 |  | By Russell Cavanagh Staff Writer Monday, 1 September 2008 |
Dealing with Debt
Sources of free advice and help:
Remember - you should never have to pay for debt advice!
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DEALING with debt is daunting for a growing number of people today. Admitting you can’t meet your outgoings anymore isn’t easy and the inability to cope financially often leads to ill-health.
However, there is plenty of free, confidential and impartial help available from the advice agencies listed on this page.
In case you feel unsure about what dealing with your debts entails, the following five steps should help explain and give you confidence in seeking solutions.
Step One – Your Monthly Household Budget
On a sheet of paper, list all household income in one column on the left. Count wages and any state benefits, pensions or tax credits you may receive.
On the right of this draft budget sheet, draw up a list of all regular, essential expenses.
Include amounts spent on rent/mortgage, council tax, utilities, food, TV licence, transport, clothes, prescriptions, essential hire purchase payments, children’s expenses, phones, court fines, pet food and any other absolutely essential household expenditure.
Work out all figures on a monthly basis and subtract your expenses from your income.
Work out how much, if anything, is left and this is the figure you have to spend on your debt repayments.
Step Two – Priority and Non-Priority Debts
On your budget sheet, further list any amounts you have to pay in addition to rent/mortgage, council tax and utilities bills in order to pay off arrears.
Any such arrears will be your “priority debts”. You can lose your home, possessions, fuel supply or even your liberty if you do not negotiate payments to these arrears on top of your regular ongoing liability.
If anything is left over after deducting payments to cover your priority debts, this is all you have with which to service your non-priority debts (usually unsecured loans, credit cards, overdrafts and such).
Step Three – Maximise Your Income and Reduce your Liabilities
Claim any state benefits, council benefits or tax credits you may be eligible for. The top two organisations in the list of advice agencies can help you with this.
Make sure you are actually liable for any of the debts you are currently struggling to repay.
It may be that some are in someone else’s name or that there are valid legal arguments as to why you are not obliged to pay.
Again the listed advice agencies can advise you about this in detail.
Step Four – Raising Money
If you have assets you can sell – jewellery, caravan, etc – these may raise enough cash to get rid of your debts. If so, trying to pay off priority debts first would make sense.
If your debt total isn’t huge but is nonetheless currently unmanageable, you might want to see if you can transfer balances onto a 0% APR balance transfer credit card and try to pay it off within the limit.
 Compare 0% balance transfer credit cards here
Be very wary of debt consolidation loans secured on any property you have. See our article Debt Consolidation Loans not for Everyone and do seek additional advice from one of the advice organisations listed on this page.
Step Five – Seeking Advice
The need for debt advice is increasing dramatically in the UK – so you are not alone!
You can get full help with benefits or tax credits claims as well as debt advice from your nearest Citizens Advice Bureau or through Community Legal Advice.
They can also help deal with county court judgments or other legal action against you and will advise you about issues such as your credit rating.
You should not have to pay for advice. “Debt management companies” that ask for a fee rarely deal with priority debts and their quality can vary.
If it is just an issue of restructuring repayments of large debts owed to ordinary creditors, the Consumer Credit Counselling Service offers a good, free, debt management service and they have a good record of dealing successfully with ordinary, non-priority creditors.
To Sum Up
Help is at hand for dealing with your debts if your household budget doesn’t balance and you are struggling. It is important to get debt advice tailored to your own specific situation and this article serves only as a guide.
If your debts are comparatively small, you could consider a 0% balance transfer, or in some cases a low-rate credit card balance transfer which works much like a 0% balance transfer, but instead of no interest at all, maintains a low rate of interest for the life of your balance.
Compare 0% balance transfer credit cards here
Compare low rate balance transfer credit cards here
If you have no priority debts and your credit commitments are too large to deal with, you could contact the Consumer Credit Counselling Service for help with negotiating reduced repayments.
Whatever you do, get free advice first about dealing with your debts from one of the agencies listed on this page.
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