If you are in financial difficulty and having trouble paying your unsecured debts then most advice will say that you ought to inform your creditors (the people you owe money to) as soon as possible and keep them regularly informed of your financial position. From my own experience I disagree with the blanket nature of this advice.
I do think that you should always try and keep a good relationship with your mortgage provider (if you have one) and obviously your monthly mortgage payment needs to be absolutely the last debt that you don’t pay in full. However the situation with unsecured debt is a little less clear-cut.
The idea behind regular contact with your creditors is that because they know what your situation is, they won’t chase you in the same way or carry out extreme measures such as sending debt collectors, issuing default notices or starting court proceedings. This may be true if you have a very minor debt problem or it is going to be resolved very quickly. However if you have an “open ended” problem with no resolution in sight then the creditors are going to put you through their collection/chasing procedures no matter what you do.
People who work in call centres chasing debts are no-doubt ordinary people just like you and I but they are trained (in most cases) to be abrasive and forceful. At a stressful time in your life, dealing with them on the phone can reduce you to tears. Most collection operations rely on the “shouting loudest” tactic to try and get their money and will tell you many lies to try and scare you into giving them money that you haven’t really got. There is no law that says you have to speak to them on the phone, if they need information then it can be provided by letter. If you are being hounded at home then you have a couple of options:
1. Have an answerphone and use it. Don’t answer any calls and when you listen back delete any messages as soon as you recognize that they are a collection agent.
2. Change your number to ex-directory (and no send)
I would stress that my advice here is not the same as just burying your head in the sand. Do write and tell your creditors about any steps that you are taking to resolve the problem, and if you are going to engage the services of a debt management company.
You need the time and space to consider what the solution to all your debt problems is going to be, e.g. selling up, debt management plans, IVA, full and final offers etc. The resolution of the whole problem is not going to be advanced by spending ages speaking to people on the phone whose job it is to humiliate and intimidate you.
Neil
Tags: Debt Advice, debt assistance, Debt Problems, Debt Solutions
Many companies have sprung up to take advantage of the explosion in consumer debt and the inevitable problems that follow. Many of these companies are reputable organizations that will genuinely try and help but unfortunately some are simply scams that will cost you money and sometimes make the situation worse. A simple rule is to only get debt advice free, and refuse to work with any company that tries to charge you upfront fees.
What Constitutes a Debt Problem?
A problem with unsecured debt can be identified by the fact that you have difficulty making your monthly payments, or that these are taking an unreasonably large proportion of your income. Note that you may have a debt problem even if you make your payments regularly. A classic sign of debt distress is using credit from one source to make payments on other debts. This is a so-called “debt spiral” that can very quickly get out of control.
What Solutions are Available?
The following solutions relate to the UK, and specifically England and Wales.
Going it alone – You could write to you creditors and explain the difficulties you are in, negotiate reduced payments for a period of time and basically deal with everything yourself. This would be suitable if you have a very small debt problem, or you anticipate it being over very quickly. It is not advised for large/long-term debt problems.
Debt Management Plans – This solution involves using the services of a debt management company to negotiate with your creditors on your behalf. They will question you about your finances and work out how much you can afford to pay after allowing for living expenses. These are best for people with mid-sized debt problems but have the disadvantage that you can end up paying off your debts over a very long period of time. They are also not legally binding on your creditors and you debt management company will have to get all of your creditors to agree to the plan.
Individual Voluntary Arrangements (IVAs) – IVAs are the big growth area in the debt management industry. They require a Licensed Insolvency Practitioner to agree the proportion of your debts that you will pay off over an agreed period (or as a lump sum). They are suitable for people with severe debt problems (over £20,000 total debt) and can avoid you losing your home. An IVA will have a severe and lasting impact on your credit score so is not an option to be taken lightly.
Bankruptcy – The oldest and most extreme form of debt solution. All of your debts will be written off but you will suffer a lot of intrusion into your personal finances. You will only be able to use certain types of basic bank accounts and if you have a home it may have to be sold to pay back money to your creditors. The law has been relaxed recently meaning that the period of your bankruptcy should be much less than it used to be (typically less than a year) but this solution has the most serious impact on your future credit score. It is a good solution for people with a severe debt problem that do not have own major assets (e.g. homes, cars) as it is usually the quickest way to become debt free.
Conclusion
Whatever debt solution you choose there is no need to pay a company upfront for any of the above solutions. Make sure that any company that helps you only charges if their advice is successful. Make sure that you get your debt advice free!
Tags: Debt Advice, debt assistance, Debt Problems, Debt Solutions
If you’re worried about being in debt then you need advice. You need to get your debt advice free. After all, if you’ve got debt problems the last thing you need is another bill to deal with.
I will be drawing on my own experience of debt problems to give debt advice free, without any obligation, or charge at all.
I have experienced the isolation that being in debt can bring so, as the blog develops please feel free to comment here/ask questions and I will do my best to help you.
You can come through the shadow of debt and emerge on the other side a stronger person. I am living proof of this. If you have found this page then you have taken the first step in resolving any problem, that is recognizing that you have one.
I can’t promise that solving a debt problem is easy or without pain, but the sooner you face up to it the sooner you will be able to achieve that debt-free lifestyle.
Beware of anyone that tries to charge you money up-front for debt solutions. The best companies offer solutions that you pay for only if they are successful.
Be patient, I will be posting some useful information here but this is really just an introduction.
Neil
Tags: Debt Advice, debt assistance, Debt Problems, Debt Solutions
