Migrants and Debt

Megan Lloyd and John Donkersley look at the factors and tactics that debt advisers need to know and use when advising clients from outside the UK

Advisers will often find that there are special factors that can contribute to a migrant’s liabilities, their debt or their ability to deal with it. Those factors are not uniform and one migrant’s experience may be different from another’s.

For instance, debt advisers can have a difficult time fitting a client’s debts and family obligations outside the UK into typical UK debt solutions. They’ll also need to look out for things that are unique to, or more prevalent in a migrant’s experience. This can be different types of expenditure, typical pressures, or even barriers in the systems they encounter.

Immigration advisers will also need to be aware of these issues. They’re relevant when helping clients show they meet the financial requirements of the immigration rules, or when applying for a fee waiver.

This article looks at these factors. If you are looking for advice on the effect debts or debt options may have on the immigration status of your client, or on becoming a British citizen, see our article on The effect of debts on immigration and nationality applications. You’ll need to take those into account when considering options for debt management.

Obligations to Support

We’re going to deal with this first because it’s important for advisers to widen their view of who might be a dependent.

Your client may come to the UK with obligations to support family in their country of origin or elsewhere. Alternatively, they may have taken on those obligations more recently, for instance when there are crises back home. A migrant might also be supporting family in the UK without any immigration status, or with a ‘no public funds’ condition.

Your client might be the main source of funds for one or more family members, either alone or in combination with others. The range of these family obligations can be wider than you are used to. It can embrace siblings, cousins, aunts and uncles and even those in wider family kinship groups or local communities. For instance, one Somali client was obligated to support, and ultimately, marry, his deceased brother’s wife in Kenya. At the same time he was supporting his mother and siblings in a refugee camp in Ethiopia.

Sometimes, they may even feel obligated to support general humanitarian efforts when there is a crisis in their home country. For instance tens of millions of dollars were sent by the Lebanese diaspora following the explosion at the port in Beirut in 2020.

A debt adviser needs to understand how important these support payments may be to the client and their family and deal sensitively with potential issues they might bring up in the financial statement. It may be necessary to

• discuss with the client how they budget for supporting their dependants, and whether there’s any flexibility in the amount they send
• discuss the consequences for the client and their dependents if they stopped or reduced these payments
• explain the expenditure to support dependants — and the consequences of stopping payments — in letters accompanying the financial statement
• respond to creditors who have further questions — it’s possible they could ask for proof of the financial circumstances of dependants outside the UK.

To support these conversations, it may be helpful to advise the client that creditors will not be familiar with these responsibilities, and may see support payments as non-essential expenditure, so you’ll need more details in order to help them to put their case.

Payments abroad may be an allowable expense in the financial statement for a Debt Relief Order (DRO), but cases are considered individually and you’ll need to contact the DRO Team before you submit the application. The DRO toolkit has some guidance on what to consider. You can access this online on Advisernet for advisers at Citizens Advice, or through WiserAdviser otherwise. Do note that both versions require sign-ins.

There is no specific guidance for IPO/As in bankruptcy, although section 310 of the Insolvency Act 1986 does state that an IPO shouldn’t reduce the bankrupt’s income ‘below what appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family.’ The Official Receiver (OR) will use the Standard Financial Statement (SFS) spending guidelines to consider whether expenditure is ‘realistic, relevant and appropriate to the bankrupt’s circumstances’ and may ‘challenge amounts that appear excessive, particularly where those payments are not supported by evidence of the expense.’

The wording of s310 suggests that if payments abroad are acceptable this may be limited to supporting people related to the client. There’s no guarantee that payments would be allowable even in this situation, and the client should be prepared to make a case justifying the expenditure and provide as much evidence as possible.

The OR will first look to make an IPA, and if agreement can’t be reached can apply to court for an IPO. At this point the court will make a decision about whether the payments are acceptable.

A wider responsibility for debt

In the UK, like many western countries, we have a fixed concept of debt as something personal to the debtor. True, there may be joint debts or assets, or joint accounts with family members, or a family member may try to help out by contributing to a client’s debts or repayments. But the idea of a debt that is enforceable against someone because of a family tie alone, or that can be inherited by family (rather than enforced against the deceased’s estate) is becoming archaic.

