Debt Help UK

FAQs about Debt Help UK: Help! I am drowning in debt.  What should I do?

The pandemic, rising energy costs, and increase in petrol prices are all contributing to people in the UK turning to debt help to get them out of a cost of living crisis.

However, what happens when you are finding it difficult to pay your debts?  Do you ignore the problem hoping it will go away?  Unfortunately, this will only make the debt issue worse.  Instead, it is time to get debt help.  But where do you get help with debt?

Before you reach out to contact a debt advisor, make a start by reading through some of our most frequently asked questions regarding debt and debt help in the UK.

I need help to collect information about my debts, where do I start?

To make a start, collate together all your contracts, bills, and statements.  Make a list of all your debts and write down the details of your debts.

You might want to obtain details on:

  • Who do you owe money to?
  • What is your account reference? This will come in handy if you need your creditors to quickly track your details.
  • How much money do you owe?
  • When did you miss your first payment?
  • At what stage are you in debt? Are you getting debt letters? Or have you been issued with a default notice or CCJ?

If it is helpful, download the Money Advisor budget planner, so you can input all your financial figures into one document.

Seeing it in black and white might look scary, but this is crucial to building up a picture of your debt and whether you need debt help.

Spot signs to see if you need debt help.

Can paying off my debt, help my credit score?

There are no clear answers as different lenders use different credit scores, however, paying off your debt can improve your credit score:

  • If you are using money from your income and savings to pay off your debt.
  • If you have just a missed payment but there are no defaults or CCJs, some lenders don’t like missed payments however, they are not as bad a default or CCJs.

Read more about default notices and County Court Judgements (CCJs) here.

However, here is where paying off your debts don’t improve your credit score:

  • When you must take out a loan to pay off your existing debts. This won’t improve your credit score as your lender will still see that you are struggling.
  • If your missed payments are recent, lenders will feel like you are currently struggling to pay off your debts so they will be reluctant to lend to you.

Find all you need to know about debt and your credit score.

I have a debt problem.  What should I say to my creditors?

Depending on the stage of your debt problem, it is important to speak to your creditors and see if you can come up with a solution to help you manage your debt problem.

Emailing them would be the best solution as you will have a record of your correspondence.  There are plenty of templates on the internet to help you do this but some of the points you may want to add to your email could include:

  • Reasons for you being in debt
  • Asking them for details of your outstanding balances
  • Asking them whether they could freeze payments whilst you try and find solutions to sort out the problem.

Find out what to do if a debt collection agency contacts you.

I have more than one debt, which one should I deal with first?

Deal with your priority debts first

Priority debts are the debts which you need to tackle first as these are the ones that are likely to cause you some serious problems.  Here is a list of priority debts:

Rent Debt or Arrears

Rent arrears have been classed as a priority as a landlord has the right to evict you if you have missed rental payments.

However, before the eviction happens, a landlord will need to issue you with a possession order obtained by the court to set a date on when they can evict you.

Find out how to get rent debt and arrears help.

Mortgage debt or arrears

Your home is probably the biggest purchase you will make in your lifetime so act responsibly when making mortgage payments.  If you get into debt, a bank or building society can move quite quickly and issue you with a possession order by the court.

Find out how to get mortgage debt and arrears help.

Council tax arrears

If you need help paying off your council tax debt, then it is important to act as soon as possible.  Your council tax is classed as a priority debt and failure to pay could lead to court action or even imprisonment.

Find out how to get council tax debt help.

Other priority bills

  • Gas and Electricity Bills – It is important that if you are struggling to pay these then you need to speak to your supplier to arrange a payment plan. If you don’t then you are at the risk of being disconnected and your energy supply could stop.
  • TV Licence – If you watch TV without a licence and you don’t pay then you could face a hefty fine or imprisonment.
  • Phone or Internet Bills – These are priorities as you could have your phone or internet cut off. This is especially important if you rely on your phone for work.
  • Tax Bills – If you are struggling to pay your tax bill then speak to the HRMC immediately. They might offer you some respite on your bill.

Find out how to get business debt help and income tax debt help.

