How to Beat Debt
There’s no easy way out, you know that already. But you
must do something or your debts will get worse. The sooner
you face the problem, the easier it will be to solve it.
DOING NOTHING WILL COST YOU MONEY its time to do something about
it.
Step 1 - Make a List
The first job is to sort out exactly what you owe and to whom,
then make a list of all your debts in order of importance.
Priority Debts
These are the most important debts, non-payment of these debts
have serious consequences. Priority debts include; mortgage
repayments or rent, secured loans, Council Tax, utility bills,
taxes and Magistrates’ Court fines. If you fail to pay these
debts you could end up being evicted from your home or in
prison.
Non-priority debts
Have consequences but not as serious as the consequences for non
payment of priority debts. They can still be expensive due to
interest payments and can give you a bad credit rating, which leads
to problems applying for loans in the future. They include; credit
cards/store cards, unsecured bank loans and overdraft,
home-collected credit, catalogue repayments and money borrowed from
family and friends.
Step 2 - Maximise your
Income
To try and increase you income or money you will need to do a
budget – don’t panic this is simply a list of money coming in and
money going out. Doing a budget it will allow you to see how much
money is coming in, and where your money is being spent.
If you spend more money than you have, try to make savings by
cutting down on some expenses right away you will be able to see at
a glance how much a takeaway or weekly pizza is costing you.
You will have to make sacrifices – think do I need it and can I
afford it.
Another way to increase your income if you are in receipt of
benefits is to have a benefit check – are you receiving all the
benefits you are entitled to? Check that you are getting your
correct entitlement. If you want to check your benefit entitlement
click on (http://www.turn2us.org.uk/benefits_search.aspx)
or contact your local Benefits Agency, The Citizens Advice Bureau
(CAB) or RMBC Advice Service, they will be able to tell you whether
there are any social security benefits or financial support you
could claim.
If you are working – Are you paying too much tax? Check
your tax code by contacting your local tax office. Check if
you already receive benefits,
Step 3 - Contact your Creditors
(people you owe money to)
Once you know what you can afford, you can contact your
creditors in writing to tell them about your situation and what you
intend to do.
You must make sure that you contact your priority creditors
first and offer a realistic repayment that you can afford to
pay. There may be little or nothing left to offer your
non-priority creditors, but still contact them and explain your
situation and explain that you may be in a position to start
repayments in the future or you can ask them to write off your
debts, but remember they may only agree in exceptional
circumstances.
Administration Orders – You can apply to court, if you have
small debts under £5,000 in total for an Administration Order. One
regular amount is paid to the court and they distribute it to your
creditors. A small charge is made and before applying for this, a
court judgement has to be entered against you.
Debt Relief Order (DRO) – There are strict rules that you have
to meet to qualify for a DRO, only certain debts can be included
but it is a cheaper option than bankruptcy. If successful,
your creditors cannot take action to recover the debt and after 12
months, the debts will be written off.
Consolidation Loans – You may be able to replace all your debts
with a single loan, usually with a lower monthly payment and a
longer repayment period.
Individual Voluntary Arrangement (IVA) – Certain criteria has to
be met to qualify for an IVA, an application to court is made where
you agree to pay all or part of your debts over a period of
time. An Insolvency practitioner has to set up the agreement,
this could take several months to organise and a large
administration fee may be payable
Bankruptcy – If your have no money or very little to re-pay your
debts then bankruptcy may be an option. Bankruptcy is a legal
status that usually lasts for a year and can be a way of clearing
debts you can't pay.
When you're bankrupt, your non-essential assets (property and
possessions) and excess income are used to pay off your
creditors.
At the end of the bankruptcy period, most debts are 'discharged'
(cancelled).
This option is costly £150 to complete your application form
(debtor’s petition) and £360 for the official receivers work.
Bankruptcy is a very serious matter and you should seek
professional advice before making a decision to take the bankruptcy
option. After the bankruptcy is over, you can make a fresh
start and your debts are written off.
Debt Management Companies (DMC’s) – A fee is charged, to
negotiate repayments with creditors for non-priority debts. A
single payment is made to the DMC and they distribute it to your
creditors. Some organisations offer free debt management
plans, such as National Debtline.
For more information on debt, bankruptcy and any of the above
click on the link to http://www.direct.gov.uk/ or
http://www.adviceguide.org.uk/
Step 4 - Getting Advice
If you feel that you can’t tackle your debt problems yourself
and you need help to manage your debts and rent arrears contact
your Housing Officer. The Housing officer will then refer you to
the RBH Money Matters Team. Once they receive the referral they
will contact you to make an appointment to come in and see the
Benefit & Debt Advisor, who will try to help you resolve your
debt problems.
Alternatively you can get you can get free independent advice
from various agencies including:
Consumer Credit Counselling Service
If you are struggling to keep control of your finances - get
freedebt help from
national charity the Consumer Credit Counselling Service.
With 15 years experience behind them, CCCS are a leading
provider of debt counselling - and there are no charges involved.
Their online serviceCCCS Debt
Remedy provides access to personalised, anonymous debt
help straight away.
0800 138 1111
Credit Action.
0207 380 3390
http://www.creditaction.org.uk/
Directgov
http://www.direct.gov.uk/en/index.htm
FSA – Money Made Clear
0300 500 5000
http://www.moneymadeclear.fsa.gov.uk/
National Debtline
0808 808 4000
http://www.nationaldebtline.co.uk/
Rochdale Citizen Advice Bureau (CAB)
01706 666676 (to book an appointment)
0844 499 1191 (Advice line)
http://www.adviceguide.org.uk/
Rochdale Council’s Advice Service,
01706 923513 (Advice line)
http://www.rochdalecab.org/
Rochdale Law Centre
01706 657766
http://www.rochdalelawcentre.org.uk/rochdalelawcentre.htm