The first steps to facing up to your debt
With the recession still biting and cutbacks in public spending on the way, getting your finances back on track should be a priority for 2011.
Although it’s easy, becoming an ostrich and burying your head in the sand over debt will only make it worse. How many of us leave bills and statements unopened, stuffed in a drawer, in the hope that they will take care of themselves?
It’s quite common to feel overwhelmed and unable to deal with debt problems, but we know that hiding the bills won’t help the situation.
With the recession still biting and cutbacks in public spending on the way, getting your finances back on track should be a priority for 2011.
Ignore your debts and they will just keep on growing and multiplying. When you finally decide to sort them out, you could find that they have spiralled out of control without you even realising.
Priority debts
If your debts include secured loans, such as a mortgage on your home, then it could be serious.
Repossession proceedings could leave you homeless. You may get offers of loans from creditors to assist you, but there will be a cost to pay in additional fees and interest charges and it can sometimes make the situation worse.
Admitting that you have a debt problem and trying to sort it out can be tough, but in the long run it is the best and only solution.
Communication is the key
By seeking the help and advice of professionals, you may find that your problems are not as bad as you thought and at least the burden will be shared. Remember the saying that a problem shared is a problem halved!
One of the most important things to remember when you are struggling to meet repayments on your debts is to contact the creditor and explain the situation.
By making them aware you are more likely to come to an agreement to make reduced payments until your circumstances improve. The sooner you let them know, the better.
First step
The first thing you should do is put together a budget showing all income and expenditure. This should detail where your money is being spent and whether there is any surplus after paying your priority bills.
Secondly, you need to find out how much you owe and who to. This credit explained booklet gives information on how to obtain your credit file. (You can also get a free credit report from Experian – just remember to cancel your membership before the 30-day trial period is up, to avoid being charged in the future.)
Obviously, any friends or family that you owe to won’t be included on there so don’t forget about them (research by More Than has revealed that the total amount of unpaid debt between family and friends stands at £44.6bn, with 32% of people saying this has caused rifts which may never be repaired).
You’re not alone
You’re definitely not alone if you’re struggling and looking for help with your debts.
For example, Credit Action reports that the average amount of debt owed by every UK adult, including mortgages, is £29,833 (which, if nothing else, demonstrates the huge levels of debt that exist in the UK). What’s more, the CCCS receives an average of 25,000 calls from financially distressed people every month. Personal debt is endemic in the UK.
There’s always a solution
Often people think that bankruptcy is their only option but there are several solutions available to deal with debt problems. A Debt Management Plan (DMP) is one way of dealing with debts, where you make one monthly payment through a third party that manages all of your creditors. For example CCCS currently administers over 100,000 DMPs completely free of charge.
However, there are many more people in unrecorded DMPs which are not included in statistics. According to estimates by R3 this could amount to 500,000 people, which is more than double the number in formal insolvency procedures such as bankruptcy.
Free debt help
If you are in financial trouble and feel you need extra help and support, there are many companies offering help and advice. There are plenty of free advice agencies so you should never have to pay for debt advice.
It makes sense to seek advice from a non fee-charger so that any spare money is going towards clearing your debts faster.
At CCCS there is no charge whatsoever for the services we provide to our clients. To get free and impartial advice, visit our online counselling service Debt Remedy or give us a ring. We can help you make that first step; you just need to take your head out of the sand.
Most Recent
Comments
-
Forgot to add - if some of your card debt(s) is with either your mortgage company or your bank, you MUST get the entire balance(s) paid eg by a balance transfer to another card (s) BEFORE claiming financial difficulty, or your bank can offset even your entire salary/pension without notice to clear the debt or a mortgage company could add it to your mortgage debt and try to re-possess your house.
REPORT This comment has been reported. -
Never go to a company that charges to 'help' with your debts. CCCS is [b]completely[/b] FREE. Just because you may not qualify for a debt management plan (which you probably won't if eg your wife is working) doesn't mean that you can't get some relief if you genuinely can't afford card minimum payments. Do some homework. First Google each card company + 'financial difficulty' to try to find out who to deal with. Capital One it's Special Support Unit, Barclaycard it's Debt Management Unit etc. [b]Phone customer service[/b] otherwise. Some card companies prefer to discuss financial problems over the phone. Some respond to letters. Phone or write in, having completed CCCS budget/ income sheets. BE REALISTIC about budget amounts. Suggest the amount you can ACTUALLY afford to pay and ask if the card companies will consider waiving interest and default charges. This is called an individual voluntary agreement with companies. Note though that the card companies [b]EXPECT [/b]you to have consulted with a debt management company or charity such as CCCS. Some require additionally proof of income. Some will require you to notify short-term or long-term plan as required. They will continue to charge interest and make charges until an arrangement is finalised with them. Some (but not all) card companies will avoid, at least for now, issuing a default notice on the account if you and they have agreed a voluntary payment plan, and where you [b]MEET[/b] the voluntary payment each month. This voluntary payment is INSTEAD of the monthly minimum payment and NOT additional to it. [b]STOP[/b] direct debits and replace these with standing orders which [b]YOU[/b] control. Again homework or phone calls may be needed to obtain correct payment details for a standing order. This information is often not available online or on statements. Finally, note that companies [b]HAVE[/b] to accept a [b]GENUINE[/b] offer of what you can afford. They will continue sending statements showing increasing arrears, They will continue to ask or try to pressure you to increase payments to them if the amount is below their stipulated monthly minimum. REPLY to letters or phone calls 'insisting' on additional or further payments or payment of all arrears stating simply ([b]and truthfully[/b]!) that you can't AFFORD to pay them ANY extra. You will need to distribute payments in proportion to the amount owed across all banks and card companies you owe money to. Do NOT attempt to enter into a voluntary agreement unless you have REAL and GENUINE financial difficulty in meeting payments as otherwise it would constitute an attempt to defraud the card company. If your financial difficulty is [b]very severe[/b] ie low income or loss of all non-benefit income, you may qualify for a [b]formal[/b] rather than voluntary payment plan, or for an IVA if the debt is long-standing and there is no substantial excess equity (eg as in a house). With a formal plan, one company, eg CCCS can arrange to collect one amount that you can afford and pay creditors proportionally for you. If you have a family, it is [b]VITAL[/b] that you take out life cover to the extent of the debt and deduct the monthly premium from what you can afford to pay the card companies each month. At least then if something happens to you, your family will have the debt covered. Get a quote online, it'll probably surprise you how relatively cheap this cover is. (Just straight life cover, for as many years as you are likely to need the cover). You can renew the cover say 10 years on for a lower amount of cover as by then you will have paid off [i]some[/i] of the debt.
REPORT This comment has been reported.
Do you want to comment on this article? You need to be signed in for this feature
10 January 2011