If you're in debt and you are finding it hard to cope, it's important to deal with the problem straight away - the longer you ignore your debts, the worse the situation becomes.
Make a list of everything you owe
The first job is to sort out exactly what you owe, and to whom you owe it (your creditors). You then need to put these debts in order of importance. The most important ('priority') debts aren't necessarily the biggest ones. Priority debts are ones where serious action can be taken against you if you don't pay what you owe.
Priority debts
Priority debts are things such as mortgage repayments, rent, taxes and payments ordered by the courts: if you don't sort these out, there's a possibility you could lose your home or go to prison.
Non-priority debts
Non-priority debts include credit card payments, bank loans, catalogue repayments and money you've borrowed from family or friends. You can't ignore these, but you don't need to deal with them as a first priority.
Work out a personal budget
To find out what debt repayments you can afford, work out a weekly or monthly budget to see what you need to live on. It's important to be realistic and honest with yourself.
Your budget will show how much money you can afford to commit to paying off your debts. Your budget may also show you where you can save money.
Help with personal budgets
National Debtline provides a free self-help pack and leaflets, including help on how to work out a personal budget. You can download these from their website or ask for them to be posted to you by calling their helpline.
You can also get advice on making a personal budget.
Talking to your creditors
Once you know what you can afford, you can talk to your creditors about your situation and what you're going to do about it. Offer to pay each debt off in a way you can afford - it's important not to offer to pay more than you can afford, and not to assume you'll be able to pay more in the future.
It's important to follow up a phone call with a letter confirming what you said and agreed.
You may have little or nothing left to offer your non-priority creditors. You should still talk to them, explaining the situation; you may be able to tell them that you will pay them back at some point in the future - but don't make promises you can't keep.
Where to get help and advice
Many organisations offer free, independent advice on debt problems, so you don't need to use companies that charge.
The following organisations will give you free help and advice:
Citizens Advice Bureau (CAB)
Your local CAB is a good starting point for free advice. They provide free information and advice on legal, money and other problems: you can find your local CAB in the phone book or on their website.
National Debtline
National Debtline offers free, confidential and independent help over the phone for people in England, Scotland and Wales. You can call their helpline and also download publications from their website.
Consumer Credit Counselling Service (CCCS)
The CCCS also has a helpline, providing free, independent and impartial advice to people who have debt problems.
Your local authority
Some local authorities offer a free debt counselling service. You can check with your local authority by following the link below. You'll be asked to enter details of where you live and then taken to your local authority website where you can find out more.
Other organisations
If you're being threatened with legal action, you can check the Community Legal Advice website to see what your legal rights are. You may also be entitled to free and independent advice from your local Law Centre.
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1 comment:
If anyone wants to apply for debt or loan, then he/she should be taken some debt advice. This advice will be very helpful for them in the future.
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