How To Deal With Your Debts
If you are in debt it is important to keep in touch with your creditors (the people you owe money to). They may be writing or phoning you and putting pressure on you to pay off your debts. Unless you contact them they may assume that you don’t want to pay and may take further action against you. It is essential to keep in contact with them and to let them know that you are in financial difficulties.
You will need to:
| • | Make a list of your debts, separating them into priority and non-priority debts. You may make offers to pay off your priority debts before you tackle your non-priority debts. |
| • | Make an income and expenditure list. Be honest and make sure that the amounts are realistic. You may be able to identify where you can make some savings. |
| • | Do not ignore creditors’ letters or phone calls. Contact your creditors as soon as possible and explain to them that you are in financial difficulties. Writing to them is preferable to phoning, and if you do phone them you should follow up the call with a letter, confirming what you have said on the phone. If you do not feel confident doing this GAIN can help. |
| • | If you are thinking of using a debt management company be aware that they usually charge a fee for their services, and speak to a GAIN money adviser first as you may have other options. |
If possible, do not borrow more money to repay your debts. Think about ways in which you could earn extra money or increase your income instead. For example, there may be state benefits that you are entitled to. GAIN can tell you what benefits you may be able to claim.
Priority Debts:
Priority Debts are:
| • | Mortgage arrears- the mortgage lender may take court action for possession of your home. |
| • | Rent arrears- the landlord may evict you if you have rent arrears. |
| • | Income Tax and VAT- you can be made bankrupt for non – payment of fines. |
| • | Fuel debts- if these are not paid you may have your fuel supply disconnected. |
| • | Secured loans are priority debts |
| • | Hire purchase is a priority debt if it is for an essential item, for example, if you have bought a car on hire purchase and you need the car for work. |
You must deal with these debts first before tackling any non-priority debts.
Non- priority Debts:
Examples of non-priority debts are:
| • | Credit card and store card arrears |
| • |
Catalogue arrears |
| • | Bank overdrafts and unsecured loans |
| • | Benefits overpayments |
| • | Money borrowed from family and friends |
| • | Hire purchase is a non-priority debt where it is for goods that are not essential to you, for example, a television bought on hire purchase. |
The consequences of not paying non-priority debts are less severe than for priority debt. However, if you make no payments and do not explain why, creditors may take you to court. This can lead to further action against you.
Options for clearing debts
There are a number of options available to you which the Money Advice Service sets out on their webpage on clearing debts.
It is important to seek free advice from an independent adviser rather than from a fee charging debt management company.
For free advice click here to search our database of advice centres across Glasgow or call the GAIN Helpline on 0808 801 1011. Calls are free from land-lines and mobile numbers.
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