Debt managemaent |
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DEBT MANAGEMENT - EXTERNAL ASSISTANCE
The path to clearing your debts, or even avoiding them, may be quite short for some. On the other hand, you could be faced with several years of hardship before you are able to clear them. In either case you need to identify the cause of your problem. Most people fall into debt through no fault of their own. It is often as a result of marriage breakdown, illness, using credit cards or being unable to resist offers of interest-free credit.
One of the key things to remember is that family pressures will arise. Not only will you have less money, but also your stress and anxiety levels are likely to increase. It is important to realise that this is perfectly natural and understandable so don't be afraid to seek help and medical advice if necessary.
Below are a few practical suggestions for saving money and staying out of debt in the future:
Only buy on a cash basis - if you cannot afford something save up for it.
When you go to buy something ask yourself whether you really need it or just want it. Try waiting for thirty days before you buy anything and if you decide you are going to buy it, try and obtain one or two quotations to compare prices.
When you go shopping prepare a list and stick to it.
Keep your financial statement up to date and live within it.
Look for ways to improve your income whilst trying to reduce your expenditure.
Keep your own accounts and always check your bank statement.
Budgets for non-regular bills and expenses, by paying some bills, for example gas and electricity, by direct debit you automatically receive a small discount.
Educate all members of your family in managing their own finances - you could be preventing much heartache in the future.
Start a regular saving plan - no matter how small the amount.
Some debts are more important than others because the consequences to you of not paying are so severe. These debts are known as priority debts. The law gives different creditors different ways of getting their money back. For example:
If you fail to pay rent, a court order could be made to evict you;
If you don't keep up mortgage repayments, the lender can ask the court to make an order to evict you and sell your home;
If you don't pay fuel bills, your gas or electricity can be cut off;
If you don't pay your phone bill, the phone can be cut off;
If you don't pay council tax, you can be sent to prison;
If you don't pay income tax, the Inland Revenue may take bankruptcy proceedings;
If you don't pay court fines, you can be sent to prison.
If you don't pay Hire Purchase agreements on essential goods, they can be repossessed.
Under no circumstances should you ignore priority debts. It is important you use your available money to pay these first. Do not pay other people you owe money to (secondary creditors) until you have reached an agreement with all of your priority creditors. Secondary creditors include:
Unsecured loans
Credit Cards
Hire purchase agreements for non-essential goods
Store cards
Catalogue and mail order
Repossessed house or car loans
Some Do's and Don'ts
DO be realistic - face up to your true situation and resolve to deal with it - using the help available to you.
DO get in touch with your creditors immediately to explain your difficulties.
DO give priority to those debts that may result in you losing your home, fuel supplies or your liberty.
DO remember that your creditors prefer small payments regularly rather than larger, irregular payments that you cannot sustain.
DO reply to creditors' letters and court documents within the time period specified and let them have all the facts.
DO keep copies of all correspondence, financial statements, debt schedules etc.
DO attend and/or be represented at court hearings and take all relevant correspondence with you, including your current financial statement.
DON'T ignore the problem - it won't go away.
DON'T give up trying to reach agreement with your creditors even if they are difficult and refuse your initial offers.
DON'T be threatened or bullied into making promises which you cannot fulfil.
DON'T borrow more money to pay off your debts, especially by taking on more credit or store cards.
Available Help. Besides the advice available from Citizen's Advice Bureaus www.nacab.org.uk, Consumer Credit Counselling Service Tel: 0800 138 1111 www.cccs.co.uk, Federation of Independent Advice Centres (FIAC) Tel: 020 7489 1800 advice UK:www.adviceuk.org.uk 12th Floor New London Bridge House, 25 New London Bridge Street, London SE1 9ST Telephone 0207 407 4070 Fax 0207 407 4071 Email general@adviceuk.org.uk or Money Advice Scotland 0141 572 0237 www.moneyadvicescotland.org.uk, there are companies who are willing to negotiate an individual's debts or to offer loans. While some of these companies are entirely legitimate, some are not. Before dealing with any commercial firm offering quick loans or insolvency advice, personnel are strongly advised to at least consult with the CAB or Consumer Credit Counselling Service in confidence. Banks and building societies can also be a source of advice and frequently offer loans at preferential and competitive rates of interest. An indication of a firm's validity is whether or not they have a consumer credit licence for the type of service they are offering. The Office of Fair Trading issues all licences.
Caution should also be given to companies who ask for money at the outset or reschedule debt repayments over several years or who are not full or associate members of organisations such as the Money Advice Association or the Money Advice Support Unit.
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