt that has been around for years, there is no such thing as a blacklist, though lenders do take a look at your credit history before deciding whether to offer you credit.
5 The less credit you borrow, the more appealing you are to lenders
This myth certainly has some logic to it, but it isn’t necessarily true. You may have found yourself able to stay out of debt by not needing to borrow money before, but this doesn’t show lenders that you’re capable of managing your finances. If you don’t borrow money, you don’t build up a credit history, and there’s therefore no record for credit lenders to look at that tells them whether you’re good at making repayments.
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Final thoughts on 5 of the most common myths about debt.
When dealing with debt, it’s always best to take advice from a credible source, such as Money Plus Advice. Seeking professional help can ensure you get the best advice and do not receive any misinformation regarding your finances. Do your research before making any big decisions regarding debt, for example, declaring bankruptcy, and always think carefully about repayment plans before taking on more credit.