In other countries or cultures, though, a debt may burden the family as a whole. This might be because

• it can be legally enforced in that country against the whole family
• It can be extracted through duress or substituted with violence against other family members
• not paying the debt can lead to huge community pressure on the family, shame, or other sanctions, such as an inability to marry

This will affect the priorities of the client and the obligation they may feel, so advisers need to take account of that. You’ll need to get details of the overseas debts, who they are helping, and the potential consequences of that debt for both the client and their family, so you can support them to make decisions about their options. Again, creditors and other third parties may not be familiar with these situations.

Debt bondage

There may even be impacts from a family being in ‘debt bondage’ — usually in their country of origin but there may be instances of it even within the UK. You can find out more about debt bondage on the Anti-slavery website. They define this as

“…working for little or no pay. In many cases they are forced to pay off extortionate fees associated with their recruitment, accommodation or food, with no control over the debt they have accrued. Most or all of the money they earn goes to pay off their ‘loan’”

That can produce a significant pressure on your client to help family in that situation.

Additionally, we are starting to hear of more UK agencies charging steep recruitment fees to workers. They might claim that this is to secure a job or to pay for travel, immigration fees and training — particularly in the health care sector. We’ve seen cases where this has been as much as £10,000. It’s akin to debt bondage, and can mean workers have significantly reduced or inadequate income until they’ve paid off the debt. There’s more on this in the section on agencies below.

Financial capability

One key issue in managing debt is your client’s familiarity with the financial system in the UK.

A migrant may come from a somewhat different financial system in their home country. Your client may be used to an element of barter to try and get the best prices or may be unfamiliar with the range of expenses when running a household in the UK. This is especially the case when a refugee has moved from asylum support accommodation where all their bills were paid. They may need to adapt to budgeting for rent, council tax, gas, water, electricity, a TV licence and the internet. Some might not be used to managing a bank account, standing orders and direct debits. If a client has family outside the UK there can be large or additional phone expenses to keep in touch.

Migrants may also have been financially exploited by individuals in their community, scammers and people pushing inappropriate financial products. Their reliance on their own community may mean they have people they trust who both can be a great help but also the source of bad advice. They may be more likely to rely on them rather than to shop around. We’ve seen clients who have fallen prey to unregulated immigration advisers and loan sharks simply because they were the only people that spoke their language or came from their community.

Refugees in particular can include ‘students with limited or interrupted formal education’ (SLIFE) because of conflict. Severe numeracy and literacy issues can exist, both with their native language and settlement language (English). They can be extremely vulnerable to financial exploitation and often due to stigma they will often try to hide the severity of their numeracy issues. Sometimes the first time they have been at school has been in the UK when they are an adult. They may benefit from referral to opportunities for not only financial inclusion sessions, but also community or adult education, particularly if maths is an issue.

You’ll need to check whether your client is able to claim public funds. Refugees, for instance, can, but might need support with understanding what to claim and how the benefits system works. Debt advisers should pick this up when looking at income maximisation.

You may also encounter migrants who are living with family or friends to avoid expenses whilst they get established and, as with any client in this situation, you’ll need to look at how their circumstances may change.

Mental Health

Debt advisers will be familiar with clients who have both physical and mental health issues. However, migrant clients could need more support in these areas.

A client may come from a country or culture that has a different attitude to mental health issues. There may be a greater unwillingness to disclose poor mental health, a different belief as to the cause, and a different approach regarding treatment.

In addition, research has shown that refugees have a much higher incidence of mental health problems. A Refugee Council survey showed that

‘61% of asylum seekers experience serious mental distress and refugees are five times more likely to have mental health needs than the UK population’.

Where there are mental health issues, studies have shown there is a greater likelihood of debt.

