What Should You Do If You Find Yourself In Serious Debt?

If you should find yourself in serious debt you may feel as though you are the only person in this situation. You may think that no-one else appears to be having your problems. But you are most definitely not alone! Over 2 million others are in exactly the same situation and usually through no fault of their own.

People get into debt for all sorts of reasons, including marriage break-ups, job loss or illness. Once you get into the situation where you owe more than you can afford to pay back, it can seem impossible to find a way out, but there are ways to get your head above and take back control of your life.
There are various sources of debt assistance open to you, and the best route to take will depend on your particular circumstances. Do NOT borrow more money to pay debts off unless you have seriously considered the alternatives available and decided that is the best course of action. With some assistance and advice you can assess your situation for yourself and perhaps put a plan in place that will not involve increasing your costs above what you already owe. Make sure any debt advice you get is unbiased and comes from someone who is not trying to sell you a service.

Never consider Debt Management Plans Individual Voluntary Arrangements, Consolidation Loans or (all of which will cost you money) Bankruptcy is the last resort. Go through the following steps yourself, which will help you get to grips with exactly the position you are in and what you may be able to do about it.

Step one – Write to your lenders
You can’t expect sympathy or understanding from the people you owe money to if they don’t know you are having difficulties. Write to all your creditors. Explain why you are having problems and get them to confirm the details of exactly what you owe them. Template letters are available online for guidance from the many consumer forums on line.

Step Two – Prioritize your Debt

This is VERY important. When you receive replies from your creditors, you must place them into one of two categories, Priority Creditors, or Secondary Creditors. The priority you give to them is about the consequences of not paying them. It is nothing to do with how snotty their letters are or how loud they shout, it is about what will happen to you if you don’t pay them first. These will include mortgages, secured loans and anything where not paying could result in the loss of your home, essential services or goods.

Step Three – Create a Budget Statement

In order to work out what you can afford to pay your creditors, you need to create a Financial Statement. This will not only tell you what you have left to pay people, but it will help to show your creditors, why you are not in a position to pay them at the usual rate. It is very important that you do NOT include your Secondary Creditors in this calculation, only your Priority ones. You must list all your income and all your expenditure for each month, which will show you what you have left to make repayments with.

Step Four – Make Offers of payment to Your Creditors

Now that you know how much you have left after making payments to your Priority Creditors, you need to work out what you are going to offer to your Secondary Creditors. The only way to be fair and consistent about this is to divide up your surplus income in proportion to the debts you owe. For example, imagine that your total debt is £10,000 and you owe Creditor A £5,000. This is 50% of your total debt, so Creditor A should be offered 50% of your available income each month. Write to each of your creditors and explain how much you can offer them. Ask them to accept this and waive any penalty charges.
Follow this step by step plan and you should be well on the way to managing your debt without looking at more costly methods.

What cause us to get into Debt? The Possible Solutions?

The British people’s personal debt exceeds 1.1 trillion pounds. They have surpassed the United States in personal debt. Mortgage payments are the cause for 82% of this debt. The uncontrolled house price inflation is the main cause for this. Next an unusually high tax rate and over the top University fees are the main culprits. Some other sources of debt could be divorce, medical expenses, not planning well enough or being put on the dole from your job. One good thing to help the British people is new consumer protection laws capping credit card fees at twelve pounds down from thirty-eight pounds.

A solution for the Scottish people is what is known as a Scottish Trust Deed. This is an alternative to filing for bankruptcy. This is an agreement between you and your creditors for three years. At the end of the time period any remaining balance is written off. This trust deed is legally binding on all of your creditors. The terms of the deed are tailored to fit your situation. Another solution for the removal of debt is to consult a debt management agency. There are many offices out there who can give advice tailored for your situation. They can be found online or locally.

One solution they can give the British people is like the Scottish Deed. It is called an Individual Voluntary Arrangement. This is a formal agreement between you and your creditors for over sixty months. In that time, you pay them what you can afford. After that period is over, the remaining debt is written off. These arrangements can help reduce your debt by seventy percent. Creditors cannot call you once this arrangement has been put in place.

Another solution they can offer is Debt Management. This is like consolidation in the United States. This involves making one payment to the agency and they take care of the bills. In some cases, you can also freeze interest rates. You will not have any more contact with the creditors as the agency will do that for you.

