So …… you’re in debt and want to sort things out yourself – diy debt help – where should you start ?

debt helpFirst things first, DON’T PANIC, after all, it’s only money isn’t it and, no matter how horrible things feel right now it’s usually not that bad and don’t forget that you are never alone – especially right now when there are thousands and thousands who find themselves in the same, if not worse position to you.

Again, it may not feel like it, but there are things you can do and steps you can take and you CAN get out of this situation. The most important thing to do right now is not to avoid the issue and pretend it doesn’t exist – it ain’t going to go away so let’s face it head on! Whilst you may not be able to get rid of all your debts right away you can certainly get rid of the worry! Grab a piece of paper and let’s make a start now:


Make A Start:

List out all you debts and get the facts together: Don’t guess but let’s be exact, get together the loan agreements, statements, the last credit card bill and write down the name, address and phone numbers of your creditors along with your account details, the whole sum you have outstanding and the minimum monthly repayments.

Prioritise your debts: There are certain accounts that you should ensure you pay before others – the mortgage or rent for example – you don’t want to be made homeless do you. Fuel supplies as they can disconnect you, Council tax, CSA payments, Court Fines and such like can all use a court bailiff to recover monies and, in extreme cases, can send you to prison, Income Tax or VAT arrears – again, prison is an option and don’t forget your TV license as it’s a criminal offence to watch TV without one. There may be other debts personal to you that you regard as priority – you decide. These debts are your priority – if you’re required to respond to a letter or phone call on any of these then DO IT NOW – DO NOT IGNORE THESE DEBTS.

Everything else is a non-priority debt – this includes overdrafts, credit cards, loans, money borrowed from friends and relatives, student loans etc etc. Just because you’re classing these as non-priority doesn’t mean you’re going to ignore them, far from it. Whilst you can’t be sent to prison for non-payment of these debts if you don’t agree and maintain a repayment plan with the lender they still have the option of court action and potential of removing your property to re-coup monies due – but we’re going to avoid this aren’t we ?

Know Your budget: Now you need to establish exactly what money you have coming in and going out each month – no guessing, be exact. Get your bank statements, bills etc together and let’s go through it one by one and make sure you get everything listed. This is usually a very good exercise – quite often it’s not ‘til you check that you realise that you’re still paying £50 a month on a TV package that perhaps you don’t need or those charity donations that perhaps can’t afford to make right now.

Income should be after tax and deductions – everything that is a regular guaranteed income – wages, tax credits, maintenance payments, rent from a lodger etc.

Expenses include the following:
 Housing Costs. Not just the mortgage or rent but also the insurance, any life insurance or endowment policy along with any re-mortgage or secured loan .
 Council Tax
 Gas, Electric (or other fuel) and Water charges
 Monthly Housekeeping. You’ve got to live so work out the realistic amounts for what you spend on food, toiletries, cleaning materials, school dinners, cigarettes etc – include everything you buy on a regular basis and be realistic.

Include also an average amount for family clothing – list it all out separately so you can see if it’s possible to make a saving that may help solve the problem.
 Telephones – Land-line and any mobiles
 TV licence
 Travel costs. Car- including any loan, fuel, insurance, upkeep plus any other public transport cost.
 Any other Insurance policy – life insurance not linked to you mortgage, PPI, travel insurance etc
 Any essential childcare costs
 Any other essential expenses – maybe a monthly prescription fee, dental costs etc
 Rainy Day fund – money you need to set aside each month to fund the replacement or repair of any essential item

Also – don’t forget it’s not all about saving money – consider too the possibility of making more money each month – could you get an additional part time job, could you rent out that spare room, are there any benefits you could be claiming – you know your situation so have a think about it.

By adding up all your incomings and taking away all your expenses will now tell you exactly how much you have left over each month to pay off your debts and hence how good or bad the situation actually is. This is called your financial statement.

Now that you have all the facts you can also decide if you are going to try to sort out your problems yourself of if you are going to seek outside professional help. Any external support that you seek will ask for the information that you have just got together so whatever you decide you will need to complete the above exercise.

Your Priority Creditors: Your priority creditors, as you established earlier, now need to be contacted straight away – don’t delay or wait for them to contact you first, either pick up the phone or write them a letter and explain that you are in debt, explain why you are in debt and convince them that you are now addressing this issue and aim to sort it all out as quickly as possible. If they are threatening you with court action then tell them you are now “on the case” but that you need a few weeks to sort out your finances and ask them to hold off further action for at least this period to give you chance to sort out your finances.

This doesn’t sort out your problems but does give you time to sort it out without the worry of letters, phone calls or court action.

From the budget (financial statement) you have now compiled if you have money left over each month you are in a position to negotiate and agree a re-payment plan with your priority creditors. You can either do this directly or through a third party. Talk to them – you may be able to agree on a minimum payment plus a small amount extra to repay arrears. Talk to them or write to them or use an external agency to negotiate on your behalf, they are usually human and will want to make this agreement as much as you but, whatever you agree, make sure you stick to the agreement or contact them in advance if you know you have a future problem.

If there is no money left in your budget (financial statement) each month or not enough for you to pay your priority creditors you need to seek professional advice without delay, you will find some useful contacts at the bottom of this page but your local Citizens Advice Bureau is usually a good place to start and advice is completely free.

Your Non-Priority Creditors: After agreeing payments with priority creditors if you have money to spare the options you have are as follows:

1: Make an offer to each of your creditors yourself
2: Employ a Debt Management Company to work with you and negotiate on your behalf.
3: Apply through the Courts for an “Administration Order”, basically a court order that allows you to only pay a proportion of the debt.
4: An Individual Voluntary Arrangement or IVA – a legal agreement with your creditors.
5: Put all your debts into one affordable loan – a consolidation loan (check suitability first).
6: Check the new Government initiatives such as Mortgage Rescue Scheme or Homeowner Mortgage Support (links below).

If there is no money to spare each month then your options include the following:

1: Ask creditors to write off all or some of the debt
2: Apply for a Debt Relief Order
3: Apply for Bankruptcy
4: Check the new Government initiatives such as Mortgage Rescue Scheme or Homeowner Mortgage Support (links below)

Check out are the following links – all national and all free:
Citizens Advice Centre: Help With Debt
DirectGov: Option For Paying Off Debt
National Debtline