This can also link in to employment rates and hence the ability to generate income to clear debts. The Migration Observatory states that

“Non-EU migrants moving to the UK seeking asylum have a higher unemployment rate and a lower employment rate than other non-EU migrants. For example, the unemployment rate in 2020 among non-EU born migrants who moved to the UK seeking asylum was 14%, while among those moving for employment reasons their unemployment rate were 6%. Differences in health status, especially mental health, might be one of the factors that partly explain these gaps, according to recent research (Ruiz and Vargas-Silva, 2018).”

One might also add that unemployment rates could be higher due to discrimination and English language proficiency.

A debt adviser should always explore the impact a client’s mental or physical health has on their ability to manage their finances. For migrant clients you may need to explain attitudes to treatment in the UK if these differ from those in the country they come from, and reassure them about seeking support. Options like entering a Mental Health Crisis Moratorium (MHCM) or asking for write-offs on health grounds will require medical evidence, as will accessing disability related benefits like Personal Independence Payment, and as always you’ll need the client’s consent to share this.

Some clients may not be able to access all NHS services for free due to their immigration status — you can check the guidance on NHS entitlement for migrants here. You could consider whether there is support available from charities or voluntary organisations like Mind. Samaritans provide a free, confidential and anonymous listening service.

Types of migrant debt

We’re indebted to Joshua Aspden, a specialist in financial inclusion among refugee and asylum seeker populations, for inspiration to write this article. Joshua sets out “4 levels of debt in refugee communities:

• Official UK debt: council tax, rent arrears, utilities, integration loans etc
• Unofficial UK debt: Money owed to informal lending networks (religious, ethnic networks/communities etc.)
• Third party unofficial debt: money owed to smugglers, friends, associates, extended family, contacts in relation to their journey to the UK, etc.
• Associated family debt: loss of income from the main breadwinner being abroad, an obligation that they will still cover their immediate and [extended] family’s expenses, debts incurred to fund [close family’s] flight”

This is a useful categorisation that can apply to many migrants, not just refugees. In the rest of this article we’ll deal with debt that is peculiar to the migrant experience or affects them disproportionately, and roughly keep to Joshua’s categories. We’ll discuss the debts themselves, and then look at their potential impact on the options available.

We will not be discussing issues around ‘official’ debt in other jurisdictions. Whether a debt from another country is recognised or enforceable here is complex and will depend on whether the UK is signed up to a reciprocal enforcement agreement with that country. If you have a client in this situation we would advise that you contact Shelter’s Specialist Debt Advice Service (SDAS). There is also some information on court enforcement of foreign judgements in the Debt Advice Handbook.

We’ll be talking about the treatment of income and expenditure in bankruptcy. The OR will consider surplus income when deciding whether or not to make an IPO/A, and more information on these can be found in chapter 35 of the Technical Guidance for ORs. It’s important to remember whenever we discuss this that there shouldn’t be an IPO/A if the client’s income is solely from state benefits — in this context this means ‘all forms of income supplement and support provided by central or local government.’ Although not directly confirmed in the Technical Guidance, this is likely to include income such as asylum support payments provided by the Home Office.

Official UK debt

Obviously, a migrant may have very similar debts to any other client. But there are a few key debts and items of expenditure that may be less familiar to advisers.

Refugee Integration Loans

Interest free one-time only integration loans of £100-£500 are available from UK Visas and Immigration (UKVI — part of the Home Office) for refugees to establish themselves in the UK. The loan can be used for things like to pay for things like vocational training, household items and a deposit on a rented property.

Repayments start 6 weeks after the loan is paid out and are handled by the Department for Work and Pensions (DWP). For clients receiving Income Support, Income Based Jobseeker’s Allowance, Income Based Employment and Support Allowance, Pension Credit or Universal Credit they will usually be deducted from these benefits at the same rate as most other third party deductions — in 2023/24 this is 5% of the standard allowance in UC and £4.25 per week for other benefits.

If your client is working, the repayment rate will depend on their financial circumstances. UKVI gives a standard rate of £50 per month if working full time, but the caseworker guidance has details about asking for payments to be revised, or for the debt to be written off. If payments aren’t being deducted from benefits, and the client doesn’t pay, the DWP will refer the case back to UKVI to decide whether enforcement is needed.

