Here are some of the most commonly asked questions about debt. If you want advice about your debt problems, call our team on 0800 072 6623.
You may also find our Glossary of Debt Terms helpful.
Click on one of the questions below to jump straight to our answer:
– I cannot afford my debts, what are my options?
– How can I stop myself getting into debt?
– What rights do I have when threatened with bailiffs?
– What debt solutions are available to me?
– How do I stop my creditors contacting me?
– Are there disadvantages to debt solutions?
– Where can I find out the benefits I am entitled to?
– What is Insolvency?
– What is Disposable Income?
– What counts as personal assets?
If your income will not cover your outgoings and leave enough money to support your basic needs, there are actions you can take to help the situation.
There are a number of options available to debtors who are unable to pay off their debts, each suited to different situations and different forms of debt.
The first step is to distinguish each form of debt you have and list all your creditors. You must then organise which debts are priority debts and which are non-priority debts. A debt advisor can help you with this task, helping to identify the full extent of the debt.
Priority debts are the debts which would have the most serious consequences if the payments are not completed and include debts such as mortgage payments, utility payments and child benefits.
A debt advisor will then be able to help you identify any suitable options you have available to you. After identifying any relevant benefits or income support options which could be sought, the debt advisor will suggest the most suitable form of debt relief for the individual’s situation.
Many people can be susceptible to falling into debt, even those who are well remunerated. It is important to live within your means and retain sufficient reserve funds for unexpected circumstances.
Accurate budgeting for all the important costs can help ensure you live within your means. Dedicate a set amount for bills, rent and food every month to ensure you have the basic living necessities. Then budget for secondary living costs such as mobile phone and travel costs.
Be wary of buying products or services on a contract or signing up to long-term payment plans. These can be problematic if you or a family member suddenly suffered from a loss in income, making it difficult to meet payments.
If taking out loans or any credit agreements, always ensure you read any terms and conditions, and small print.
If a creditor threatens to send bailiffs to remove property from your home in payment for debt, there are a couple of options available to you.
Firstly, try to negotiate with the creditor. Even if you cannot afford the debt in full, the creditor may be willing to accept a repayment plan suited to your financial situation.
If that does not work, you can apply to courts to have any warrant of execution suspended. This will remove their right to enter your home and remove your property.
The Citizens Advice Bureau offers more advice about dealing with bailiffs in their Help with Debt section.
There are a selection of different debt solutions, all suited to different circumstances and varying forms and levels of debt. There include:
Talking to a debt advisor can help you determine which solution is best suited to your personal situation.
Being contacted and harassed by creditors can be incredibly stressful for debtors. Entering into certain debt solutions can make it illegal for creditors to contact you in regards to the debt.
Under a Protocol Compliant debt management plan, creditors have to give you a 30 day breathing space at the start of your plan, which means they should not contact you or add interest or charges while the plan is being drawn up. They are also instructed to contact your provider for any payment queries.
All forms of debt solution have their advantages and disadvantages. These disadvantages can include negative effects upon credit rating and impacting upon your professional career. A debt advisor will make you fully aware of all the advantages and disadvantages of each of the solutions before you enter into them.
If you believe you should be entitled to benefits or financial support, it is important to contact your local Citizens Advice or local council welfare rights office. This will help you determine the full extent of the benefits you may be entitled to.
Insolvency means you are unable to pay off your debts when payments are due. Insolvency indicates you have total debts of a higher value than assets.
Some debt solutions will require a certain level of disposable income. This is the amount of money you have after paying off essential living costs such as food, rent and utilities.
Many debt solutions will ask for a complete list of assets which may be used to pay off the debt. Assets can include property, savings, stocks, shares, personal effects, antiques and collectables. The following cannot be collected for a debt as assets:
- Items (such as tools and books) which are necessary for use in employment, business or vocation.
- Any household items deemed necessary for basic domestic needs including bedding, clothing and furniture.
- Any personal belongings which have been adapted to support a person with substantial or long-term physical disability.
- One domestic motor worth less than £1,000.
For expert advice about coping with debt, visit the InControl homepage or call our dedicated team on 0800 072 6623.