Dealing with debts
If you have debt problems, creditors (the people you owe money to) will often be willing to accept arrangements to pay the debt off over a period of time. Therefore, be proactive where you find that your debt has become too much for you to handle by taking the steps discussed below. If you ignore your creditors, they may start court proceedings or take other steps to recover the amounts they are owed. The consequences of action of this kind can be very serious.
There are various steps you can take to manage your debt and the first would be to create a budget listing all your debts, income and expenditure as discussed below.
List your debts
You should separate the debts into 'priority debts' and 'non-priority debts'.
Priority debts would include those where non-payment could result in you losing your home, amenities or even worse, being sent to prison, such as:
Non-priority debts generally include:
You cannot be sent to prison for not paying these debts. However, that does not mean that you should ignore them. Your creditors may take you to court if you fail to pay. If you still fail to pay despite there being a court order against you, your creditors may take further steps. For example in England and Wales, by using bailiffs to seize your property to be sold to cover your debts, or in Northern Ireland, seeking enforcement of the court order in the Enforcement of Judgments Office.
Work out your income
Income will include:
Work out your expenses
You may need to make some temporary changes to your life style in order to reduce your expenses which should generally include:
Calculate your available income
You should now have enough information to calculate how much money you have available to pay off your debts. You should start by paying off your priority debts. If you cannot afford to pay anything towards these debts or if you need help making payment arrangements with your creditors, then you should obtain some advice.
Once you have paid the priority debts, you should then work out how to pay off the non-priority debts.
Where to get advice
Many organisations, such as the ones listed here, are independent and don't charge for guidance. Always get free, independent advice before using a commercial service.
offers free, confidential and independent advice on how to deal with debt problems for people in England, Scotland and Wales. You can call their helpline or download free fact sheets from their website.
StepChange Debt Charity
offers a helpline, providing free, independent and impartial advice to people with debt problems for people in the UK.
Your localwill provide free information and advice on legal, money and other problems by phone, online or in person.