An integration loan is a qualifying debt for a DRO and will be included in bankruptcy, so a client will no longer be liable for it after the DRO moratorium period or the making of the bankruptcy order. It’s also a qualifying debt for the purposes of the Breathing Space scheme. If your client is having deductions taken from ‘legacy’ benefits these should stop during the Breathing Space moratorium, but if they’re on UC they’ll continue. For more information you can read our article on Breathing Space and benefit deductions — integration loans will follow the rules for third party deductions.

Zakat and church tithes

Some clients may be making regular payments to a religious body or to charity (‘Zakat’ for muslims), often of a set proportion of their income.

These payments may be a fundamental religious obligation for your client, and not paying may also affect their standing in the religious or local community. You’ll need to be sensitive to this when discussing their options and the impact these payments may have on different debt solutions. If the client is in financial difficulties they may be able to speak to religious leaders to discuss pausing or reducing payments, but this may not always be possible or be acceptable to the client.

These payments should be recorded in the financial statement, and unfortunately there’s no guidance around how to include this. You’ll need to explain to creditors the client’s religious obligations and the potential consequences if they stop paying, as they may be unfamiliar with this.

Local religious communities may provide informal services and activities for clients and their families, for example youth clubs, seniors clubs, English language classes. If this means their expenditure is lower in categories such as child care or hobbies/leisure, this is something to point out.

These payments aren’t allowable expenditure for a DRO, but a client can keep making payments out of surplus income. In bankruptcy, chapter 35 of the Technical Guidance states:

‘Where it has been the practice of a bankrupt to make a regular monthly payments to a charity or a religious organisation/place of worship (sometimes referred to as tithing), this might continue provided it does not compromise the bankrupt’s ability to make a contribution to their creditors. In saying that, the bankrupt should be invited to suspend payments for the duration of the IPA, the money being used for the benefit of their creditors.’

Budgeting for immigration application fees

It will be necessary for a debt adviser to explore how a client with limited leave to remain will meet any future expenses for immigration applications. If they don’t, then any debt solution could fall apart when the client — or a dependant — has to find these fees. It should be given some priority because it is necessary for them to be able to stay in the country and lawfully work and/or claim.

As an illustration, if the partner of a British citizen along with two children has to apply for an extension of their leave to cover a further 30 months, the total fees and health charges (as at February 2024) will total £9,611.50 — and a little more than that if they also book paid appointments to enrol their biometrics!

It may be appropriate to involve an immigration adviser to work out what the fees are, and also to advise on whether an application for a full or partial fee waiver could succeed. When the Home Office considers a fee waiver application, they will look at whether income could have been saved for the application, but won’t expect the applicant to take out loans for the payment. This does not mean that a client will not have done this on their own initiative.

Your client’s savings will usually count as an asset for the purposes of a DRO or bankruptcy, limiting their ability to put money aside for immigration application fees.

Charges for hospital care

‘Secondary health care’ is treatment delivered by or on behalf of a hospital. Some hospital treatment — including accident and emergency, and for certain diseases as well as treatment for some categories of migrants — is exempt from charge. Charges can be applied to individuals who are not ordinarily resident here or are not lawfully in the UK. Even children born in the UK can be charged if they don’t apply for permission to stay within three months of their birth!

The most common cases we see are from failed asylum seekers no longer receiving asylum support, and from visitors who fall ill. Because ‘immediately necessary’ treatment like maternity care services can never be denied, we’ve seen clients receive invoices of up to several thousand pounds for maternity care- which can increase to five figure sum if they need a caesarian.

There is an Adviser article in preparation on this subject, but for now Maternity Action has lots of information on liability, challenging charges and dealing with the debt.

The NHS trust can agree a payment plan for this charge if the client has the ability to pay, using the SFS. They can also agree to ‘write off’ the debt for a period of time if the client is destitute. You can find more information on what is considered in chapter 6 of the NHS costs recovery guidance on overseas visitors.