Then deal with your non-priority debts

Once you have paid your priority bills or come up with a payment arrangement for them, it is time to tackle the non-priority debts.  These include:

  • credit card or store card debts – find out how to get credit card debt help.
  • catalogue debts
  • unsecured loans including payday loans
  • unpaid water bills – your supplier can’t cut off your water supply
  • unpaid parking tickets – these are called Penalty Charge Notices or Parking Charge Notices

 

I am not sure that I am responsible for a debt.  What should I do?

You will be responsible to pay a debt if you have signed a contract or the law says you will be liable to pay the debt.

If you feel you are not responsible for paying the debt, then you can contact your creditor and challenge the claim.

Some of the reasons which may mean that you are not responsible for paying a debt are:

  • If it has been six years or more since you made a payment or were in contact with the creditor
  • If you were pressured into signing the contract or have evidence, that you were mis-sold a product.
  • The creditor did not do an adequate eligibility check on you to see if you could afford it.
  • If you were an authorised additional cardholder on someone else’s credit card account, then the credit card company can’t ask you to repay any debts on the card. The main cardholder is always responsible.
  • If you are under 18 you can only be responsible for a debt if it is something, you need on a day-to-day basis.
  • If a loved one passes away, you are not responsible for their debt. Find out more about debt and death.

Can payment protection insurance help me with my debt problem?

Yes, PPI can help you if you have a debt problem.  People often take out payment protection insurance on a mortgage, loan, or credit card.  This is an additional fee that is attached to your credit agreement and is usually paid monthly.

It is important to check if PPI on a particular credit agreement covers you if you suddenly become unemployed, fall ill, or have an accident.

How long before an unpaid debt is written off or statute-barred?

Most unsecured debts can get written off or become statute-barred after six years.  This predominantly applies to credit cards, payday loans, personal loans etc…

Secured debts such as mortgages have limitation periods of twelve years, usually because the loan amount is considerably more, and the term is a lot longer than other credit agreements.

You can also be legally contacted for council tax bills even if your last payment was six years ago.

After the limit has passed, the debt might be statute-barred which means you don’t need to pay.  Your debt could be statute-barred if, during the time limit:

  • You haven’t made any payments towards the debt within the six years
  • You have not claimed responsibility for the debt
  • Your creditor has not taken you to court for the debt.

It is important to check the date of your last payment to find out whether it is out of the time limit

As much as people in debt would be happy that their debt has been written off, it is highly unlikely that priority debts such as the council tax or HRMC tax will allow your mispayments to exceed for such a long period of time.

It is essential that you treat your priority debts seriously or you could face fines as well as imprisonment.

Can I get government debt help?

Government debt help schemes include various debt solutions.  These could include:

Individual Voluntary Arrangements (IVA) – An IVA is making one agreed payment of your debts over five or six years.  At the end of the term, your unsecured debts are written off.  Find out more about IVA debt help.

Bankruptcy – This is a type of insolvency that writes off your debts.  Any assets or income you may have may be used to pay off your creditors.  Find out more about Bankruptcy debt help.

Debt Relief Order (DRO) – This is dependent on whether you qualify for a DRO, but if you do then all your debts could potentially be written off.  Find out about Debt Relief Orders debt help.

See more solutions on our debt plan page here.

If you live in Scotland, find out what debt help is available in Scotland

Breathing Space Scheme

In May 2021, the government introduced a government debt help scheme, called Breathing Space also known as the Debt Respite Scheme.  The aim of the scheme is for the government to help people with debt problems and relieve some of the pressure when they’re in debt and dealing with creditors.

Not everyone is eligible for the scheme so there are certain criteria that you need to meet.  You must:

  • Live in England and Wales
  • Owe at least one qualifying debt to a creditor

You must not:

  • Have been on the Breathing Space Scheme for the past 12 months
  • Be on a debt relief order (DRO)
  • Have an individual voluntary arrangement (IVA)
  • Be subject to a charging order
  • Be an undischarged bankrupt

To apply you will need to speak to an advisor that has been authorised by the FCA.  The debt advisor will make an application for you.  National debt help charities such as National Debt Helpline can help with this.

Can I claim benefits to get me out of debt?

