Debt can make you experience many different emotions. You may feel scared, despairing, ashamed, helpless, or guilty.
It is important not to hide from your financial difficulty, or to panic and take desperate measures. You have time, but you must face the situation head on.
Get help
Contact a debt counselling service. These organisations are free and they can help you to talk to creditors.
The Society and College of Radiographers recommends the charity https://www.stepchange.org/ as a first port of call, and a lot of the information given here is based on their advice.
The debt counselling service will inform the people chasing you for payment that you have contacted them and you are addressing your debts. This will provide a month's breathing space to get yourself on a better footing. The debt collectors should stop contacting you during this period.
Other benefits of using a debt counselling service is that they can:
- Negotiate to freeze interest on your debts
- Place you on a Debt Management Plan (DMP), where they negotiate with your creditors (see DMP statistics from StepChange).
- Make you aware of your options
They will show you how to prioritise the most important debts to enable you to keep food on the table and a roof over your head.
If there is a delay in arranging an appointment with a debt counselling service because they are busy, use the information on their websites to start to plan.
Not for profit debt counselling organisations
https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/
http://www.debtadvicefoundation.org/
http://www.debtsupporttrust.org.uk/
https://www.nationaldebtline.org/
Companies that advertise consolidation of debts, or other debt assistance, are commercial organisations and should be avoided.
Make a spending plan
Prepare a sheet that shows your income and assets and your outgoings. You will need this to show creditors, or a court, to provide information about your circumstances and to help plan what you can pay towards your debts.
There are budget planning guides online or organisations that will help you to do this.
https://www.stepchange.org/debt-info/how-to-make-a-budget.aspx
Know your rights
What is going to happen to me?
This depends on what action you take. If you ignore letters, do not contact your creditors, and do not take steps to reduce your debt (however hopeless you feel that might be), you will be subject to legal action.
If you look at the problem calmly, prepare a budget and get appropriate help, then the chances are that you can start to get yourself out of debt, however long that may take.
What can my creditors do?
Creditors are aware that if you don’t have money, then you can’t pay. They will assume that they are unlikely to be the only people to who you owe money and they will be keen that you pay them before anyone else. They may make false claims. It is important that you understand your legal rights, as well as what rights creditors have to recover a debt.
Creditors can:
The law indicates that creditors should not call ‘excessively’, but there is no set limit. They should also not call at unreasonable hours, but again it is not specified what is ‘unreasonable’. You are entitled to complain if you feel a creditor is harassing you. You might find it easier to use caller display, or silence your phone, if the calls are upsetting or disturbing you. Creditors must NOT call you at work if you ask them not to.
- Chase you for the debt by phone or letter. Telephone calls can be upsetting, but all you need to say is that you are aware of the amount outstanding and you are taking steps to resolve the problem. Don’t be pressurised into making a payment over the phone. Anything important will come by post, so there is no need to speak to creditors if you would prefer not to.
However, some callers will be sympathetic and might be helpful, so do not dismiss them out of hand. If the call makes you feel upset or angry, or if you’re feeling under pressure to make payments you can’t afford, it’s better to end the call. Politely ask the caller to send a letter or email instead, then hang up the phone. You won’t get into trouble for doing this. - Send a debt collector to your house. These are not bailiffs and have no more power than someone calling by phone. It is unusual for reputable companies to do this because it is not cost-effective.
- Add interest and charges to the debt. This is a key reason why it is important to complete your budget and contact the debt counselling service. They can often negotiate to freeze interest and charges on a debt. It is now a legal requirement that creditors do not pursue a debt for 30 days if you are using a debt counselling service.
- Take money from connected accounts. For instance, if you have a credit card and an account at the same bank. However, they must advise you before this happens.
- Issue a Default Notice. This can affect your credit rating, but a DN is usually issued only after 3-6 missed payment deadlines. This is another reason why it is important to maintain contact with your creditors
- Pass the amount owing to a debt collection agency.
- Apply for a County Court Judgement (CCJ). You must complete court forms if you receive them and make an offer of repayment. This should be realistic and based on your budget. If you present a budget, it is likely that the court will set a realistic repayment schedule, which you must stick to.
Creditors cannot:
- Harass you. You can ask only to be contacted in writing, but you must open letters.
- Discuss your circumstances with anyone but you (or anyone else who is jointly liable for the debt).
- Pretend to have legal powers they don’t have, such as sending letters that look like court documents, or claiming then can send bailiffs to seize goods without a court order.
- Add ‘excessive’ interest or charges. For example, they can’t add £100 to a debt for sending you a letter.
- Stalk you on social media.
- Be threatening or abusive, or lie to you.
In general, creditors are practical business people. They want their money and if you can’t afford to pay the debt in full, they want what you can pay. Forcing debtors into bankruptcy is expensive for a creditor, and they are unlikely to take this step unless you have significant assets. What creditors hate most is debtors who won’t communicate with them.
Look after yourself
Financial problems have an emotional toll. Coping with debt can be very stressful and many people have already suffered because of the events that precipitated the debt problem in the first place.
Take steps to reduce anxiety as much as you can:
- Tell family and friends. They will understand if you can’t join social events or buy presents, and they may be able to help you.
- Stay in the present. Thinking about what could happen and worrying will not help. Try and concentrate on what you need to do today. For example, ‘Today, I have to go online and work on a budget.’ ‘Today, I must call the debt counselling service and make an appointment.’ Plan manageable goals
- Go out, spend time with family, do what you enjoy. Debt doesn’t mean your life comes to a halt, or you can’t enjoy yourself. It is important to do other things besides stewing about your difficulties
If you feel overwhelmed by your problems, visiting your GP might be helpful. The Samaritans are also recommended. They provide support not only for people who are suicidal, but for anyone who needs to talk. They can offer practical advice. https://www.samaritans.org/