If an arrangement isn’t made, the NHS is required to report the debt to the Home Office and the NHS Trust can take action through the civil courts. They can apply for a County Court judgment and use the standard enforcement methods available. They may pass the debt on to a debt collection agency to do this.

These debts will be covered by Breathing Space, and can be included in a DRO and bankruptcy, but the information in our effects of debt on immigration and nationality applications article should be considered, as they can have serious consequences.

Other possible debts

It’s hard to set out every possible debt or expense that relates to the migrant experience, but we’ve also seen payments to:

• repatriate the bodies of close family members to their home country
• re-register overseas vehicle in the UK
• immigration advisers

A debt adviser may need to research some unusual debts or expenditure. You can also contact SDAS for support if needed.

Unofficial UK debt

Saving circles

It’s not uncommon for a group of friends or families to have a savings circle — a form of community finance. Money is paid into a pot by participants and each person has their turn each week or month to get the pot.

The adviser will have to think about their approach to both the paying in and the receipt of the payout. Creditors may think that the latter is a hidden form of income, and the former an unjustified expense. You may need to approach this sensitively with your client and explore what happens if someone wishes to leave the circle.

Demonstrating how complex the situation can be, we have to think of savings circles in terms of debts, assets, income and expenditure.

The client will usually have received a payout before they’ve paid that amount in, and will therefore ‘owe’ the circle money. For example:

5 people are in a savings circle, each paying in £100 per month. As the circle pays out every month, the first person to get paid gets the £500 for that month. They’ll need to pay in £400 over the next 4 months for everyone else in the circle to get their £500.

As with other unofficial debts here, this doesn’t fit neatly into the ‘family and friends’ debt category. If the client fails to pay, they, other members and their wider community may feel they aren’t honouring their commitment. Other members of the circle will be members of the client’s community, and may be in financial difficulties themselves, so it’s likely the client will feel it’s an important obligation. For a bankruptcy or DRO, however, there’s no scope for allowances for this to be made, and these should be listed as debts. Each person in the circle may be an individual creditor.

You should also consider whether the client has been paying towards this and not other debts, and if so whether the Insolvency Service would view this as a preference. You’d need to report and explain a preference in the DRO application. A preference of this nature might result in the DRO being declined. It will be important to provide the DRO Team with full details of the debt and why payments have been made. In bankruptcy, a preference should be disclosed to the OR, and could lead to a Bankruptcy Restrictions Order or Undertaking. It’s also possible that the recipients could be asked to repay the money.

Money ‘held’ in savings circles for the client may be an asset for the purposes of a DRO or bankruptcy, but there’s no easy answer on how to calculate this, and it will depend on how the circle works. You’ll have to use your own judgement on what best reflects the client’s circumstances.

If the client receives a payment from the circle during the DRO Moratorium this would need to be reported as a lump sum received. If this takes the client’s property to more than £2,000 (including existing property) the DRO could be revoked. This is a discretionary decision, and the DRO Team will consider the client’s situation, as well as whether the lump sum has been reported in a reasonable time. An option could be for the client to delay their turn for the payout until after their moratorium ends.

During the DRO moratorium period and until discharged from bankruptcy (or any restrictions orders), it’s an offence for the client to obtain credit of more than £500 without informing the creditor/s that they’re in a DRO or bankrupt. We aren’t aware of any cases or guidance on arrangements like savings circles, but the client should be advised on the risk.

If payouts are guaranteed and regular they may also count as income for insolvency purposes — in bankruptcy s310 of the IA 1986 defines this widely as ‘every payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled.’

Expenditure can be particularly complex. Depending on the situation this could be seen as loan repayments or as savings expenditure, which might come down to very specific considerations like when the client’s turn is to receive payments.

If negotiating with creditors, it’s worth noting that the Standard Financial Statement (SFS) guidelines state that payments towards savings are allowable expenditure, and it may be possible to argue this should be treated in the same way. This is limited to 10% of available income (after expenditure but before payments to creditors), and a maximum amount of £25 per month.

You should always be sure that this realistically and accurately reflects the client’s situation.

