Debt |
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Debt
There are four steps you can follow to help you deal with your debts: Step One - make a list of all your debts Step Two - work out your budget Step Three - sort out your priority debts Step Four - sort out your non-priority debts Step one - make a list of all your debts Before you can tackle a debt problem you need to collect information about your money affairs. Make a list of all the people and companies you owe money to (your creditors) Once you have made a list of all your creditors, you need to work out which ones to deal with first. You need to deal with some debts first before others because the consequences of not paying these debts can be more serious than for other debts. The debts you deal with first are called 'priority debts'. The debts you deal with after your priority debts are called 'non-priority debts' Priority debts may include: Mortgage or rent arrears. If you don't pay these, you could lose your home. Fuel arrears. If you don't pay these, you can have your fuel supply disconnected. Council Tax arrears. If you don't pay these, a court can use bailiffs to take your goods away to the value of the debt you owe. If after this you still have arrears unpaid, you can be sent to prison. Court fines such as magistrates' court fines for traffic offences. Failure to pay these debts may result in bailiffs taking your goods. If, after this, you still have arrears unpaid, you can be sent to prison. Parking penalties issued by local authorities are not priority debts. Arrears of maintenance payable to an ex-partner or children. This includes Child Support payments you owe to the Child Support Agency. If you don't pay these, a court can use bailiffs to take your goods.If, after this, you still have arrears unpaid, you can be sent to prison Income tax or VAT arrears.You can be sent to prison for non - payment of Income Tax or VAT. Non-priority debts may include:
You can't be sent to prison for not paying non-priority debts. But if you don't make any offers to pay, without explaining why, your creditors may take you to court. If you still fail to pay when the court has ordered it, your creditors can take further action. For example, they can get another court order which allows them to send bailiffs around to take your property away. This will be sold to cover your debts. Step two - work out your budget List all income and expenditure for your household. Be honest and make sure that the amounts are realistic. Your income includes:
Step three - sort out your priority debts Don't ignore letters or phone calls from your priority creditors. Get in touch with them as early as possible and explain to them why you are unable to keep up with payments. If you do telephone, do so in the first instance and follow up with a letter, confirming what you have said on the telephone. Keep copies of any letters you write to them. If your priority creditors are threatening to take court action or have started to take court action against you and you need a little time to sort out your finances, send them a letter explaining your problems, and ask for more time. Say that you will contact them again within two to three weeks, and ask them not to take any further action in this time When you have worked out how much you have left over after paying all of your expenses, contact each of your priority creditors and try to make an agreement to pay back what you owe. For example you may be able to pay a little each month until the arrears are cleared. Or you may not have any extra money at the moment. If you can't afford to pay anything to your priority creditors and your situation isn't likely to get better, the outcome may be very serious. Get advice straight away; contact us for further help. Step four - sort out your non-priority debts After dealing with your priority creditors you need to work out how to deal with your non-priority debts. This will depend on whether you have any money left over. Any money you have left over after paying your expenses and priority debts is called your available income. You can use this to pay off your non-priority creditors. You should share out your available income fairly between all your non-priority creditors. This means you should offer your creditors a percentage of your available income, based on the amount you owe them. These offers are called pro-rata offers. This is the system used by the courts to work out what you can reasonably pay and it is accepted by most creditors. We can provide advice on how to deal with your debts, help you to negotiate and make offers to creditors and act on your behalf in dealing with your creditors. Contact us for more information. Citizens Advice www.adviceguide.org.uk  |
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Basic Bank Accounts
Almost everybody should be able to open a basic bank account. The bank or building society may want to check your credit history to see if you have any county court judgments (CCJs) against you or have been made bankrupt. But even if you have you may still be able to open an account. A basic account allows you to receive money and pay your bills. You can:
You will still have to pay the bill as well as any charge so it is really important to have enough money in your account to pay your bills. You will have access to every last penny in the account. This is generally provided through a buffer zone up to a specified amount, e.g. £10.The bank will not charge you for going overdrawn up to the buffer zone limit. You can take out the exact amount of money you have in your account over the counter either at your bank or building society or at a Post Office branch. You can contact SAIL for further information and a Basic Bank Account leaflet or visit, The Financial Services Authority at http://www.fsa.gov.uk |
| Financial Capability and Financial Inclusion Financial capability is about being able to manage money, keep track of your finances, plan ahead, choosing financial products and staying informed about financial matters. Financial capability helps people avoid serious financial difficulty and prevent the stress, ill health and other problems associated with over-indebtedness. It equips individuals and families with the skills and knowledge and motivation to manage money well both for the present and the future. The Government recognises that too many of the most vulnerable people in society find it difficult to access mainstream financial services, leading to higher costs and even reliance on illegal sources of credit. It has committed £250 million to support financial inclusion since 2005. It is committed to continue widening access to banking services, free face-to-face debt advice, affordable credit, saving and insurance. Financial capability supports financial inclusion by helping people to feel confident dealing with their finances and make well informed choices. In turn, financial inclusion projects support financial capability through work with the most vulnerable groups. If you would like to discuss budgeting, planning or have any questions relating to financial capability please contact us and talk to our Financial Capability Advisor. For more information about financial products and services visit The Financial Services Authority at http://www.fsa.gov.uk For more advice about debt visit: Citizens Advice www.adviceguide.org.uk Money made clear www.moneymadeclear.fsa.gov.uk National Debtline www.nationaldebtline.co.uk Department of Work and Pensions www.direct.gov.uk/en/ MoneyTaxAndBenefits/ManagingDebt Financial Ombudsman Service www.financial-ombudsman.org.uk/ See also our Case Studies |
