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Debt advice

Debt Help & Advice

What should I do if I am in debt?

Being in debt is difficult for everyone, regardless of the amount or the severity. Many people find the problem seeps into their personal life, affecting their relationships and their confidence. But, don’t worry! Just like the millions of other people who are in debt, you can get help and advice.

Step One: Money Management

The very first thing that you need to do, if you haven’t already, is learn the best ways to manage your money. Not everyone was given a financial education as they were growing up, and many people who were, still might not know the best tips to managing your money.

Managing your money involves understanding your income, all the money you have coming into your household, and your expenditure, all the money that you spend. This isn’t always as easy as it sounds, as it isn’t just about your monthly expenses and you need to factor in all the one-off costs, such as Christmas and holidays. The best tip is to look at a whole years-worth of bank statements and bills, so that you understand how your spending changes month-to-month.

Step Two: Understand Your Debts

There are many different kinds of debt, and, sometimes, creditors can sell your debt on to other creditors, which can lead people to lose track of who has their debts, and how much they are. During Step One, you should make a note of all the debts you know you have, how much you owe, and what the interest rates are.

First of all, you need to understand what types of debt you have. Do you have rent arrears? Tax arrears? Credit card debts? Pay day loans? Or a mortgage? Understanding the differences between these debts can help you pay them off in the best way for you. Essentially, you need to figure out what are your ‘priority debts’.

These are the debts that will lead to serious problems if you don’t pay them, you could end up homeless, powerless, or with Bailiffs at your door. Most notably, these are likely to be tax, rent, or utility arrears, or your secured debts, such as a mortgage.

It is still very important to pay your unsecured debts, of course, but it is possible to put off any serious consequences by paying the minimum payment every month rather than paying off the entire amount.

Step Three: Get Help

If you are struggling to do any of the above, whether it be managing your money, or paying off more than your minimum payments, then you should seek debt help. This is an important and courageous first step towards getting on top of your debts. There are two types of debt solution you may want to look into:

Informal Debt Solutions:

These are managed by you or by another party. Essentially, you reorganise your debts to make them more manageable. You may take out a loan to pay off your smaller loans so that you only have one payment to deal with, which is a consolidation loan, or you may want to renegotiate with your creditors to lower your monthly payments, which is calleddebt management. Informal Debt Solutions, however, are not legally binding and creditors are under no obligation to follow any agreements.

Formal Debt Solutions:

These solutions are government-regulated and legal. They include theIndividual Voluntary Arrangement (IVA)Arrangement (IVA) which allows you to clear your debts after five year of successful, affordable payments to an Insolvency Practitioner, andBankruptcy, which clears your debts relatively quickly, but requires you to give control of your assets and finances to an Official Receiver who can sell your property, or even take part of your wages.

Find Out More About The Debt Solutions Considered

Solutions Debts Written Off Legally Binding Interests & Charges Residential Status Fees Notes
IVA Yes – Average 58% Yes Stopped Tenant or Homeowner (Eng/Wales) Yes on average around 20% of the payments you make to creditors Typically you must have debts over £15,000 and be able to offer yourcreditors about 20% of the value of the debt back over 5 years.
Debt Management No No Many Freeze Tenant or Homeowner Yes In a Debt Management Plan, you will be required to repay all of your debt in full.
Consolidation No yes New Rates & Charges Tenant or Homeowner Yes Consolidating your debts generally means you’ll pay more back over a longer period of time.
Bankruptcy yes yes Stopped Tenant or Homeowner (Eng/Wales) Yes – up to £700 depending on your circumstances. You may also be subject to a 3 year Income Payments You need to think carefully about all the affect bankruptcy will have on your home and your employment.
Debt Relief Order yes yes Stopped Tenant Yes – £90 You must have debts under £15,000 and have little in the way of assets

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