Help! My debts are spiralling out of control…

With the coronavirus pandemic impacting many people’s income, rising unemployment rates and average household debt of £60,403 (The Money Charity), it is no wonder that more and more people are struggling to make ends meet. And although interest rates are currently low, a missed payment on a mortgage, credit card or other forms of borrowing, can mean debts quickly build up.  

Swabra Natabi, debt caseworker in our Croydon branch, answers some common questions about debt and explains why you should always focus on paying your priority debts.

I feel like I’ve lost control of my finances and have run up debts all over the place. How do I even know where to start?

The most important thing to do when you feel like you cannot manage financially is to communicate with your creditors. For instance, if you have a credit card and you’re struggling to keep up with payments, contact them and let them know. You have rights as a consumer and as such, companies have procedures in place to support those who are going through financial difficulty. This applies to rent, gas and electricity. If you get ahead of the problem, then you are more likely to save yourself a lot of stress further down the line.

I always say to my clients that all these companies see is a number, mainly an account number. There is no story behind it. All they see is an account number with a monthly direct debit. So, when the payments stop, they have a default recovery method to chase you up. However, the moment you contact them and explain your situation, the way in which your case is dealt with is adjusted. Don’t be afraid to contact them – it really is in your best interest.

How do I know which debts are the priority?

A priority debt is one where the creditor’s ultimate sanction may result in the loss of liberty; home; essential supplies, for example, gas or electricity; or essential goods. Below are some examples of priority debts and what can happen if they are not paid:

Rent/mortgage – you could lose your home

Council Tax – the council could:

  • Send enforcement agents to your house (they cannot force entry but if you have a car then it could be at risk)
  • Apply for a direct deduction of wages/benefits
  • Apply to make you bankrupt if the debt is over £5,000 or secure it against your home
  • You could be imprisoned due to wilful refusal or culpable neglect.

Gas and electricity – you could be disconnected.

TV licensing – You could be prosecuted with a court fine of up to £1,000. If not paid, they could send enforcement agents to collect this.

There are many other priority debts such as secured loans, magistrate’s court fines etc.

If I focus on paying the most important debts, what happens to everything else?

If you have any spare money after your essential expenditure and paying off the important debts, then you could arrange a repayment plan with others.

However, it would be advised that you get some debt advice before making any such offer.

What sort of options are there for debts and how can I find out what is suitable for me?

There are 15 main options that a debt adviser will explore with you once they have information about your situation to find out which of them are suitable for you. You should always get debt advice to ensure that you have explored all the debt options that are suitable to your situation. Each of the options has its own advantages and disadvantages so your debt adviser will explain them to you so that you make sure you choose the one which is best for your situation. 

I’m really worried that the people I owe money to are going to take court action against me?

One of the first things your debt adviser will do once they understand your financial situation is explain to you what risks you have if you do not pay each of the different types of debts you have. They can explain to you the way the creditor could take court action and the opportunities you have to stop them from doing this. If you have received a letter saying someone you owe money to is going to take court action against you, or even court papers, the first thing I would say to you is speak to a debt adviser. 

I’m really not confident with managing my money. How can I get more advice?

You can contact our service by filling in our debt contact form or calling us on 020 8667 9252.

As part of our debt advice, we complete a standard financial statement where we look at your income and expenditure. Many clients have found this useful because they are able to see where their money goes. This in turn helps them to budget better and make cuts where they can in order to maximise their income.

We also run a series of free money webinars on a range of financial topics helping you to manage your money better.

If you need debt advice don’t delay. Fill out our debt contact form or call us today on 020 8667 9252.