The last solution they can offer you is a loan or to remortgage your home. The last resort to debt elimination is filing for bankruptcy. There are two types: voluntary and involuntary. You go to court yourself to file and the district judge decides whether to grant it or not. It costs four hundred and eighty five pounds to do this. The fee may be waived if you are poor or unemployed. Involuntary is when a creditor petitions the court for your bankruptcy if you owe more than seven hundred and fifty pounds. The advantages are: you are protected from creditors, your stress levels go down; after a year, the debt left over is written off and you’ll be able to make a fresh start. The disadvantages are: your assets will be sold to pay the debts. This can include your home.

The bankruptcy is put in the local paper for everyone to see. This will affect your credit rating for six years and it will prevent you from working in certain areas of employment. The best advice any debt manager will give you is try to keep your debt at or below twenty percent of your income level.

There is another solution.

If you have credit agreements taken out before April 2007 there is a new unenforceable credit agreement claim which is becoming more and more known about here in the UK. It is possible to have your credit finance agreements –agreements such as credit cards, store cards, secured and unsecured loans, car finance agreements, and those with payment protection insurance ( PPI) ‘audited’. They may not comply with the terms of the 1974 Consumer Credit Act and if they do not they are unenforceable credit agreements. This means you can claim to have them written off. That is the balance completely cleared. For NO FEES a solicitor with handle your claim. This is on a no-win-no-fee basis so it is risk free.

Help with Debt Problems

Worried about debt which you can’t have written off?

The credit crunch is forcing more people into debt.The terrible impact of the credit crunch is becoming more obvious. Several stories have been reported about desperate debtors who have committed suicide after failing to see a way out of their financial troubles. And those are just the people we hear about. There may be many other thousands – if not millions – of people who are suffering alone and in silence.

The Samaritans say that the number of calls to their city branches have risen significantly in recent months as even high earners also feel the pinch. The debt charity Credit Action claims the debt problems people call in about are much more serious than they were a year ago. Some callers are in such a state of despair that they have called up to get advice while holding a loaded gun in their hands.

Unless you’re on the frontline, like these charities, it’s all too easy to read statistics like “repossessions by mortgage lenders are up 48% in the last year” or “applications by homeowners for insolvency increased by 17% in 2008”, and not see the thousands of personal, human tragedies they involve.

Anyone can fall into debt. The question is, at what point does it become a serious problem? The key warning sign that you are at risk of falling into serious debt problems is the discovery that you are borrowing just to keep on top of your monthly expenses. In other words, you are paying for regular outgoings using credit cards or an overdraft because you are exceeding your income every month.

The moment this starts to happen, it is wise to seek help. Set a budget and stick to it. But what if cutting back is simply not possible? What if the situation is already quite serious, and you are being hassled by creditors or mortgage lenders? What should you do then?

First of all, be careful about who seek help from. Many companies will try to take advantage of you while you are in this desperate situation. For example, some unscrupulous insolvency practitioners may try to convince you to enter into an expensive and unsuitable insolvency agreement. Similarly, if you’re a homeowner who is facing repossession, you may also be offered the chance to sell your home and rent it back. This is an extremely dangerous way to get out of debt.

There are, however, three really good places to go to in order to get help. You can do all three simultaneously – and none of them will cost you anything:

Consult a debt charity such as:-

The Consumer Credit Counselling Service

National Debtline

Citizens Advice Bureau. There is usually a long waiting list.

1. The Consumer Credit Counselling Service will be able to provide practical help as well as free advice. They can speak to your creditors on your behalf and try to negotiate a solution for you, so that you can make affordable payments and still pay off your debt. If you are struggling with your mortgage, for example, they can speak to your lender and ask them whether you can reduce our payments to a more affordable level or take a payment holiday. Most importantly, they will sit down with you and go through everything you owe and explain all the jargon.

2. If you are deeply in debt, you are no doubt under a lot of stress – and it is often this stress which drives people to despair. If you feel depressed, don’t suffer alone. Contact counselling charities Mind or Relate for practical advice on how to deal with the emotional fall-out of debt. Don’t ignore it or bury your head in the sand, because inevitably this will only make the situation worse.

3. Find a debt forum on line and ask for support from other people who have been through the same thing.

It’s not easy to face up to debt, and sadly there’s no magic button you can press to make it go away. But there is always an answer to any debt problem and that answer should never be suicide. So hang on in there. And remember, you’re not alone. Debt charities can help you and most importantly of course, you can help yourself. Just don’t give up hope!