when you’re in debt

Looking after a family can often be a strain on your finances and you’ll probably find yourself in debt at some time or another. You’ll have less money coming in and more people to look after. It happens to most of us, so there’s no need to feel that you’ve failed just because you can’t pay your gas bill.

If you are having money problems then get some advice as soon as you can. Most debt problems can be sorted out – if you deal with them quickly.

The Citizens Advice Bureaux have staff that are trained and experienced in debt management (and free) so they may be the best place to start. You can find their number in your telephone book or Yellow Pages.

which debts must be dealt with first?

If you owe money to lots of companies it can be difficult to know who to pay first. Some debts are undoubtedly more important than others and these need to be dealt with urgently.

If you’re being warned about any of the following then you need to get advice straight away: –

  • disconnection of your gas or electricity
  • bankruptcy – if you’ve had a notice called a Statutory Demand
  • court action to repossess your home
  • imprisonment for non-payment of council tax, a fine, maintenance or child support

Even though some debts are more pressing than others, it’s also vital to look at all your debts at the same time – even the small ones. Your creditors (the people you owe money to) will want to know exactly how much money you owe in total. Make sure you tell them everything. This is for your own good! If you hide some of the debts, companies will assume that you have more money to spare than you actually have. If they adjust your repayments based on incorrect information they may still be too high for you to manage and you’ll be back where you started.

what a creditor can and can’t do

Most companies will be sympathetic to people with young families who are having money problems – as long as they know what’s going on. They will assume that you’re just trying to avoid paying until you tell them otherwise.

Your creditor may well accept reduced payments or a short break in payments to help you get straight.

A creditor is entitled to send you reminders but they are not allowed to harass or threaten you.

seeing a debt counsellor

Before you go

Collect all the papers which relate to your debts – court papers, letters from creditors, bills and credit agreements. It is also useful to write down exactly how much money you’ve got coming in (wages, benefits, savings etc) and then list your monthly expenses (rent, electric, phone, food travel to work etc etc.) This will give you an idea of how much money (if any) you have left to start paying your debts.

If you have to wait a while for an appointment then it’s a good idea to write to your creditors and tell them that you’ve asked an advisor for help. Tell them when the appointment is and when you are likely to contact them again. Ask if they can agree to hold off any further action until you’ve taken advice. Most companies will welcome an advisors involvement. Not only does it show that you are trying to sort the problem out, but they are much more likely to get their money back.

dealing with debt yourself

If you are trying to sort the debts out yourself: –

  1. Add up all the money you have coming into the house every month including wages, investments, benefits and pensions etc. Then make a list of your monthly outgoings like your rent, electric, phone, gas, water, food, clothing, travel to work etc etc. Take the outgoings away from the money coming in and you’ll see how much you have left over to pay debts with.
  2. Make sure that you are claiming all the benefits and tax allowances that you’re entitled to.
  3. Deal with any urgent debts first. Urgent debts are those where you’ve had written warning of any of the following: –
    • disconnection of your gas or electricity
    • bankruptcy – if you’ve had a notice called a Statutory Demand
    • court action to repossess your home
    • imprisonment for non-payment of council tax, a fine, maintenance or child support
  1. Collect all your bills, letters, court papers and credit agreements together and work out exactly how much you owe.
  2. Write to everyone you owe money to straight away. Tell them you are having problems and ask if they would consider reducing your payments.

Never agree to borrow more money to pay off your debt without asking for professional advice. These kinds of loans are called consolidation loans and will normally have a very high rate of interest. This will almost always be a short-term solution to the problem but a long-term commitment to the repayments. Remember too that if you secure a loan against your home and then find yourself unable to make payments in the future, you could lose it.

This information has been contributed by Barry Davys – Davys Direct