Regularly reviewing personal finances such as bank
accounts, mortgages, pensions and savings is a good way to stay out
of debt, however it is easy to over commit on your monthly payments
for example, hire purchase orders, mobile phone contracts
and changes in personal circumstances, such as losing a job,
having an accident or separating from a partner, can send peoples
finances spiralling out of control. Students too are often faced with massive debts
on finishing university.
In the UK, debt advice is
provided free of charge. If you find yourself in
debt, do not ignore the problem and try not to panic.
Our debt advice pages have been set up to inform the various
options available to anyone facing unpaid debts and where to get
help.
Where do I start?
Priority and Non Priority Debts
Some unpaid debts can have serious consequences; such debts are
known as priority debts and they are classed as priority
because they are debts where serious action can be taken
against you if you don't pay what you owe. Examples of
priority debts include not paying the rent or mortgage, your
gas or electricity bill and taxes or payments ordered by
the courts. Not paying these debts could lose you your home
or put you in prison. The first step for anyone trying to get
out of debt is to decide what their priority debts are
and how much you can realistically afford to repay.
Non-priority debts include credit card payments, bank loans,
catalogue repayments and money borrowed from family or
friends. Non priority debts should not be ignored but they
are not your first priority.
Working out a Budget
Working out a budget will help you work your priority
expenses, highlight things that you may be
able to cut back on and things that you may be able to get for less
by shopping around, for example gas and electricity
providers, mortgages and insurance.
Benefits and Tax Credits
Do you know if you are entitled to
benefits or tax credits? If your circumstances
have recently changed, you may be losing out on your
entitlement.
Bankruptcy
A court can declare you
bankrupt by issuing a 'bankruptcy
order'. Bankruptcy is a legal status that usually lasts
for a year is one way of clearing debts you can't
pay.
Important
- Think carefully before taking out a loan to pay off your
debts.
- Interest rates on loans can be secured against your home,
meaning you could lose your house if you fail to make
the repayments.
- Rates can also be extremely high and you could end up
paying back considerably more than you borrowed.
- If you are unable to repay a debt, most organisations, will be
more helpful if you approach them early on, than if you allow the
debt to grow.
Where can I obtain further information?