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What to do when debt gets too much

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Yesterday was Blue Monday: officially the most depressing day of the year. Apparantly not only do we all have the January blues with bleak weather and a post-Christmas slump, but debt also reaches its peak as credit card bills hit many doormats. Now that is a depressing thought isn’t it? The fact is that debt is a very real situation for many Brits but what do you do when that debt becomes unmanageable?

SPEAK TO YOUR LENDERS

First of all, in every instance you need to speak to your lenders. Often, they will be willing to work with you to find a solution which works for everyone. Remember that you are not the first person to ever become overwhelmed by their debt and they have experience in working with their customers to find a solution.

DEBT CONSOLIDATION LOANS

In many cases the issue is that you have too much debt in too many places and the repayments start to really add up. If this sounds familiar, then a debt consolidation loan is a great place to start. With store cards, credit cards, overdrafts, and personal loads all available to people, it’s easy for it all to add up. The great thing about this option is that often by consolidating all your debt into a single place, not only do you have only one monthly payment, but that amount can often be much smaller than your previous payments all added together making your debt far more manageable.

DEBT MANAGEMENT PLANS

If you are in a position where you have a steady income and a good amount of disposable funds each month then a Debt Management Plan can be a good option for you. What this does is take a very close look at your finances and calculate just how much of your income is disposable each month. Once you know this, you can negotiate with your lenders to agree just how much you are willing and able to pay them. You can do this alone or employ a debt management agency to support you in this negotiation and make sure you get the best deal. However, please remember that these agencies will often charge a fee. 

INDIVIDUAL VOLUNTARY ARRANGEMENTS

However, circumstances change and very often people just do not have that disposable income. If you get to the stage where you really cannot afford your repayments, then an Individual Voluntary Arrangement – or IVA – may be a good option for you. This is a formal agreement between yourselves and your lendors that can lengthen the term of your loan and lower your monthly repayments. To set up an IVA though you will have to find an insolvency practitioner such as Creditfix to help you do this. Insolvency practitioners are usually professional people – such as accountants or solicitors – who have experience and qualifications to be able to support you through your insolvency. The great news is that through this solution, you only need three thirds of the creditors to agree to the agreement your draw up with your insolvency practitioner before the other third is bound by law to accept it too. 

COUNTY COURT JUDGEMENTS

Sadly though, sometimes this decision is taken out of your hands and a County Court Judgement – or CCJ – may be taken against you. If this happens then you often have two choices. (1) to apply for an administration order by filling out an n92 form and providing information about your debts to the courts. If this is accepted, your monthly payment will be made to the courts who in turn will distribute the funds to your lenders. (2) the other option is to file for bankruptcy. This is not a decision to be taken lightly though as it will affect your credit history and financial situation for years to come. However, sometimes though this really is the best option available to you.

Through all these options though, the key will be to talk to someone. That someone could be a friend or family member, the bank, a debt management company or – if you ever feel like it’s all getting too much – please remember that the Samaritans are always just a phone call away on 116 123. When debt is mounting up, DO NOT to ignore it. It will not go away and the key to not letting debt rule your life is finding a solution that works for you.

The fact is that debt is a very real situation for many Brits but what do you do when that debt becomes unmanageable?

Header Photo by Ian Espinosa on Unsplash | content photo by rawpixel on Unsplash

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