Your Simplified Options for Dealing With Debt

Debt can feel like carrying around a backpack full of bricks, weighing down not just your bank account, but also your peace of mind. Ever found yourself drowning in bills, wondering if you'll ever come up for air? You're not alone. As of December 2023, the average UK household had a total debt of just around £58,000, and it’s expected to worsen for the upcoming financial year. 

The thing is, seeking help for debt can feel like stepping into the unknown. Maybe you're afraid of judgment or think you should be able to handle it on your own. That feeling isn’t uncommon. A recent study has shown that more than half of people across the UK think that there is a negative stigma with seeking debt advice. But here's the truth: there are options available to you, and you should not feel ashamed for taking them. Some of them don’t even cost you anything. 

We know how overwhelming it can be to explore your next steps on the road to overcoming debt, so in this blog, we're breaking down your options. Whether it's combining all your payments into one, crafting a plan to chip away at what you owe, or exploring other strategies, we've got you covered. It's time to take back control of your finances, one step at a time. If you want to read through these options in a more fleshed-out way, you can find them in our dedicated section on options for dealing with debt, or by clicking on the relevant link within each tip.

Here are some things you might want to consider:

1. Categorise your debts.

Start by dividing your debts into two categories: priority and non-priority debts. This ensures that you prioritise paying off the most important ones first, such as mortgage or rent arrears, council tax, and utility bills.

2. Understand your bank accounts.

It's important to be aware that a bank or building society has the authority to withdraw funds from your account if you owe a debt to the same banking group. To safeguard your finances, ensure that your income is deposited into an account not associated with any debts you owe.

3. Create a budget sheet.

Gain insight into your financial situation by creating a comprehensive budget sheet. A budget sheet can help you understand your income, expenses, and available funds for debt repayment each month. Explore our budget planner for assistance in managing your finances effectively.

4. Negotiate.

If you find yourself unable to afford your regular monthly payments, consider negotiating reduced payments that are more manageable with your creditors for your current financial circumstances. Many creditors are willing to work with you to find a solution.

5. Explore debt management options.

Investigate options such as Debt Management Plans (DMP) or Debt Arrangement Schemes (DAS) to facilitate repayment over a structured timeframe. These avenues can provide invaluable assistance in negotiating with creditors or extending repayment periods to alleviate financial pressure.

6. Consider bankruptcy and trust deeds.

In cases where negotiations fail and financial complexities arise, bankruptcy or trust deeds may offer a viable solution. Formal bankruptcy and sequestration provide legal processes for managing insolvency, whilst trust deeds offer a unique opportunity to allocate disposable income and assets towards debt repayment.

7. Seek write-offs for special circumstances.

If you're facing significant health challenges that hinder your ability to repay debts, you may explore the possibility of requesting debt write-offs. Ensure to provide medical evidence of your condition when making such requests, as creditors may consider exceptional circumstances.

Here are some Frequently Asked Questions (FAQs) about debt:

• Will I be blacklisted if I don’t pay my debt?
  No, there is no "blacklist." Credit reference agencies store information about your credit history, but in most cases, there's no permanent stain on your record. Read more about it here. 
• What actions can creditors take if I don't pay?
  Creditors have varying powers of recovery for different types of debts, often requiring a court hearing before taking legal action. Read more about the different ways they can do it here. 
• Should I disclose mental health conditions to creditors?
  Consider sharing mental health conditions with creditors if they impact your ability to repay debts. Some creditors have guidelines for handling customers with mental illness. See more here.  
• Who can I talk to for help?
  Reach out to a specialist debt adviser who can guide you through available options and their implications. Read more about advisers here.  
• What if I borrowed money from a loan shark?
  All lenders must be authorised by the Financial Conduct Authority (FCA) to lend money. It's illegal for unauthorised entities to lend money, and you should seek assistance if dealing with such situations. Read more about it here.  
• Who else can I contact?
  There are many places you can contact if you are currently going through debt. See more here.  

By understanding your options and seeking appropriate support, you can take proactive steps towards alleviating the burden of debt and achieving financial stability. Remember, you're not alone, and help is available to guide you through your financial journey. 

Mental Health and Money Advice Service 

If you or anyone you know is struggling during the cost-of-living crisis, you can consult the following resources from our Mental Health and Money Advice Service for support: 

• Free Mental Health and Money Toolkit   
• Free Budget planner 
• How the Cost-of-Living Crisis Might Affect Your Mental Health 
• What Other Effects Might I See Because of the Cost-of-Living Crisis? 
• I can’t afford my debts, what can I do? 

Or, if you are in Scotland and you would like to speak with one of our specialist advisers at our Advice and Support Service for free and impartial advice, call our Advice line on 0808 8010 515. We are open Monday to Friday, 10 a.m. – 4 p.m., or email us at advice@changemh.org.