Money problems / dealing with debt

Hiding from debt won’t make it go away. It may be easier than you think to get debts under control, especially with professional help. You may end up with a bad credit rating but you’ll feel loads better! The following is a step by step guide to dealing with debt, including local and national organisations that can help.

  1. Maximise your income: If you are struggling to make ends meet, make sure you are not missing out on any benefits or tax credits that you may be entitled to—see here for who can help.
  2. Make a budget plan: call in at Castlegate for a copy to fill in, or fill in online at nationaldebtline.org – (click on ‘your budget’). Work out your income and outgoings. Talk it through with a friend and see if there are any savings you could make—for example packed lunches, buying a bike or reducing your mobile phone costs.
  3. Prioritise your debts and deal with priority debts first: List everyone you owe money to. Your priority debts are the ones with the most serious consequences, not the ones hassling the most. First should be current rent or mortgage arrears, then ‘secured’ loans, gas, electricity and water bills, Council Tax and unpaid fines or maintenance payments. Debts such as credit cards, store cards, bank debts and old phone contracts are usually non-priority debts and should be dealt with after your priority debts are tackled.
  4. Contact the people you owe money to and explain the situation: Send a copy of your budget plan to all your creditors with an offer of repayment that you can afford. Don’t worry if it is small. Most creditors will accept this rather than chase you for missing payments. If you can’t afford anything now, tell them so, and that you’ll contact them again if things change. Ask them to freeze any interest. Sample letters available at nationaldebtline.org, but you can get help doing all this from Castlegate or CAB. CAB can also contact people you owe money to on your behalf. Answer creditors’ letters, and if they are calling you, insist that they deal with you in writing instead. It is easy to be talked into agreements you can’t keep or aren’t happy with over the phone. Creditors are allowed to remind you of missed payments but not to harass you.If you are dealing with your debts, it is unlikely that a creditor will take you to court, but if this happens, don’t ignore court summons – fill in the papers and attend the hearings. The courts can arrange affordable repayments. Most unpaid debt is only a civil offence, not a criminal one. You won’t be arrested for it, or put into prison. stepchange.org has information on ‘what creditors can do’.
    If you have taken out a payday (internet) loan and can’t afford the repayments beware – you may have signed an agreement to allow them to take money from your account at any time. Ask your bank to cancel this as soon as possible. Sample letters at nationaldebtline.org.uk – search for ‘CPA’ or ‘payday loans’. Repayments to payday lenders are now capped by law so that you should never have to pay back more than twice what you owe.
  5. Don’t borrow other money to pay off your debts. This often works out more expensive, no matter how tempting. Avoid debt consolidation companies—they are in business for your money.

6. Getting help and advice about debt

If you would like help dealing with debts, there are local and national organisations you can contact. For example, to help with a budgeting plan, contacting creditors and arranging affordable repayments.

If this is just not possible, they can also advise about other options—for example a Debt Relief Order (DRO) or bankruptcy. Some of these options can only be done with a specialist debt adviser who can talk you through the process and make arrangements on your behalf.

The CAB Adviceguide.org.uk has information about diagnosing your debt problems and finding solutions. Also about budgeting, credit, banking, repayment options, bailiffs, sample letters to adapt etc.

Christians Against Poverty is a national debt counselling charity that offers help in York. They can help you work out a realistic budget as well as negotiate affordable payments with creditors.

GamCare’s helpline and online support can help if you have a problem with gambling; or think you might do.