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.
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 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.
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.
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.
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/
Further details on the agencies below can be found on the A-Z of Services page.
Citizens’ Advice Bureau
The Law Centre
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.
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.