Joining with debt?

Discussion in 'Finance, Property, Law' started by Death_Rowums, Jul 18, 2006.

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  1. I notice that on the army's application forms there is a question about whether you have any financial commitments that would make it difficult to join. What exactly does that rather sweeping question mean?

    Say for instance, one were currently studying for a degree, but had decided that there is only so much hemp smoking peacenik jive that one can take, and in fact wants to get out into the real world, join the British Army and be a man, instead of watching Countdown.

    Student loans aren't exactly a crippling amount of debt, and if I recall my figures correctly the amount of money One, would make initially as a soldier is less than the amount you would need to make before the loan repayments can be taken.

    Would there be a problem if one were to apply after dropping out of University (other than the obvious problem that it would give the mild impression that you can't stick to anything for more than 5 minutes)?

    Purely hypothetical of course......
  2. What about if you are a declared a bankrupt? I'm not before anyone asks. I do have debts though and I should be ok for when i join up in 2 years.
  3. Cna't comment on joining - how about "Leaving with debt?"
  4. Death_Rowums
    I can tell you what they told me. Student loans weren't an issue as their calculations were based on whether you would be able to make the repayments on your army wage. As student loans repayments are based on your income and don't even start before you hit £15000 they won't cause you a problem.

    Hope that helps
  5. Thats what I used a portion of my resettlemt money for. I started with a clean slate, mind you, it's pretty dammed grubby again now :)
  6. Student loan company finally caught up with me... But only now im over the threshhold. It didnt affect me joining up.
  7. As long as the trustee or Official Receiver thinks it a good idea and you declare what you earn that shouldn't be a reason to refuse someone from joining, if you owe more that £750 to one or more creditors they can alone or jointly, apply for a debtor to be made bankrupt.

    I know a few people that have taken this course of action since the offical line is

    Joining the Forces is just like getting another job sure you need to declare it but as long as the paymaster know's that he might have to talk to a trustee or Official Receiver whats the problem.

    Same rule applies

    The rule is simple if you owe anyone £750 or more they can make you bankrupt.
  8. Ah the problems of youth!

    Don't bankrupt yourself, it will always be on your file and eventually you will be back in civdiv where it will ALWAYS be a problem to some beancounter. If you are in serious financial trouble simply restructure your debt - offer 20 pence in the pound or whatever over a lengthy period reinforce this with a 'administration order' which is the next down from bankruptcy with no stigma attached and the court actually on your side. The chances are that the magistrates presiding, once they hear your circumstances, may actually impose a lower settlement on your creditors (everybody, even judges hate credit companies and the like).
  9. As far as I understand, the concern is more to do with whether an individual is managing thier debts (and can continue to do so when in service). I had a similar issue following my divorce a few years ago (ex-wife was still running up bills for me to pay). Bankruptcy may not be an issue unless you are undischarged. The best policy is to get everything out in the open so there are no suprises at a later date. If anyone out there has debt worries and wants some good advice about being in debt, contact the Consumer Credit Counselling Service. They are a charity so won't charge you for the help they give.
  10. Its should not remain on your file even under the old system it was ‘discharged’ after 5 years but remained on records with credit agents for 6 years after which it had to be removed.

    The problem is when you are 'disharged' under the new system you provide the certificate from the court/trustee and it is then up to the credit agent to remove it from their records if you do not then it remains on record with the credit company for 6 years from date of first filing so the choice to remove it quicker is up to you.

    Never been bankrupt myself I am open to correction I to would recommend seek advise since there are other options such as IVA etc as for the administrative order I was under the impression to be able to apply you must not have the following:

    At least one County Court (or High Court) Judgement issued against;
    At least 2 creditors; and
    Your total debt must be less than £5,000

    A CCJ but I could be wrong here to and I

  11. Bankruptcy is absolutely not to be taken lightly. Hope this helps:

    As our passion for credit becomes an obsession, increasing numbers of borrowers are losing control. Many people see bankruptcy as the ultimate disgrace but increasingly, people who owe thousands of pounds rather than millions are opting to be declared bankrupt to erase their debts - a move previously considered to be the absolute last resort.

