If you are worried about paying any of the debts you owe you can contact the person or organisation to whom you owe the money directly to try and resolve the problem. If you would like someone to help you decide how best to manage your debt, you can contact either a face-to-face debt advice service such as a Citizens Advice Bureau, or a telephone service such as National Debtline. You could also ask a friend, family member, carer or other support person to support you or to intervene on your behalf.
For information on agencies that may be able to help you see useful organisations. Some solutions are only open to you if you are in contact with an agency that is helping you.
In order to work out how much you are able to pay back to the people to whom you owe money (your creditors) there are a number of things that you need to do. These include:
Both Citizens Advice and National Debtline provide user-friendly information and tools on how to follow these steps. National Debtline provides a downloadable personal budget sheet to help you work out how much money you owe and how much you can afford to pay off your debts.
There are four key points to remember:
If you're worried about your debts, the sooner you get advice the better. Facing up to a difficult situation may not be easy but you are likely to sleep better once you have a plan of action. Citizen's Advice, National Debtline or another organisation should be able to help you for free.
Alternatively, you could ask a friend or family member, your carer, your local Mind association, your social worker or other support service to help you contact someone for help. Sometimes these people can help you prepare information and financial papers etc before you approach an advice service.
The Money Advice Liaison Group (MALG) has announced the launch of a set of mental health awareness guidelines.
These voluntary guidelines are designed to encourage good practice by creditor agencies, debt collection agencies and money/debt advisers in relation to working with people with debt and mental health problems, in order to ensure that proportionate and sensitive approaches are adopted, for the mutual benefit of customer and creditor. The guidelines are available on the debt and mental health resources page of the Money Advice Trust website.
There are many options to settle your debts that you can look at with an advisor.
Sometimes, if you explain you are in difficulties, you can offer to pay less than the required monthly repayments on your non-priority debts and sometimes on your priority debts. An adviser will help you with this.
Follow these five steps:
1. Identify which debts you owe.
2. Identify your priority debts.
3. Identify your other debts.
4. Work out your budget, including your disposable income. This is the amount of money you have left after you have worked out how much you need to repay your priority debts and what your essential living expenses are is your disposable income.
5. Work out how much you have left over.
You can then work out how much money you can offer to pay for your non-priority debts. It's a standard formula, details of which are available at the Citizen's Advice Advice guide website or at the National Debtline website.
Some face-to-face advice services will be able to help negotiate repayment plans on your behalf, but you will be responsible for making the payments.
This is an agreement with your creditors to pay back your debts in regular instalments. A debt management company usually arranges the debt management plan. This means that you do not have to speak directly to your creditors, and that you only make one payment to the debt management company that distributes payments to your creditors based on the amount you owe them and your disposable income.
Some debt management companies will charge you for arranging the debt management plan, while others, such as the Consumer Credit Counselling Service and Payplan provide this service at no cost to the person in debt.
If you are thinking about using a debt management company that charges you a fee, you should make sure that you fully understand the charges before you agree to let them act on your behalf. It might be more beneficial to you to decide to use a free service.
This means adding up all your debts and getting a loan to pay them off. You may be able to consolidate your debts by taking out a consolidation loan. A consolidation loan can be used to pay off your non-priority debts.
If you are thinking of taking out a consolidation loan you should shop around for the best deal and make sure you can afford the repayments. They can often be secured against your home if you own your own home or have a mortgage. If they are, you may lose your home if you fail to make the repayments.
It might be useful to contact Citizen's Advice or another free, independent, confidential face-to-face advice service if you are thinking of taking out this type of loan to ensure that this is the best option for you.
Creditors (companies you owe money to) may consider accepting a full and final settlement from you if you are in very difficult circumstances and have no other assets or available income to offer.
It is intended as a way of getting rid of the debt altogether for you and although called 'full' is not the full amount of the debt.
It is very important to obtain agreement in writing from creditors before paying them and it may be worth having a legal agreement drawn up by solicitors. Citizen's Advice, National Debtline or another similar free service can help you if you are considering this option.
If you have no available income you could try to offer no payments to your creditors. This is called a 'moratorium'. Or a creditor might accept token payments (usually of £1 a month) if the moratorium is unacceptable.
Again, a discussion with Citizen's Advice or National Debtline will help you decide if this option is the best one for you.