Dealing with Debt Factsheet

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We have a team of trained debt advisors at Reach and would love to help you to deal with your debt. However, if you feel that with some guidance you could deal with your creditors yourself then please read on.

The first thing to do is to get an idea of what income and expenditure are.  To do this we recommend that you complete a budget sheet, looking at your income and expenditure. 

This is just one example of many budget planners available on the internet:  

It is vital that this is accurate, taking into account anything you may need to purchase over the course of a year, for example, considering how much school uniform is annually rather than whether you have to buy it that month and how much you will need for an MOT/service/car repairs.  Your budget does not include any current debt repayments, they come out of your disposable income at the end of the process.

Subtract your outgoings from your income. This gives you your disposable income, which you will use to pay your debts.

The next step is to list all of your debts and calculate the total that they come to. Please do not panic at how high they seem. If you feel completely overwhelmed and don’t want to deal with them yourself or don’t know where to start, we are here to help.

You will need to split your debts into priority and non-priority debts. Put simply, priority debts have the most serious consequences, for example, rent or mortgage arrears put you at risk of becoming homeless, utility debts put you at risk of having your gas or electricity cut off.  Click the link below for a list of types of debts. Make a careful note of any creditors where there is either a court summons or a threat to take you to court.

Open a new bank account and arrange for your income to be paid into it. This is particularly important if you owe money to your bank as they may cancel an overdraft leaving you without access to money if you rely on it after your salary/benefits are paid in, or they may use the money for any payments you have missed.

After completing all of the above it is time to work out a Debt Management Plan – i.e. who you will offer what payments to.
A significantly larger part of the disposable income will need to go towards priority debts so start by contacting those companies first. Before you make any calls have an idea of how much you could offer each proportionally, starting with the priority debts but also ensuring that you have some leftover to put towards your non-priority debts. Also, be very aware that if you agree to give all of your disposable income to the first creditor you will not have anything left to offer the others and it needs to be a fair process to those owed money.

Most companies want to work with you to try and resolve the situation rather than let it spiral out of control. Explain your situation and ask them whether they can put any interest, and any actions such as passing it on to Enforcement Agents, on hold.

Ask the company whether they have any help that they can offer, for example, some companies may be able to reduce your debt to a level you can repay if you have some savings with which you could pay a lump sum, others may be able to offer a matched payments scheme if you continue to make the agreed regular payments, and some may be able to move you onto a more favourable and more affordable tariff. You won’t know what help is out there if you don’t ask!

Do not be pushed to agreeing to pay a higher amount than your disposable income as you will not be able to keep up with your repayments if you do not have enough left over to live on. The minimum that you can offer towards a priority debt is £3.70 per week, however, the company does not have to accept that.

If you have a County Court Judgement (CCJ) and need to vary the amount in order to be able to deal with all your debts, you will need to submit an N245 to the court. If you are unable to afford the court fees you will need to complete an EX160. There are criteria listed on the page that you will need to meet to qualify for this support.

When you have agreed payments with the priority creditors calculate how much you have left for your non-priority debts. Work out what percentage of the money you owe to each and then offer that percentage from what you have left for the non-priority debts.

If you find that the creditors are not agreeing to payments within what you are able to afford, please do consider contacting us for help. Our service is free and confidential.

If your circumstances change you may need to contact the creditors to revise your payments.

Finally cut up your credit cards and store cards so that you can avoid the temptation to get into more debt.

Congratulations on taking your first step towards becoming debt-free!

Click on the button below and they will take you through the next few steps that you need to think about. 

go back to self help page