Bank Debts

If you owe money to your bank in the form of credit cards, overdrafts or unsecured personal loans, they can make life very difficult for you, as they may try to control your debt repayments to ensure that they are paid as a priority. If your salary or wage is paid directly into that account, the bank will want to take anything it is owed out of your account, leaving you with nothing to pay the higher priority debts such as your mortgage.

If you owe the bank a lot of money, they may ask you to agree to a 'voluntary charge' on your house in return for reduced payments. Do not agree to this without considering the consequences very carefully or without obtaining legal advice, as this will turn this debt into a secured loan. This could put your home at risk in the same way as mortgage arrears.

The first step is to use your financial statement to try to get an agreement with the bank on what you can afford to pay. Write them a letter using the same sort of wording as the example seen in credit card debt. If they don't respond favourably to this, you should open a new account with a different bank or building society and ask your employer to pay your wages into this account immediately. As you have credit problems, the new bank will probably only offer you a basic account, without a cheque book or overdraft facility.

However, you will then be in a much stronger position to negotiate with your old bank, as they will not be able to access your salary. Ask them to stop adding interest and charges to the current account so that you can pay off the debt. This will be in their own interests, as if the money you pay them does not reduce the debt; you won't have any incentive to pay any more.

If the staff at your local branch do not agree to this, contact the regional or head office of the bank.