Debt Guide

This booklet is intended as a self-help guide to assist you managing your debts.

Realistically it cannot cover every eventuality.

If you feel you cannot cope on your own or that the problem is too great to deal with then you should:

SEEK HELP IMMEDIATELY

Contact TC Debt Solutions on 0800 046 3328

People find themselves in debt for many reasons – for example; poverty, loss of income, redundancy, unemployment, illness, relationship breakdown, death or the birth of a child.

Sometimes it may be simply due to over commitment.

What should you do if you find yourself in this situation?

Don’t panic!

Don’t ignore it!

Take a good look at your income and expenditure and consider:

Is there any way to reduce your expenditure?

Are you paying too much for insurance?

Are you using the cheapest method for paying your bills?

Steps you can take…

Step 1
• Make a list of your debts.
• Separate them into Emergency, Priority and Non Priority debts.
• Write to the people you owe money to (creditors) and let them know you are having problems.
• Pay your creditors what you can in the meantime.

Step 2
• Complete a financial statement to work out if you have any money left after you have made all your essential payments.
• If you have money left over this is called ‘disposable income’ and will be used to help pay off your debts.

Step 3
• If you have no disposable income, try not to worry. Speak to TC Debt Solutions or your local CAB.
• If you do have disposable income use this pack to assist you in contacting your creditors with your offer of payments.
• Start making the payments

Step 4
• If your offer is not accepted please contact TC Debt Solutions, your local CAB or money advice centre.
• If your offer is accepted, continue making the agreed payments.

To use the self-help pack please follow these steps -

Types of Debt

It is important to identify the types of debt that you have.

There are 3 types –

• Emergency Debt
• Priority debt
• Non priority debt

Emergency Debt – has serious consequences if ignored and must be dealt with immediately.

If your home is at risk of repossession, you are being evicted or having legal problems, this is an emergency situation.

Examples of Emergency Debt –

• Rent or Mortgage arrears,
• Council Tax arrears,
• Court summons,
• Wages arrestment,
• Bank account arrestment, Unpaid fines,
• Threat of bankruptcy.

Priority debt has serious consequences if ignored. You could be at risk of losing essential services to your home or your car.

Examples of priority debts –

• Missed Mortgage or Rent payments.
• (These may also be an emergency debt situation along with missed council tax payments)
• Unpaid Gas and Electric bills,
• Unpaid bills for household goods and services e.g. telephone,
• Missed payments on a car or van etc,
• Secured Loans

Any debt left is classed as a non-priority debt. However please don’t ignore them as non-payment can result in legal action.

Examples of Non Priority Debts –

• Catalogue debts,
• Credit cards,
• Store cards,
• Credit agreements,
• Debts to family / friends,
• Personal loans.

*REMEMBER*
If you are having problems paying any of these debts contact the department or company involved IMMEDIATELY – they are usually willing to negotiate.

What’s next?

You should draw up a Financial Statement. A Blank form can be found later in this guide.

• Add up ALL the money you have coming into the home.
• Then list ALL the money that you are paying out on basic living expenses. Remember to include all essential outgoings e.g. childminding, etc.

A rough estimate for housekeeping would be:

To find out how much money you can offer your creditors:

• Take away your total expenditure from your total income, this is your disposable income.
• Make a list of all outstanding balances to your creditors.
• The best way to divide this disposable income amongst your creditors is by what is know as a ‘pro-rata distribution’. This gives all your creditors a fair share of the money available. (This is how the courts would do it).

To work out the pro-rata payment:

Multiply each individual debt balance by the disposable income then divide by the total amount due to all creditors.

Now send your letter

Include copies of your financial statement and repayment offer to all creditors.

Example Financial Statement

Items marked with an * are those considered essential/priority, as non-payment may result in sanctions such as repossession, eviction, court fines, and/or disconnection of services. It may be possible to argue that car expenses are essential to get you to work and that a telephone is essential because of the need to be contacted by your employer.

Seek help immediately by contacting a TC Debt Solutions Money Adviser on 0800 046 3328

If you have no disposable income...

Contact your local CAB of the Department of Work and Pensions about benefits you may be entitled to which could increase your income, e.g. Working and / or Child Tax Credits. You may also have entitlement to help with rent or council tax charges, which could reduce your expenditure.

Blank Financial Statement

Name:

For additional help on any of the information outlined in this guide, contact TC Debt Solutions on 0800 046 3328 or email at advice@tcdebtsolutions.com

Click here to download a copy of this FREE Debt Self-Help Guide

About the author

Ian Brown

Ian is an expert in the Debt Arrangement Scheme and Business Debt Arrangement Scheme, assisting individuals, sole traders and partnerships.

He also advises on personal debt solutions recommending the best option to resolve problem debt issues.