    Almost 12,000 people declared themselves bankrupt in the three months to the end of September 2004, a 31% jump on the same period in 2003 and the highest number in a single quarter since the figures were first compiled. The annual total is now set to hit 45,000, almost double the number in 1997 when Labour came into power.

    Last resort

    Since April 2004, restrictions faced by bankrupts will be cleared after 12 months instead of the three years it used to take. This may go part of the way to explaining the sharp increase in UK bankruptcies. Although the figures, released by the Department of Trade and Industry's Insolvency Service, include bankruptcies among small businesses, analysis by economists showed that more than 70% comprises consumer debtors - people going bust through spending on credit cards and personal borrowing. The figures fuel concerns that the system is being abused by ordinary people seeking a quick exit from financial problems as they are choosing bankruptcy as a way out rather than being forced into it.

    Making ends meet is tough enough on a whole salary, but many Britons don't even have that luxury. Figures from Debt Free Direct reveal that 2.6 million people spend at least half of their monthly income paying off debts, whether mortgages, credit and store cards, overdrafts or loans. Problems have been exacerbated by rising interest rates but this has not stopped us borrowing more than £1 trillion.

    Until recently, bankruptcy was becoming popular with students, who saw it as an attractive solution to the average debts of £12,000 they faced following grduation. In 2003, no fewer than 899 graduates filed for bankruptcy to wipe out their student loans - more than three times as many as the previous year. However, that loophole closed on 1 July 2004 when the Higher Education Act came into force. This stipulates that any undergraduate made bankrupt after this date may still be obliged to repay their loans.

    What bankruptcy means

    Anyone can go bankrupt, but despite the relaxation of rules and increased appeal, it is by no means an easy option.

    Bankruptcy proceedings free you from overwhelming debts so you can make a fresh start - subject to some restrictions - and make sure your assets are shared out fairly among your creditors.

    A court makes a bankruptcy order after a petition has been presented by you or by one or more creditors who are owed at least £750 in unsecured debt by you. A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditor's claim, you should try and reach a settlement before the bankruptcy petition is due to be heard as this can difficult and expense to address after the event. The bankruptcy order is then advertised in The London Gazette, an official publication which contains legal notices and in a local or national newspaper, or both.

    How it will affect you

    Once a bankruptcy order has been made, you must comply with a number of requests from the Official Receiver (OR). These include providing documentation and a full list of assets. You must stop using your bank, building society, credit card and similar accounts straightaway and cannot obtain new accounts or credit of £500 or more from any person without first disclosing the fact that you are bankrupt. You may also have to go to court and explain why you are in debt. If you do not co-operate, you could be arrested.

    You will no longer control your assets including the contents of your home. The OR will decide whether the value of your possessions is more than the cost of a reasonable replacement. Any assets seized will be disposed of by the OR or an insolvency practitioner - appointed as trustee - to pay the fees, costs and expenses of the bankruptcy and then your creditors.

    You may also be required to make contributions towards the bankruptcy debts from your income. This will be based on afforability and is kept under review. A trustee cannot usually claim a pension as an asset if your bankruptcy petition was presented on or after 29 May 2000, as long as the pension scheme has been approved by the Inland Revenue. However, they will be able to claim your life assurance policy.

    If you own your home, whether freehold or leasehold, solely or jointly, mortgaged or otherwise, your interest in the home will form part of your estate which will be dealt with by your trustee. The home may have to be sold to go towards paying your debts. If your husband, wife or children are living with you, it may be possible for the sale to be put off until after the end of the first year of your bankruptcy to provide an opportunity for other housing arrangements to be made.

    You will no longer have to make payments direct to creditors, although there are some exceptions, such as your mortgage lender. If you owe money to utilities suppliers they may not chase the debts but could ask your pay in advance for services or put the account in a partner's name. The OR will liaise direct with creditors to arrange any payments.

