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Organise your debt

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If you find yourself in financial difficulties, the best way of dealing with it is to organise your debt. Unless you know exactly how much you owe and to who, you can’t begin to tackle the issue. Here we look at prioritising your debts and working out how to pay them.

How much do you owe?

You need to calculate exactly how much debt you actually have, as the figure is often far higher than we estimate. Make a list of all your creditors and the balance of the accounts. Usually the most recent documentation from them will contain all the relevant information.

Which are the most urgent debts?

All debt is a problem, but some debts have much tougher consequences if you don’t pay them. This can include having bailiffs take your goods or even prison, so you need to tackle these ones first. These debts are known as priority debts.

Priority debts include:

–          Mortgage or rent arrearsorganise your debts

–          Gas and electric arrears

–          Council tax arrears

–          Unpaid court fines

–          Child maintenance arrears

–          Income tax or VAT payments

–          TV licence

If you’re in any doubt as to whether or not your debt is a priority, then you should speak with a qualified debt advisor. If you’ve received any court documents or official letters from other creditors, you should also look to deal with these as a matter of urgency.

In some circumstances, you might have other debts which you class as a priority. For instance, if you have arrears on a car finance agreement and you rely on your vehicle then this might be a priority. However be careful what you class as urgent, as other creditors might not consider this to be more of a priority than their debt if you receive a court summons.

Other creditors

After you’ve sorted out all the priority debts, you can start to look at your other creditors. These might include:

–          Benefit overpaymentsorganise your debts

–          Unsecured personal debts, such as credit cards, overdrafts and loans

–          Water arrears

–          Student loans

–          Any money you’ve borrowed from friends or family

–          Parking fines from local authorities

These creditors may take you to court if you don’t make an attempt to pay. This could lead to bailiffs attending at your property or goods being seized, but you wouldn’t end up in prison.

How to pay off your debts

When you’ve organised your priority and non-priority debts, you need to work out exactly how much you can afford to pay each of them. First set up a budget planner with all your incomings and outgoings. You will then see how much you have left each month to put towards your debts. If this isn’t enough to meet the minimum monthly repayments then contact your creditors and put forward an offer of payment that you can afford. They don’t have to accept this, but it’s usually a better option than dealing with the situation through the courts. Once they’ve confirmed your agreement, make sure that you stick with it. Otherwise they could start court proceedings to recoup the full cost of the debt.

If you don’t know where to look for help, dealing with debt can be a scary prospect. Debt advice charities can provide you with free support and guidance if you have financial problems.







About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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