2 Having problems meeting your debts?
Many people have problems with their debts. Try not to worry - you do not have to deal with it on your own.
This booklet is designed to help you to work out what you can do about your debts, what choices you may have, and where you can go if you want to talk to someone about them. It is not, however, a detailed statement of the law. Instead it should be seen as sign-posting you to possible solutions.
Are you are worried because you owe money and can't keep up your payments?
The first thing to remember - you are not alone. You can get expert advice.
Whether you only have a few debts, or whether you owe money to lots of people or companies, it is important that you think about everyone you owe money to and to try and list them.
Your debts might include credit cards, catalogues, rent/mortgage arrears, council tax arrears, bank loans.
Reasons for getting into debt
There are lots of reasons why people find it hard to pay their debts. It could be because of an unexpected change in circumstances or an unplanned increase in your outgoings because of:
- onset of a disability
- a new baby in the family
- or you may have borrowed too much.
It is important to understand why you are in debt, but it is more important for you to understand how to help yourself, or get a money adviser to help you and work through your difficulties with you. There are details in the sheet that comes with this pack about where to find a local money adviser.
Take action now!
It is best to deal with your debt problems at an early stage, as the longer you leave it the worse things become. And, remember you don't have to do this on your own, as there are advisers in your area to help. Free, independent, impartial, and confidential money advice is out there for you from the money advice agencies listed here.
A money adviser will look at all your debts, help you decide whether you are able to make any payments to your creditors and, if so, which creditor should be paid first. They can also negotiate with your creditors and deal with emergencies such as:
- gas or electricity being disconnected
- your wages being arrested.
Money advisers will also look at how your income can be maximised. They may suggest you could try applying for state benefits. For example:
- income support
- tax credits
- council tax or housing benefits or rebates.
A money adviser will help you look at your overall debt situation, and help you cope better. They will not make your decisions for you, but will give advice and information, so that you can make informed choices.
Do you know?
The following are some of the choices you may have in order to deal with your debt.
- Debt management programme - this allows you to pay off your debts over an extended period of time with agreement from your creditors.
You need to be aware of a couple of things when entering into a debt management programme. It is an informal arrangement with your creditors who can, at any time, decide they no longer wish to accept the payments you offer. But normally they will continue to accept payments as long as your circumstances don't change.
However, they will not always agree to freeze interest charges, and in some instances may also apply an administration charge if the account is not up to date.
You can get help with setting up a debt management programme by approaching a money adviser, or one of the telephone helplines, such as National Debtline, or Scottish Debtline (run by the Consumer Credit Counselling Service).
Go here for money adviser and helpline details.
- Debt arrangement scheme ( DAS) - this has been introduced to help and protect debtors who owe money to several creditors and who have surplus income from which payments can be made on a regular basis.
DAS works like a debt management plan, but gives you, as a debtor, more protection. Under DAS, a single regular payment is made to an approved payments distributor who sends the money to your creditors. If you are applying for a debt payment programme ( DPP) under DAS or if you already have a DPP and keep to the agreed payments, your creditors cannot carry out enforcement action against you or make you bankrupt. Also, interest is frozen when you have a DPP.
You must have a money adviser if you want to apply for a DPP. He or she will advise you on whether DAS is suitable for you and, if you wish to proceed, will ask your creditors to agree a DPP. The DPP will allow you to pay off your debts at a lower rate over a longer period of time. It can be for any amount of money or for any length of time. The regular payments can be quite low if necessary.
If all your creditors consent (or are considered to have consented because they do not respond), the DPP is approved automatically. Creditors will then be bound by it as long as you stick to the payments.
If creditors do not agree, or object, then the DAS administrator can still approve the DPP if it is fair and reasonable.
If your circumstances change, the programme can be varied to take account of this so long as the DAS administrator decides it is fair and reasonable.
DAS contact - phone the DAS administrator helpline 0845 612 6425 for details of DAS. You can also find out more from the website at www.moneyscotland.gov.uk.
- Bankruptcy - it may be that you have to consider bankruptcy. This is a serious step which passes control of all your assets to a trustee (often a chartered accountant). Bankruptcy carries severe legal consequences and may place long-lasting restrictions on you.
- Trust Deed - this is an informal alternative to bankruptcy, but still has serious legal consequences. It does not involve the court, but all your assets will still be in the hands of your trustee. The legal consequences of a trust deed are usually thought to be less harsh than in full bankruptcy. A trust deed is only suitable if you have some assets that can be sold, or you have enough money left over when you have paid your bills to make a reasonable regular contribution. If the trust deed becomes 'protected' because a sufficient number of your creditors agree to it, it becomes binding on all your creditors.
Bankruptcy, either through the courts or a protected trust deed, can lead to loss of your family home, savings and insurance policies. So never take a decision about either of these without first seeking advice.
You can find the phone and contact numbers of local money advice agencies on the sheet that accompanies this booklet.