    What happens when you are discharged

    You will be automatically freed from bankruptcy - 'discharged' - after a maximum of 12 months or sooner if the OR concludes his enquiries. Discharge releases you from the debts you owed at the date of the bankruptcy order.

    However, when you are discharged there may still be assets, such as your home, that either owned when your bankruptcy began, or which you obtained before your discharge. These remain under the control of the trustee and can be sold at any time after your discharge. If your spouse, a relative or friend wants to buy your interest they should contact the trustee straightaway.


    If you have exhausted all avenues in attempts to resolve your debt problems, including taking advice from specialist counsellors, there are still alternatives to bankruptcy.

    If one or more of your creditors has obtained a court judgment against you, the county court may make an administration order. This allows you to make regular payments to the court towards the money you owe your creditors. To qualify, your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly repayments. There are no fees involved but the court will take a small percentage from the money you pay towards its costs. If you do not pay regularly, the order could be cancelled and you may become subject to the same restrictions as someone who is bankrupt.

    A more formal version of the administration order is an individual voluntary arrangement (IVA). This begins with a formal proposal to your creditors to pay part or all of your debts. You need to apply to the court and must be helped by an insolvency practitioner who will charge a fee. Any agreement reached with your creditors will be binding on them.

    There is no maximum or minimum level of debt and no maximum or minimum level of repayments, except what is acceptable to your creditors. IVAs can work well if you have friends or relatives prepared to help pay or contribute towards paying your debts or your income enables you to pay regular sums to creditors. They also allow you to retain more control over your assets, including your home and you can avoid the restrictions of bankruptcy.
  12. DR,

    I don't know how much debt is enough to "frighten the horses", and the ACIO will have the latest figures.

    Student debt will not be counted. As the others have pointed out, repayment is in the future. Mortgage debt should not be an issue, either, as it is secured against the value of the house. However, we then get into a murkier area with credit card and bank loan debts....

    I suggest that anyone who has racked up several thousand pounds worth of debt at a tender age will have a problem enlisting. There will be the question of integrity: can the Army trust this soldier to keep his/her affairs in order? Secondly, is this a potential problem child? Thirdly, if a soldier is devoting a huge chunk of their pay to servicing their debts, are they going to be able to join in fully with unit life?

    I have encountered several soldiers who have been in debt. Most of them were several years ago, and they were all discharged after being declared bankrupt. One recent soldier was a bankrupt and had kept his job, but his life was, to be frank, miserable as he could not join in with anything in the unit.

    Soldiers with large debts cause significant problems in units and I would counsel against anyone joining the Army until they have their debts under control.

  13. If you are in debt then you can't handle your finances and shouldn't be allowed to join up. This goes for all you graduate officers too.
  14. I see where you're coming from, c_f, but your parting shot seems somewhat short-sighted. Taking out a student loan isn't a luxury for most students, it's a necessity - there's no other way to pay for university, particularly at universities like Oxbridge, where students can't take a job during term time. Even when they work full time in the vacations, that still isn't enough to cover costs - the student loan is needed to get people through university.

    Moreover, I'd argue that having a student loan does not indicate that you can't handle your finances. It's a sensible financial decision - it's a low-rate, relatively easy-to-repay loan that more than justifies itself by the increase in your human capital provided by a degree. Being unable to handle your finances is one thing - but taking reasonable financial decisions, the consequences of which you fully know and are capable of dealing with, is utterly different.

    If this sounds self-justifying, consider it from this perspective. 80% of OCdts at Sandhurst are graduates; bar people with any debt whatsoever, and suddenly the Army's intake of officers plummets. Moreover, it won't pick up again. People won't go to Sandhurst after a couple of years clearing their debts; they'll find other, more forgiving, graduate careers. You may think that the Army would be better off without graduate officers - but I venture to suggest that in the current climate, when so many people are getting degrees and, as a result, carrying student debt, the Army can't afford to do without them.
  15. A reasonable amount of debt at 3 to 6% interest is probably manageable for most people.

    A small amount of debt at >16% is probably manageable for most people, but has a habit of turning into a large amount of debt at >16%!