Debt


All debts are important, but some are more pressing than others. Some debts carry severe penalties and should be dealt with first; these are priority debts. The list here shows what may eventually happen if debts are not dealt with.


Mortgage Repossession of your home; eviction
Second mortgage/secured loan Repossession of your home; eviction
Rent Eviction from your home
Council tax Distraint/distress*; deductions from wages/benefit; imprisonment
Gas/electricity Supply disconnected
Unpaid magistrates' court fine Distraint/distress*; deductions from wages/benefit; imprisonment
Unpaid maintenance/child support Distraint/distress*; deductions from wages/benefit; imprisonment
Income tax/VAT/National Insurance Distraint/distress*; bankruptcy
Telephone Disconnection
Hire purchase (not normal credit) Repossession of HP goods
Unsecured credit card debts County court judgement; impaired credit rating


* Distraint/distress is the seizure of some of your goods by bailiffs.


Don't delay!

The worst thing you can do when you owe money is to ignore the problem, hoping it will go away. The earlier you contact your creditors, the more flexible they’re likely to be in coming to an agreement with you. Decide which debts are priority debts and which are not. Write to your creditors, or phone, and indicate that you want to work out an arrangement to reduce and clear the debts.

If you make any arrangements over the phone, ask the name of the person you speak to. Write down what was said and then follow up with a letter to confirm the arrangement. Remember to quote your account reference and to keep a copy of all letters you send.


Don’t make promises you can’t keep

Don’t be bullied into agreeing to repayment arrangements which you cannot keep. Arrange a rate of repayment that you can afford to keep up. The aim is not just to solve the immediate problem, but to get things organised so you can afford to pay your creditors and meet your other expenditure for the foreseeable future.


Make regular payments

Many firms are computerised and their systems are programmed to send reminders and warnings automatically if payments are missed. It is better to make regular payments, however small, than large occasional payments.


The law is on your side

Although the law gives creditors the power to take action to recover the money you owe, it also makes them go through fixed procedures before the final action can legally be taken. So the law also gives you protection. For example, you cannot legally be evicted from your home without the creditor having been to court and obtained the necessary authority.


Don’t be unduly intimidated

Harassing people in debt is illegal; if you are harassed by creditors seek advice immediately.

The Financial Services Authority has a useful website regarding money matters which gives details of the different types of credit available and lists some of the things you should be aware of when taking out any credit. Visit http://www.moneymadeclear.fsa.gov.uk/


Agencies to approach for advice

Further details on the agencies below can be found on the A-Z of Services page.

Citizens’ Advice Bureau

The Law Centre

  • Tel: 01983 524715

Frontline Advice Centre

National Debtline

Consumer Credit Counselling Service

National charity CCCS offers free debt advice and help with issues like credit card debt, bankruptcy and debt management. Their free online debt counselling tool - CCCS Debt Remedy - gives anonymous debt advice any time of day or night.



Checklist

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 which 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 summonses within the time period specified and let them have all the facts.
DO keep copies of 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.
DON’T be afraid to ask for free specialist advice.