If you are worrying about getting out of debt, then there are several things you need to know right now.
You are not alone
Help is at hand
Fact : Millions of people are in debt crisis.
The phone rings for the hundredth time today. Of course, you already know who it is; it's that dreaded debt collector. Why won't they stop? Don't they take the hint?
Dealing with debt collectors is a very scary and nerve-racking ordeal, sometimes even unfathomable. Debt collectors can be tough, hard nosed and, at times, ruthless.
Their job is to collect your debt and some will pull out every trick in the book to get you to pay. From non-stop phone calls to threats of litigation, debt collectors mean business so you need to be prepared for the next time they call.
If managing your debt has become a problem, it’s important to do something about it as soon as possible.
It can be tempting to do nothing and just hope things will sort themselves out, but if you start to miss payments, your creditors can put you under increasing pressure to settle the arrears.
If you’re already in this situation, don’t be bullied into agreeing to pay more than you can afford, because that will make your problem worse rather than solve it.
Where to find debt help
If you need debt help, it can be difficult to know who to turn to. If you look on the internet there are many different companies offering different solutions and know where to start can seem daunting.
Whatever your circumstances are there will be solution to help you.
This guide will provide you with a brief overview of some of the most common debt solutions.
Debt management plan
Who is it for?
A debt management plan is designed to help people who have some money left over at the end of the month, but not enough to pay all their debts.
How does it work?
A debt management plan is
normally arranged by a third party
– for example, a charity or
a debt Management Company. The organisation arranging your plan will draw up a proposal for your creditors, asking them to accept reduced payments. They will also ask for interest and charges to be stopped.
For example, if you have 10 unsecured creditors you will only pay 1 monthly payment depending on the size of your available income and the debt management organisation divides this payment between your creditors.
Debt relief order
Who is it for?
A debt relief order (DRO) is designed to help people with debts of less than £15,000 in total and have no more than £50 left over each month after paying essential living expenses.
It’s a legal procedure similar to bankruptcy. It is not suitable for anyone who either owns their home or has assets totaling more than £300 (excluding one car up to the value of £1,000).
How does it work?
You apply for a DRO through an intermediary who submits the application to the official receiver. You have to pay a fee of £90.00, which you won’t get back if the application is unsuccessful. But if it is successful, your debts will be written off after 12 months as long as you keep to the terms and conditions of the order.
During the 12 months your creditors won’t be able to chase you for payments or add interest and charges to the debt.
Individual Voluntary Arrangement
Who is it for?
An Individual Voluntary Arrangement (IVA) is a legal procedure for people with unsecured debts of £15,000
or more. It is an alternative to bankruptcy.
How does it work?
An IVA is arranged by an insolvency practitioner who will help and advise you throughout the process.
Your finances are assessed and the insolvency practitioner draws up a proposal for your creditors. Your available income is used to make affordable monthly payments towards your debt over an agreed amount of time, usually 5 years. You may also pay a lump sum as well as your available income. The remaining debt is written off at the end of the agreed time.
A creditor’s meeting is called
and a vote is taken. If creditors representing at least 75% of your total debt vote in favour of the IVA, then it can go ahead.
This means that the creditors can no longer take any legal action to recover the debt providing you keep to the terms
of the arrangement. There is a fee involved but this will be included in the payments you make.
The insolvency practitioner contacts you once a year to review your finances and you and your creditors receive an annual progress report and notification when the IVA is complete.
Who’s it for?
Bankruptcy is a legal procedure for people who cannot pay their debts within a reasonable time. It is a form of insolvency so to be eligible, your unsecured debts must outweigh your assets, including property and vehicles.
How does it work?
If you make yourself bankrupt, creditors write off your unsecured debts, meaning you have a fresh start. However, you will be subject to certain restrictions during the term of the bankruptcy, which is usually 12 months.
In order to file for bankruptcy, you have to pay a fee of £700 (£175 to the court and £525 to the official receiver).
If the bankruptcy is approved, creditors must stop charging interest and are prevented from contacting you or taking legal action to recover the debt.
In some cases, you are asked to make monthly payments towards your debts from your available income. This is known as an Income Payment Agreement, and can last for three years.
Bankruptcy should not be taken lightly as it is a big step and you may have to give up your assets.
You should always get expert advice before making the decision to go ahead with it.
The places we'd suggest contacting are:
Christians Against Poverty
Debt counselling agency, which specialises in helping those who are emotionally struggling too. The religious focus is why they do it, not how they do it.
Link: Christians Against Poverty
Tel: 01274 760720
Opening times: different for each bureau
Citizens Advice Bureau
Full debt and consumer advice service with many bureau having specialist caseworkers to deal with any type of debt including repossessions and negotiation with creditors.
Link: Citizens Advice or visit your local CAB centre (find nearest)
Opening Times: different for each bureau
Community Legal Advice (includes Housing Duty Scheme)
Legal advice on a wide range of issues, including debt (usually for those on benefits or a low income). The Housing Duty Scheme gives free advice by phone or at around 100 courts across England and Wales if you are in danger of eviction or repossession.
Link: Community Legal Advice
Tel: 0845 345 4345 (or text 'legalaid' and name to 80010 to get a call back)
Opening times: M-F 9am-6:30pm, Sa 9am-12:30pm.
Consumer Credit Counselling Service
A full debt help service in England, Scotland, Wales and Northern Ireland. Online support is also available via its Debt Remedy tool and vulnerable people (due to age, mental health or capacity) are able to get extra help support via the free advocacy service.
Tel: 0800 138 1111 (also free from mobiles)
Opening Times: M-F 8am-8pm, Sa 9am to 3pm
Debt Advice Foundation
A debt advice and education charity offering one to one advice.
Link: Debt Advce Foundation
Tel: 0800 043 40 50
Opening times: M - F 8am to 8pm, Sa 9am to 5pm
Debt Support Trust
The Debt Support Trust is a not-for-profit debt advice charity covering England, Wales, Scotland or Northern Ireland via it's phone, email or online debt analyser tool.
Link: Debt Support Trust
Tel: 0800 085 0226 (or email)
Opening times: M - F 8am to 7pm
A full debt help service in England, Scotland and Wales. Online advice is also available via its My Money Steps tool.
Link: National Debtline
Tel: 0808 808 4000
Opening Times: M-F 9am-9pm, Sa 9.30am-1pm (or see Business Debtline for business debts).
Free debt advice and solutions for those in financial difficulty.
Tel: 0800 280 2816
Opening Times: M-F 8am-9pm, Sa 9am-3pm
Northern Irish residents
Two free, confidential and independent schemes in Northern Ireland are: advice4debtNI, a government funded service offering phone and email advice and AdviceNI, local centers that offer face to face advice and the ability to chat online to an advisor via its 'beattherecession' scheme.