Debt and mental health

Gives information about where you can get support with - and out of - debt when you have a mental health problem.

About debt

If you already have a mental health problem being in debt can make you feel worse.

[When I was unwell] I spent so much money – you've no idea how much money – and got myself very seriously into debt. I ordered so many things from catalogues and would do quite a lot of gambling...

If your mental health fluctuates, being in debt can bring on a bad episode. If you experience anxiety or depression, you may feel tempted to ignore the problem and hope that it will go away. You may become too afraid to open any official-looking envelopes or answer the phone. For help with these feelings see managing your money.

If you are in financial difficulty, you may feel ashamed or scared and not want to talk to others about it. There are sources of help that will allow you to regain control and will not be judgemental.

What is debt?

Being in debt means that you owe somebody money. Owing money is not in itself a problem. Many people owe money such as a mortgage, use credit and other financial services and are able to manage their finances without any worries.

When is debt a problem?

If you do not have enough money to pay for all the things that are essential, like food, rent and bills and to make the minimum repayments on all your debts then you may have problem debt. There are steps that you can take to prevent your debts becoming out of control.

Do you have a problem?

To work out whether the money you owe is likely to cause you problems you can take the Money Advisory Service Debt Test or use the Debt Remedy Tool from StepChange, the debt charity.

What if you do have a problem?

If you've decided that you do have problem debt, there is a lot you can do about it and the earlier you start the better. Facing up to a difficult situation may not be easy but you are likely to feel better once you have a plan of action. Citizen's Advice, National Debtline or another free, independent, confidential face-to-face advice service will be able to help.

If you are happy talking to someone on the phone, you could contact National Debtline, whose advisers can talk through your concerns with you. The National Debtline has a self help pack that contains all the information and standard letters you need to deal with your own debt problem. The pack shows you:

how to work out your personal budget
how to decide which debts to deal with first (priority debts)
how to work out offers of payment
how to deal with court procedures.

If you would prefer, you could ask a friend or family member, your local Mind, local advocacy service or other support service to help you contact someone for help. For details of your local Mind see Mind in your area.

Types of debt

Debts can be split into two distinct groups, priority and non-priority debts.

Priority debts

Debts that might result in you losing the roof over your head or getting into legal trouble are called priority debts. Sometimes you can negotiate payment amounts with creditors for priority debts. It is important to focus on repayment of these debts first, due to their legal impact.

Priority debts are:

rent or mortgage
secured loans
business rent
business rates
council tax
electricity and gas
magistrates' court fines
child support or maintenance
hire purchase or conditional sale rented and hired goods
income Tax/VAT
TV licence

Non-priority debts

It can often feel as if non-priority debts are the most important because you might be chased more persistently to repay them, they are larger amounts of money or because you feel a personal obligation to pay back debts to family or friends first of all.

However, debts that do not affect your home or have the immediate threat of fines or legal action are considered non-priority.

If you have a limited amount of money you should pay your priority debts first. But if you have non-priority debts it is still important that you deal with them, as you may ultimately be taken to court if you do not make arrangements to repay these debts.

Non-priority debts include:

default on loans that are not secured against your home
credit card or store card debts
overdrafts
benefit and tax credit over payments
student loans
money borrowed from family and friends
water charge arrears - water companies may no longer disconnect supplies to enforce payment, but payment of water bills should still be high up the list
county court orders - where you have been ordered to pay a debt via a county court order: However courts will take into account someone's ability to pay a debt.

Resolving debts

You might either decide to deal with your debt on your own or work with an agency that can provide you with information, advice and support.

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 take the Money Advice Service’s Debt Test to see whether you should be worried. You could also ask a friend, family member, carer or other support person to support you or to intervene on your behalf.

“I talked to my Community Psychiatric Nurse and support worker about my problems I was actually referred by him to the Housing Trust, he showed me where I could get some help from.”

- Mind focus group participant

Top tips to get out of debt

Don't ignore debt. It won't go away, it will get worse.
Get independent advice before you are tempted to borrow money to pay off your debts.
When drawing up a budget, be honest and don't try to hide your debts. If you hide or leave existing debts out of your budget then the budget won't help you clear your problem debts.
Take it one step at a time and sort out your most important debts first.
Let everyone you owe money to know you are having problems. If you do not speak to them, they may start court action against you. If you do speak to them, they may be able to offer you a break from making payments or come to an agreement with you (for example, allowing you to pay back the debt in instalments).
When talking to a large company, keep a record of names and the reference number for your case.
Keep copies of all letters you send and receive.
If you arrange to pay back missed payments in instalments, make sure you agree to instalments you can afford so that you don't break the arrangement.
Don't try to deal with this alone. There are independent organisations that can offer you advice and support.