Payments towards savings are not an allowable expense on a DRO financial statement but the client could make contributions of up to £75 per month from their surplus income. ORs considering an IPA/O in bankruptcy have said that savings expenditure is allowable up to the limits in the SFS. If the client is paying money ‘owed’ into the circle after they’ve had their turn, these are likely to be seen as loan repayments, which wouldn’t be allowable expenditure in either form of insolvency.

Other Informal lending networks

Your client may have received money or loans from lenders who do not operate formally, but might still be able to provide evidence.

We’re not talking here about loan sharks but where clients are given money by their communities — for their particular nationality or ethnicity — or by religious organisations such as mosques and churches. Whilst some of this may be outright gifts — from the Zakat fund of a mosque, for instance — others have received money with the expectation that it will be repaid when they are able.

A debt adviser will need to set out the source of these funds and explain whether there is any realistic expectation of them being provided regularly. If repayment is expected, these debts are likely to be treated for the financial statement or debt solutions in the same way as debts to family or friends. They will be included in bankruptcy and as qualifying debts for a DRO, which means they should be listed, and will count towards the £30,000 debt limit. You should also consider whether there’s been a preference that would need to be disclosed.

There may be sources of income specifically open to migrants that you can explore, whether this is a mosque or a trust fund, such as the Prisoners of Conscience fund for those imprisoned in the past for their beliefs.

Third party unofficial debt

Debts from the costs of travelling to the UK

Large debts arising from your client getting to the UK may mean they are repaying

• family
• agencies
• people smugglers
• traffickers

Family

Your client or their family may have borrowed to get to the UK. Their family — not necessarily immediate family — may have used their own resources to get the client to the UK and they will be obliged to repay them.

In the UK, a debt to a family member will usually be seen as a non-priority debt, as discussed above. There’s less likely to be an enforceable agreement and other creditors may question whether a family member or friend will take any enforcement action. There shouldn’t be any interest or charges involved, as the individual is very unlikely to be FCA regulated. If there are, this is a warning sign that the debt may be to an illegal money lender, or ‘loan shark’.

But if your client has been funded by their family to get to the UK, they may consider repaying this to be a priority. It could be that if they don’t make repayments their family outside the UK will not be able to pay for food and rent. This could also be the case with family debts incurred in the UK, but there may be specific consequences for those outside it. In these circumstances it may be appropriate to record the debt on the financial statement in the priority debts section, and give a clear explanation to creditors. The guidance we have on illegal money lenders may be relevant where family members could face reprisals if the client doesn’t pay.

Agencies

The other source of funding for travel to the UK — and we are seeing this particularly for health and care worker visas — are overseas agencies. The agency will usually have worked with the employer to find the worker.

A UK based agency cannot legally pass on their fees to the employee, only to the employer. You may see some charging for the flight, accommodation, legal or training costs. These agreements and the scale of costs will sometimes need to be examined closely by an employment law adviser to make sure there are no hidden charges that the employer should have paid, for instance the immigration skills charge.

If the charge is for legal fees for the visa application, check whether they have used an OISC registered adviser or solicitor, and ask to see their invoices.

Overseas agencies have no such restrictions. We’ve seen up to £16,000 charged for a health and care visa. The burden of repayments can result in the client being unable to afford to support themselves or pay their rent. Where the UK employer is collecting these fees it’s likely there is some collusion and possible breach of the law. Your client might, though, risk dismissal and cancellation of their visa if they complain. See the Adviser Online article on Health and Care workers.

People smugglers

There’s a fine line between agencies, traffickers and people smugglers. We are using the latter term to mean individuals or groups who have arranged irregular methods of travel between countries for payment, but not for specific work or exploitation.

If your client has a debt related to paying for their journey or that of a family member, it’s worthwhile checking whether this could be to a people smuggler. These are unlikely to be legally enforceable, but as with several of the debts described above there could be other consequences for a client or their family if they aren’t paid. You should make sure you’re aware of these in order to advise in their best interests.

If you want to find out more the Journeys Project has detailed descriptions of how refugees have made these journeys and the costs incurred.

Trafficking

Debt advisers also need to be aware of human trafficking which is ‘the movement of a person from one place to another, within a country or across borders, into conditions of exploitation against their will’.

