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Tackling your debts

Can I include credit union debts on a debt solution?

Posted 19 May 2016 by Christine Walsh

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When you start a debt solution, you can normally include credit union debts. Read on to find out more.

Before you start a debt solution, it’s really important to check that it can actually help with the type of debts that you have. Today we’re looking at whether a debt solution could help if you’ve got credit union debts. 

 

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What are credit unions?

In case you’re not sure, credit unions are a type of financial group run by and for a specific group of people, like a community bank. For example, the Police Force and NHS workers have their own credit union, and there are also credit unions for specific areas, like the Salford Credit Union

They aim to create a safe, cooperative financial space way for their members, where they can save, borrow at low rates of interest and get the financial help they need. 

The Financial Conduct Authority (FCA) regulates credit unions, as they do with other financial organisations. If you want to learn more, you can visit the Association of British Credit Unions. 

Will a debt solution help with these kinds of debts?

It might be possible for you to include credit union debts onto your debt solution – it just depends on your situation. 

Normally, when it comes to Individual Voluntary Arrangements (IVAs) you should always include credit union debts along with all our other unsecured debts, as long as it didn’t have a negative effect for you. 

If your credit union was also your employer and you didn’t pay back everything that you owed there’s a possibility that it could affect your job. In some of these cases we can write into the proposal (the document that outlines how your IVA will work) that this debt will be dealt with separately. 

It works in exactly the same way for Debt Management Plans (DMPs) – the credit union debt is added on if it’s appropriate for you. 

The exception to this is if you had a secured loan with a credit union. Debt solutions are designed to take care of unsecured debts, so in this case you can’t include your credit union debt. However, it’s worth remembering that a debt solution that lowers your unsecured repayments will free up more money for you. This could make it easier for you to afford your secured debts as well. 

Savings can help with your debt

Some credit unions won’t lend to you at all unless you have savings with them first. If your credit union operates in this way, your savings with them can be used against the debt to reduce how much you owe. 

What if I don’t want to include my credit union debt in my debt solution?

Because of their nature, there’s a chance your credit union might be connected to another part of your life, like where you live or your job. This means you might be reluctant to include a credit union debt on your debt solution because you might feel embarrassed, or want to keep your situation private. 

However, with most debt solutions you are supposed to include all your unsecured debts and it’s normally in your best interests to do so. For example, if you carried on with your normal payments to a credit union, but paid a lower amount to all your other unsecured lenders, this could be seen as preferential treatment and may not be something your other creditors will agree to. 

Speak to your credit union

A credit union belongs to the people that are part of it, which means that when you borrow from one, you are effectively borrowing from the other members. If you fall behind with your payments without any explanation, your credit union may try to recover the debt by using debt collectors or starting court action, in order to protect its other members. 

That’s why it’s so important to tell them if you’re having problems. It’s very possible that they may be able to help by lowering your payments for a while, or by freezing any interest and charges. 

Whatever debt you’re struggling with, it’s a good idea to speak to the creditor and make them aware you have every intention of paying the debt back and you’re putting a plan in place to do so.  

Make sure you get professional advice

Before you go ahead with any kind of debt solution, it’s really important that you get professional advice. Our debt experts can tell you which solution is most beneficial for you and which debts you can and can’t include on each one. Use the buttons on the left to get in touch with one of them today. 

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.