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Debt: How to deal with creditors

what to do if you can't pay your mortgage

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There is something about money worries that is uniquely frightening. If you have a family to support, you may find that you are falling deeper and deeper into debt and that the whole thing is very difficult to face up to. Maybe that is because deep down, you suspect that there is no way out of your trap. But in actual fact, there is a lot that you can do. So, once you’ve faced up to the fact that you have a problem, what are the next steps?

Make a list

Time to be honest with yourself.  Sit down and make a list of everyone you owe money to and exactly how much.  It’s painful but necessary.

Once you have your list, highlight all the urgent debts. This will include mortgage or rent arrears, utility debts and VAT or tax arrears. It should also include higher purchase agreements on items that you really need, because it may be that the finance company can seize these if you don’t take action. It will also include anything which can land you in court in short order, such as court imposed fines, or maintenance payments to a former partner. Other debts, such as authorised overdrafts, may be able to wait.

Make a budget

In order to sort this out, you are probably going to have to offer your creditors some payment, and so your family budget may be very tight for a time. Work out how much you and your family need to live on first. Your monthly or weekly budget must be realistic because you really do have to keep up any payment arrangements that you make with your creditors. Once you have your budget, look at what is left and allocate payment amounts to all your creditors, dealing with your urgent debts first. Even quite small amounts can be enough to forestall legal action by creditors.

Bite the bullet

This is the difficult bit, so be brave. For urgent debts, you must make a phone call so as to sort it out quickly, so deal with those first. Ring the organisation concerned and explain how you came to be in debt, and when things are likely to get better if the problem is a only temporary one.  Make an offer to pay the regular amount that you have allocated, and if the person you are speaking to is not co-operative, ask to speak to someone more senior. Have your budget to hand and be prepared to go through it, so as to explain your financial situation and why you can only afford the amount you are offering.

Debt: How to deal with creditors

Make contact with creditors

Now ring or write to your less urgent creditors and make them an offer of payment. If you cannot afford to pay them anything at the moment, explain that you have urgent debts and say what those are; ask for some time to clear those first. Send them a copy of your budget so that they can see that you really are fully committed with your other debts. As soon as things ease up and you can afford to start paying your less urgent creditors, do so, even if it is only a small amount.

Next steps

Once you have arrived at an arrangement with your creditors, confirm it in writing and keep a copy. From now on in, you really are going to have to keep up the payment schedule if you possibly can, as although most creditors will be cooperative at first, they dislike payment schedules not being adhered to. That said, if you really are struggling, don’t just miss payments – phone them again, explain why you are not managing to keep up and ask for a break in payments or a reduction in the payment amount.   Keeping in touch and communicating with your creditors might seem like the hardest thing to face, but it really does help, as they will view you in a much more positive light and will not feel that you are tying to evade the debt.

Getting help

If you cannot come to an arrangement with your creditors, then it is time to get some expert help. The same applies if you are facing court action, or disconnection of utilities, or if your circumstances worsen drastically and your payment schedule becomes completely untenable. Find a Citizen’s Advice Bureau or a specialist debt counsellor. They have long experience in this work and your situation will not be anything new to them, so don’t feel embarrassed or ashamed. No matter how bleak things look, the chances are that a debt expert will be able to help and this may be the turning point that will finally put you back in charge of your finances.




About Paula Hendry

About Paula Hendry

Paula Hendry is a freelance consultant in the field of social work. She has been a social worker for twenty five years, and specialises in mental health. Paula has two children and writes in her spare time (which is virtually non-existent.)

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