Many, but not all, victims will typically be kept isolated and thus not seek advice about debt, but advisers may find this article on spotting the signs of trafficking helpful.

Associated family debts

Costs of family reunion

Many refugees have fled their country leaving behind close family members. The immigration rules allow them to apply, free of cost, for a visa for partners and children to come to the UK. In some cases they may apply for other family members.

Although there are no visa fees, refugees may get themselves into debt to afford

• travel — for the relative to make the application (sometimes in an adjacent country), for them to travel here and for the sponsor to escort them)
• hotel or accommodation costs
• setting up a home and purchasing essentials for their newly arrived family

They may also get into debt because of loss of income — for instance loss of benefits when outside the UK trying to bring their family back. They may also suffer an interruption in benefits whilst they make a new Universal Credit claim with their partner.

If these debts are to UK creditors, e.g. bank loans have been taken out, these should be treated as standard debts and prioritised accordingly.

Advisers might refer clients for help with family reunion costs or debts to:

• British Red Cross: help with visa applications, travel assistance and post arrival support
• Together Now: travel assistance to those not meeting Red Cross criteria, grants for visa application and other associated costs
• Refuaid: loans for some of the costs, usually travel related
• Prisoners of Conscience: grants
• National Zakat Foundation: some grants for Muslims

The client might have to meet specific criteria for this help.

Evidence of finances

Gathering evidence of a client’s finances can be tricky at the best of times, but for migrant clients there may be specific issues. It’s important to remember that you can advise a client even if you haven’t seen evidence. You can find more information in the guidance on verifying client identity, income and expenditure.

Additionally, you may face clients whose options for income maximisation are extremely limited because they are unable to work or claim benefits because of their immigration status, or lack of one. You might need to demonstrate this to creditors, which is a challenge in itself and involve other agencies or individuals who have been supporting your client or preventing them from starving.

Getting evidence of a client’s debts could be equally difficult. The client may not have records of unofficial or community arrangements, or debts outside the UK, whether these are formal or related to family obligations. Whether or not you can get evidence, you should record these debts in the financial statement, which needs to be as full a picture of the client’s situation as possible.

The pressure on your client means they’re likely to make those payments even if no expenditure is put down, and any debt solution based on a financial statement without them is likely to fail.

It’s possible your client may own property or other assets in other countries, and it’s important to explore this. Owning a property will mean they are unable to apply for a DRO, and in bankruptcy the OR will look to sell assets for the benefit of creditors, including assets abroad. There may be practical challenges with this if the country doesn’t recognise UK insolvency laws, or if there are local creditors, but the bankrupt does have a duty to cooperate with the OR to realise assets and will risk enforcement action if they don’t.

If the client can sell assets abroad, the proceeds could be used to make lump sum payments or full and final offers to creditors.

Money transfers to or from the UK

There may be money that is leaving or entering your client’s bank account, sometimes through transfers, sometimes through cash withdrawals and deposits, to or from their home country.

This might be through

• the conventional banking system
• international money transfer agencies such as Western Union
• unofficial money transfer agencies
• trusted friends or relatives carrying the money, or substitute goods, when they next travel
• ‘swaps’ — where your client gives money or goods to a migrant in the UK and their family reciprocate back home

The aim of many of the informal arrangements are to get a more advantageous exchange rate with lesser fees for currency conversion.

Some unofficial methods also give better rates of exchange for pounds or dollars than regulated financial institutions that have to take the central bank’s exchange rate. In some countries it may even be more reliable than other methods.

The unofficial methods are often used by clients who are refugees and students, primarily to get better exchange rates. The method may be country-specific. For instance 30 years ago the significant growth in the numbers of Somali refugees would use an informal agent — Dahabshiil. That agency grew, and is now much more ‘official’.

You might also see certain agencies, such as Western Union, used more than native banks because they have agents operating in many more countries, or in smaller towns and villages than other financial institutions.

These remain common methods, even in long established South Asian communities.