You might be able to claim certain benefits which could help you get out of debt.  For example, if you are on a low income, you are looking for work, a carer or are pregnant.  These could all be potential benefits if you are eligible.

The Turn2us benefits calculator can help you find out which benefits you can get and how to get them.

It is important to check this as you might be eligible for benefits you are unaware of, that could potentially help you with your debt situation.

Are there ways to increase my income and help me get out of debt?

There are some longer-term ways to keep yourself out of debt and increase your income, however, it might be worth checking some of the more instant ways to help you get out of debt:

Check you are being paid the right wage

On the gov.uk website you check the minimum wage calculator and see if you are being paid the correct amount.

If you are not being paid the correct amount, then it is important to first have a conversation with your employer.  It may be an oversight on their side in which case they should agree to pay the shortfall.

If your employer disagrees with your claim then you should contact your local Citizens Advice to ask for advice on the matter.

Getting paid the right amount could help you cover your expenditure and help you get out of debt quicker.

Check the right amount has been deducted from your wages

Quite often employers may take money out of your wages to:

  • pay tax, student loans repayments and national insurance
  • pension contributions or if you are part of a union
  • pay debts owed to creditors – this often happens with priority debts.

If you think your employee is making deductions they shouldn’t, then get advice from the Citizens Advice.

Check if you are paying the right amount

Did you know that you could be paying less tax if?

  • You have a disability such as you are registered blind
  • You are married or in a civil partnership
  • You spend money on things that are vital to your jobs – such as protective uniforms, and tools for your job. This is called tax relief.

Check if you get relief if you have children

You might be able to get help with children who are of school age.  For example, if you earn a low income then the school can provide free school meals and discounts on school uniforms.

Check if you can get help with your energy bills

Energy bills are a major cost in most households; however, you might be able to get grants, benefits or help from the government to help you pay your bills.

Currently, to help with the rising cost of living, Rishi Sunak announced in his Spring Statement that he would offer a £150 rebate from your council tax as well as other incentives.  Look at the details of the Spring statement here.

I have some money to pay my debts.  What options are there for me?

If you have some money after your essential costs to pay your debts, then you could look at a few options to pay your creditors over a few years.

Before considering any debt solution it is important to work out what you can realistically pay.  Working out your income and expenditure will give you a clear idea of what you can afford.

Once you have done this speaks to your priority creditors and start making arrangements to pay the debts as soon as possible.

If you have money left after paying your priority debts, then you may want to consider the following options:

Debt Management Plan (DMP) – If you agree to a DMP then this will mean you will pay off your debts in one monthly payment to a DMP provider.

The DMP provider is an independent company that will deal with the creditors for you.  All you will need to commit to is paying the repayments each month.

Find out more about Debt Management (DMP) debt help in the UK.

Administration Order – If you have an unpaid County Court Judgement (CCJ) then you might be able to apply for an administrative order which will mean you pay an agreement debt amount to the court.  The court will then pass the money onto your creditors and deal with them for you.

Individual Voluntary Agreement – An IVA is when you agree to pay off your debts with one monthly payment over a period of 5 years.  An IVA is overseen by an insolvency practitioner who will help you agree on a monthly amount and deal with your creditors for you.

Find out more about IVA debt help in the UK.

I have very little or no money to pay my debts.  What help is available?

If you have no money to pay your priority debts, then you might want to consider the following:

Debt Relief Order – A DRO means that if you are eligible then you won’t need to pay anything towards the debts for 12 months.  After the 12-month period has passed, you will no longer owe these debts.

Check to see if a Debt Relief Order will help you pay off your debts.

Bankruptcy – You might be able to apply for bankruptcy if you can’t pay your debts and the amount you owe is more than the number of things you own.

Check to see if Bankruptcy is the right debt solution for you.

Need more debt help?

Visit our debt help pages to find out more information on how to deal with your financial challenges.

Money Advisor is committed to providing you with the best possible service to help deal with your finances.

If you are struggling to make ends meet or you have experienced a change in circumstances, please contact us as soon as possible.  We can offer you the right help and support so you can lead a better and brighter financial future

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