Struggling with your debts? Don't panic, there's help available. We'll take you through who you can talk to and the different repayment options they might suggest
Money is a sensitive subject, and debt especially so. We know how hard it can be to work up the courage to face, let alone talk to someone about any financial problems.
But it’s important to know you don’t have to face debt alone. There are a number of organisations that can help take the load off your shoulders, giving you the breathing space and help that you need.
There are a number of different types of help available when it comes to debt. Here's a run through of the options...
Someone to talk to
It could be that you just need to talk to someone to get things off your chest or need a friendly ear to listen to you. Lots of charities have helplines where you can speak to a real person about your situation.For example, Mind and Samaritans have helplines that you can call and they can also help you deal with the mental repercussions of debt and financial worry.
Also known as 'debt counselling', debt advisors can look at your situation and every debt that you have and tell you exactly what your options are. Some debt advice organisations can go one step further and might be able to help you deal with your creditors by talking to them on your behalf. They might recommend different debt solutions, and some will help set you up on these.
There's also a huge variety of ways that you can access this advice. Debt advice is available face to face, over the phone, online, and some organisations are even piloting advice via WhatsApp. Some of the organisations you can go to include:
Money Advice Service
Christians Against Poverty
Debt Advice Foundation
In order for an organisation to offer official 'debt advice' they have to be authorised by the Financial Conduct Authority. This means they are fully regulated and have to adhere to a code of conduct. You should never have to pay for these services when there is free help available. It’s important to contact debt advice organisations as soon as you decide to get help as they are often very busy and it may take some time to get an appointment.
Many organisations will have some pre-work you can do such as completing income & expenditure forms and providing other details in advance to help you get the most out of their services when you get your appointment. Don’t worry if you have urgent debts or even the threat of bailiffs coming round. Just make sure you let the organisation know and they should be able to prioritise your case to help you avoid that horrible situation.
Once you’ve contacted an advice organisation, they will provide you with information on what to do next. You may also want to start contacting creditors to advise them that you will be seeking formal advice. Many lenders will give you something called ‘breathing space’. This varies from lender to lender but is designed to give you some time to seek advice and get things back on track. Some lenders may even agree to waive interest, fees, or allow you to miss payments during the period. The most important thing is to be honest with the lender. They can help you better if you’re clear what action you intend to take to resolve it.
These are schemes or arrangements designed to either 'write off' some or all of your debt or provide you with a more manageable way to pay them off. We'll go into more detail on these schemes a little later.
If you’re struggling to make any payments, there are a number of options to consider, although none of these should be taken without seeking advice first. They can all have a significant impact on your credit report and score.
Debt management plan (DMP) - an informal agreement between you and your creditors to come up with a payment plan. You can make a DMP plan yourself by calling creditors or working with a debt charity to help you put arrangements in place.
Administration order (AO) - If you have a county court judgment against you and are unable to pay in full then you can apply for an AO. This is a formal and legally binding agreement between you and the creditors.
Individual voluntary arrangements (IVA) - An IVA allows you to pay your debts over a set period. You will need to contact an insolvency practitioner to set up an IVA.
Debt Relief Order - If you don’t own a home, don’t have spare income, and owe £20,000 or less then you can apply for a DRO for eligible debts. A DRO will impact your credit rating; it will show up on your credit file and a lender may reject you if they see you have struggled with repayments.
Bankruptcy - If you are unable to pay off any debts, then you can apply for bankruptcy. If you are declared bankrupt, then your debts are written off, but you may have to sell your home and possessions, close your business and you could even lose your pension savings.
When should you get advice?
When it comes to getting help with your debts, reaching out sooner rather than later is the best thing you can do.
Lots of people think you can only speak to someone when the creditors are actually knocking on your door, but that's not true. If you're worried about your debts, or you're struggling to manage on your own then you might want to seek out some advice. Even if you think your problem is small in comparison with others, there is never any harm in reaching out.
If you've already tried to tackle your debts yourself but feel you need more support, then that may also suggest now is the right time to ask for some help.