Working out what you can pay

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:

identifying which debts you owe
identifying your priority debts - those that you must repay to avoid legal action
identifying your other debts
working out your budget
working out how much money you have left over.

Both Citizens Advice and the Money Advice Trust’s National Debtline have easy to use information and tools on how to follow these steps. National Debtline has a downloadable personal budget sheet to help you work out how much money you owe and how to pay off your debts.

There are four key points to remember:

Make sure that the total amount of your priority debt repayments and essential expenditure have been added up and taken away from your income before you work out how much you can afford to pay towards your other debts.
Be realistic about how much you can afford to pay back. You should not agree to make repayment arrangements that are going to be difficult for you to keep. If you continue to be anxious about whether you can pay back the agreed amount, you have just replaced one worry with another.
Make sure that you are receiving all the income that you are entitled to.
If your circumstances change you should work out a new budget and get in touch with your creditors, or your adviser.

How to settle your debts

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, StepChange debt charity, 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, 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 before you approach an advice service.

Don't ignore creditors who contact you about your debts.
If you are aware that you are facing financial difficulties and you might have problems with meeting your commitments you should contact the people or organisations you owe money to as soon as possible to let them know.
If you are in debt or at risk of falling into debt due to your mental health problems, and do not feel comfortable telling your creditors about your situation, you should consider asking someone you trust to tell them on your behalf.

The Money Advice Liaison Group (MALG) good practice guidelines

The Money Advice Liaison Group (MALG) has 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. This is intended to help both those lending money and their customers. The guidelines are available on the debt and mental health resources Money Advice Trust website.

If things get serious

There are many options to settle your debts that you can look at with an adviser.

Making offers direct to your creditors

Often, 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.

Once you have worked out how much money you have available – following the steps above, you can work out how much money you can offer to pay towards your non-priority debts. It's a standard formula, the Citizen's Advice Advice guide website and the National Debtline website both give details.

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.

Debt management plans (DMPs)

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.

Most debt management companies will charge you for arranging the debt management plan. This can be expensive. Some, such as the StepChange debt charity and Payplan provide this service at no cost to the person in debt.

StepChange Debt Charity has produced a guide to debt management plans covering how they work and things to consider before contacting a debt management company.

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 and are sure you want to use them before you agree to let them act on your behalf. You will need to consider whether you can afford to add the company’s fees to your existing debts. It might be more beneficial to you to decide to use a free service. StepChange debt charity provide a free online tool, StepChange debt remedy, offering a budget assessment and tailored recommendation that you may find useful.

Consolidating your debts

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 (see 'types of debt').

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 it or have a mortgage. If a loan is secured, 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. The Money Advice Service, available on 0300 500 5000, will also be able to help explain your options.

Full and final settlements

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.

This is a way of getting rid of the debt altogether without paying the full amount. It will damage your credit rating, making it harder to get loans or mortgages in future, but will mean you no longer have to worry about repayments.

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.

Token payments or moratoriums

If you have no available income you could try to offer no payments to your creditors. This is called a 'moratorium'. It will not mean that the debt goes away or is ‘written off’, but will mean you are not asked to pay until you have more income. Alternatively, a creditor might accept token payments (usually of £1 a month). While this is unlikely to mean you pay off your debts, it will often mean that your creditors stop contacting you so much.

Again, a discussion with Citizen's Advice or National Debtline will help you decide if this option is the best one for you.

Reducing spending

Ways to reduce spending

It is quite a common experience for most people at some time in their lives to have difficulty making ends meet.

Having a mental health problem can compound this if it means that you are prone to periods of excessive spending or if you feel too low to concentrate on paying bills or finding the best utility deals.

If you are finding that you have little or no money left at the end of the month you will need to find ways to reduce your spending or increase your income. Here are some tips for reducing your spending and energy bills, as well as information on winter fuel payments, grants to help reduce energy bills and comparison websites.

