The past year has caused a dramatic surge in those dealing with debt. Whether it’s rent or mortgage arrears, energy bills piling up or simply some money mismanagement, we’ve got a few tips on how and where to begin with dealing with your debt.
Depending on your circumstances (type of debt, how much you owe overall, your current financial situation and how much you can realistically pay) debt management may be the best way to move forward. However, if you’re unable to pay your debts, or have arrears of over £20,000 you may have to consider bankruptcy.
Your first point of call can always be to get in contact with a debt advisor. We, at JK Advice Centre, offer this service and can help you get on track with managing your money. Just call us on 020 3302 6682 to book your consultation. But there are other service providers a quick google may be able to help with. Debt advisory services can help you go through your finances and help you in beginning to understand your debt. They can set up payment plans and know which debts to focus on if you have multiple. They can also advise on budgeting plans to get moving in the right direction again.
Dealing with debt yourself
In dealing with your debt yourself there are steps you can take to move towards a debt-free life. A simple (but maybe not so easy) would be to check if you can increase your income:
- Are you being paid the right amount (Or enough? This should be at least National Minimum Wage. Check the deductions on your wages are correct too, such as tax, National Insurance and pension contribution)
- Are you eligible for welfare benefits? (Advice centres can help you figure this out and help you claim for what you’re entitled to).
- Are there any charities that can help you?
You can also try to reduce your general living costs such as opting for cheaper alternatives on travel, energy suppliers, broadband or general bills. Contact your local council to see if you’re eligible for a council tax discount also. If you already receive welfare benefits they may automatically reduce other costs too. You could get a cheaper TV licence, prescriptions from the NHS or help with your children (childcare or free school meals).
If a debt advisor is not for you right now there are other ways to get yourself out of debt. Talking to your creditors should be a top priority (a creditor being the person/business/organisation you owe money to). With them, you can arrange a debt solution: a formal agreement to establish how/when you are going to pay off your debts.
Individual Voluntary Arrangement (IVA)
An IVA (Individual Voluntary Arrangement), or debt management plan is an agreement to pay all or part of your debts. You pay an insolvency practitioner on a regular, scheduled basis to then be split between your creditors. An insolvency practitioner is someone who is licensed and authorised to act for an insolvent individual, they are normally accounts or those who specialise in it specifically. They will start if the majority (75%) of your creditors agree (even with those who don’t) and can then stop your creditors from taking action against you.
The government-backed Breathing Space scheme may also be able to help. For more detailed information we have a full blog post on it here <<link>> but briefly: it is a debt respite scheme for those eligible to receive 60 days without enforcement action, no contact from your creditors and no additional interest/charges on your debts. This also can apply to those receiving mental health treatment, the scheme will last as long as the treatment does plus an additional 30 days.
If you can’t pay your debts
If you cannot pay off your debts through your current finances or don’t have any assets you can sell you may be able to apply for a Debt Relief Order if your debts are under £20,000. This means your creditor cannot recover their money without the permission of the court and you could be freed from debt after 12 months. To apply, contact a debt adviser who can take you through the process. For more information on Debt Relief Order Options for paying off your debts: Debt Relief Orders. <<edit link>>
If your debt is over £20,000 you may have to consider bankruptcy (for an individual only, not a business), but this should be considered as a last resort. Costing £680, your Bankruptcy Order will usually remain for 12 months where your assets will be used to pay your debt, you follow their restrictions and your name and details published in the Individual Insolvency Register.
Please note: this is not legal advice, please refer to gov.uk for further information and official guidelines.
If you are in need of debt advice, call JK Advice Centre on 020 3302 6682 or email us at email@example.com to book your consultation.