Debt advisers should explore and record all of this on the financial statement, with an accompanying explanation if necessary. If goods swaps are being used you may need to work out the value of these, and if payments aren’t regular then you may have to consider averaging over a relevant period. Guidance on recording variable income is available in:

• The Citizens Advice Standard Financial Statement guidance
• The DRO guidance for debt advisers

There’s no set guidance for this specific situation, and you’ll need to use your own judgement and discuss this with your client. As ever, the financial statement must be accurate, and present a realistic picture of the client’s situation.

An immigration adviser might also have to wrestle with these issues when trying to show destitution for immigration fee waivers, applications for asylum support, and applications to lift the ‘no public funds’ condition attached to a client’s permission to stay.

Bank accounts

A migrant is not able to open (or continue to hold) a bank account if they’re in the UK and require leave to enter or remain in the UK but don’t have it. This can affect illegal entrants, people on immigration bail, and overstayers — including those who miss the deadline for applying to extend their current leave. This can mean migrant clients aren’t able to open bank accounts, or may have bank accounts closed or funds frozen, causing problems with accessing income, making payments, or evidencing their financial situation.

For a more detailed look at this issue and what advisers can do to help, you can read

• the banking section in our article on the effect of debts on immigration and nationality applications
• guidance online for those whose accounts have been closed, or have been refused an account

Phantom transactions

A client can sometimes be the first person within their group of friends or acquaintances who has had access to a bank account. Alternatively, those friends may have reasons not to use their account.

For instance, one client in a women’s refuge allowed another occupant to have money paid into the client’s account because an abusive partner had control of theirs. This was withdrawn in cash immediately to pass to her friend. On this occasion problems were avoided because the refuge staff had knowledge of the arrangement and confirmed it in writing.

Other arrangements may cause more difficult problems, for instance where your client is helping friends without bank accounts to pay for things, or is receiving their wages or bank transfers. A supporting letter from a friend explaining the transactions and arrangement would be helpful.

You may need to signpost the client to specialist advice if there are any concerns they may be acting illegally — for example receiving wages on behalf of someone whilst knowing they had no permission to work. You should speak to your supervisor to make sure you know what you can and can’t do for the client in this situation.

Conclusions

Everything we’ve discussed is likely to make the already complicated job of a debt adviser even trickier. Insolvency options aren’t going to be effective for many debts outside the UK, and even if it does remove a client’s legal liability it may not remove the threat of reprisals against family members. Whether a debt is legally enforceable is unlikely to be an important factor for a client in these circumstances, and their priority may be to keep enough income available to deal with them, regardless of how this impacts their financial statement or debt options.

Having said that, there are many useful things advisers can do. We’ve suggested how you might include various forms of income, expenditure and debts in the financial statement, and you can play a vital role in supporting the client to understand their financial situation and negotiate with more formal UK creditors. Those regulated by the Financial Conduct Authority (FCA) will have to act according to the Consumer Duty, and you can read more about this in our article on what this is and how to use it.

Bankruptcy or DROs may still be an option for UK debt, potentially improving the client’s situation even if they don’t completely resolve it, and with your support, your client may be able to negotiate with some of the creditors mentioned above, or may be able to reduce expenditure in these areas. Charitable grants or local or religious communities may also be able to offer support.

All clients have different priorities, and for migrant clients you may be less familiar with these. As ever, questioning sensitively and listening respectfully will be key. Through this, your client will feel able to discuss their situation with you openly, and help you get as much evidence as possible of their finances and debts.

The Money Advice Trust runs a course on Equity, Diversity and Inclusion (EDI) in Debt Advice, which covers a lot of these topics, and you can look out for this on the WiserAdviser website.

Megan Lloyd and John Donkersley work as debt and immigration experts, respectively, in the Expert Advice team at Citizens Advice. We are grateful for input from Joshua Aspden on refugee and migrant debt and from our colleague Asfah Kosir on NHS charges.

The information in this article is correct as of the date of publication

Unfortunately, we are unable to respond to comments left on the medium site — please contact expertadvicesupport@citizensadvice.org.uk if you wish to give feedback on an article.