Prioritise your debt
- Rent/mortgage arrears (you could lose your home). Do not simply hand in the keys to the lender and walk away, you will still be liable for the debt.
- Council tax arrears (you could land up in court).
- Fuel debts (you could be cut off).
- Water rates/community water charge (you could be cut off).
- Second mortgage or secured loan (you could lose your home).
- Hire purchase debts (if you've paid less than one third, your goods could be repossessed (without a court order).
- Maintenance payments (via Child Support Agency). Court fines (there can be penalties if you do not pay these.
Are you in debt?
You're in debt. You can't pay your bills. Gas, electricity, telephone: the list seems endless. You've missed the payments on the house, car, washing machine, furniture, TV, catalogue and credit card. Everything is in an utter mess.
There's no easy way out, you know that already. But you must do something or your debts will get worse. The sooner you face the problem, the easier it will be to solve it.
Act NOW
Tell your creditors (the people you owe money to) as soon as you have problems. Don't ignore letters or demands. Warn creditors if a change in your circumstances will affect your ability to keep to your credit agreement. The earlier they know about any problem, the more sympathetic creditors are likely to be.
Step 1: How much do you owe?
List all arrears (missed payments), loans and credit commitments and when they fall due. Some debts can cause more trouble than others. These are priority debts. You must deal with these first.
Step 2: Maximise your income
Find out how much money you have coming in. Work this out on a weekly or monthly basis. Include your take-home pay.
Are you receiving all the income you're entitled to? Are you paying too much tax? Check your tax code by contacting your local tax office.
Step 3: What do you spend?
Work out your essentials like rent or mortgage, utilities and food, again on a weekly or monthly basis. Don't forget occasional payments like haircuts. Include items such as DVD rentals or cigarettes. Also note your present installment payments on any hire purchase or credit arrangements. Make a budget and stick to it.
Step 4: Still more going out than in?
Nothing left over. If you spend more than your income, can you make savings anywhere? Divide up your essential outgoings from other extra expenses like clothes. Try to cut down on things like alcohol, cigarettes and eating out. You'll have to make sacrifices. Can you get an extra part-time job for a while? Is there anything you can sell to bring in extra money to pay your debts? Do not sell anything on which you still owe money. You could contact the creditor with a view to returning any items being bought on hire purchase.
Step 5: Talk to your creditors
- Deal with priority debts first. Concentrate on keeping a roof over your head. You can then decide how much you can give any other creditors you have on a monthly basis.
- Don't make offers to creditors you can't afford. A small but regular payment is better than no payment at all, or one that you can't keep up.
- Keep copies of all letters you send each company and their replies. Make notes of any phone calls with the dates and the name of the person to whom you spoke.
- You must try to stick to any agreement made about reduced payments. If you have made any arrangements by phone, it is important that you follow this up with a letter stating clearly what has been agreed
- If your situation is pretty hopeless fill in the burn my debt form on the debtburn website for a specialist to contact you.