“We don’t always stick totally to our budget, but having a set plan there helps to keep spending down” – Mind focus group participant

Top tips for reducing your spending

These tips may help you to start saving:

Consider making small cut-backs on non-essential items. For example, skipping a morning coffee from a chain store could save you £10 a week or over £500 per year.
Consider using supermarket 'own label' or 'own brand', or just a cheaper brand on some items. You may find that the cheaper washing up liquid is just as good as the expensive one.
Consider switching your electricity, gas or phone supplier. Try Consumer Focus’s energy price comparison page which helps you to compare prices. There are also various internet switching services or search engines you can use.

Top tips for reducing your energy bills

Don't leave appliances on standby; turn off your television, video and DVD player when you're not using them. Not doing so wastes £37 a year for the average household.
Turn off your mobile phone charger at the wall when you're not actually charging your phone.
Switch off the lights when you leave the room and don't have more on than you need.
Don't heat more water than you need when boiling a kettle.
Use lids on saucepans as the contents heat quicker.
If you have a dishwasher or washing machine, use the half load or economy cycle if it isn't full.
Turn down your cylinder thermostat on your hot water to 60 degrees.
Fix leaky taps and make sure they are properly turned off. A dripping hot tap wastes enough water in a week to fill a bath.

Top tips for reducing your energy costs

In the winter:

Keep active (if you can). Even doing some housework will raise your metabolism and make you warmer.
Pull the curtains when it starts getting dark to make your home feel warmer.
Tuck your curtains behind your radiators when they're on. If you don't, the heat will warm the window instead and escape outside.
Reducing your room temperature by as little as 1 degree centigrade could cut your heating bills by up to 10 per cent. You could save around £40 a year.
Tumble dryers are very expensive to run and produce a lot of heat. If you are able to dry your clothes outside do so.
Wear an extra item of clothing. Just something as simple as a sleeveless jumper might be all that you need to stop you feeling chilly and will save on other forms of heating.
Turn the heating off if you go out. While it's nice to come back to a warm home, it only takes 20 minutes to warm up.
Keep the room you're in most nice and warm, not your whole home. Remember that you do need to keep some warmth in all the rooms to prevent damp and mildew.

In the summer:

Don't use the tumble dryer unless you don't have anywhere to dry your clothes.
Don't use an electric fan to keep you cool unless you have to as they are very expensive to run. If you have to use one, turn it off if you're not in the room.

If you want to find out more about reducing your bills and saving the environment call the Energy Saving Trust on 0800 512 012.

Winter fuel payment

If you're aged 60 or over you may get a Winter Fuel Payment to help pay for keeping warm in winter. The tax-free annual benefit is normally paid directly to you along with your pension for November and December.

For more information on whether you can get Winter Fuel Repayment see the Directgov website.

Social Tariffs

If you are on a low income, elderly or have a mental health problem your energy provider should offer you a social tariff. This means that your bills should be no higher than the lowest deal on offer. NHS choices provides further information.

Comparison websites

There are a range of money saving websites including Moneysavingexpert, Thisismoney, Frugal , Utility Warehouse, Comparethemarket and Moneysupermarket that can offer you ideas about saving money on all sorts of things.

Most comparison websites are run by commercial businesses. Some promote particular products because of commercial arrangements. Most sites will give information about whether they cover the whole of the market for certain products or just a selection, but not many give details of their commercial arrangements. Mind is not responsible for the content of external websites.

Avoiding debt

Don't ignore debt. It won't go away, it will get worse.
Get independent advice before you are tempted to borrow money to pay off your debts.
When drawing up a budget, be honest, and don't try to hide debts. If you hide or leave existing debts out of your budget then the budget won't help you clear your problem debts.
Take it one step at a time and sort out your most important debts first.
Tell everyone you owe money to that you are having financial problems. If you speak to them, they may be able to offer you a break from making payments or come to an agreement with you (for example, allowing you to pay back the debt in instalments). If you do not speak to them, they may start court action against you
When talking to a large company, keep a record of names and the reference number for your case.
Keep copies of all letters you send and receive.
If you arrange to pay back missed payments in instalments, make sure you agree to instalments you can afford so that you can keep the arrangement.
Check you are claiming all the benefits and tax credits you are entitled to.
Don't try to deal with this alone. There are independent organisations that can offer you advice and support.

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