When you are drowning debt, it can be incredibly stressful. However, no debt problems are unsolvable.There is not always a quick fix solution; but there’s always a way.And the sooner you take the lifeline the better, because the earlier you deal with debts, the easier they are to deal with.
Often debt isn’t simply a finance issue – it seeps into all elements of your life.
Are you in debt crisis, or do you just have worrying or large debts?
There are varying definitions of debt crisis but consider this:
Are you struggling to pay all basic outgoings, eg, mortgage, rent, energy bills and credit card minimums?
– or –
Are your debts (excluding your mortgage) bigger than a year’s after-tax income?
If you answered yes, to both these questions the chances are you are in debt crisis.
No one wants to be in debt and it is a result of spending money you don’t have. Debt can be created for various reason; either frivolous, or even a horrible change in circumstances, like a partner dying, personal illness, divorce, mental health problems or losing your job.
Yet whatever the reason, good or bad in a way it’s irrelevant. What is important is to get a disciplined handle on all spending.
Debt is a symptom of a problem. Before tackling it, it’s important to reduce spending. This is to stop borrowing more, and to maximise repayments.
Debt Management Plans
A Debt Management Plan is an agreement between you and your creditors to pay all of your debts.
Debt management plans are usually used when either:
- you can only afford to pay creditors a small amount each month
- you have debt problems but will be able to make repayments in a few months
You can arrange a plan with your creditors yourself or through a licensed debt management company for a fee. If you arrange this with a company:
- you make regular payments to the company
- the company shares the money out between your creditors
Which debts can I pay off with a Debt Management Plan?
You can only use a Debt Management Plan for non-priority debts.
These include:
- Overdrafts
- Personal loans
- Bank or building society loans
- Money borrowed from friends or family
- Credit card, store card debts or payday loans
- Catalogue, home credit or in-store credit debts
Which debts can’t I pay off with a Debt Management Plan?
You can’t use a Debt Management Plan to pay off priority debts.
These include:
- Court fines
- TV Licence
- Council Tax
- Gas and electricity bills
- Child support and maintenance
- Income Tax, National Insurance and VAT
- Mortgage, rent and any loans secured against your home
- Hire purchase agreements, if what you’re buying with them is essential
Who offers Debt Management Plans?
Many free debt advice organisations can arrange a Debt Management Plan or you could contact Creditfix debt management to ensure that all the money you pay into it goes towards paying off your debts.
Free debt advisers give expert advice to hundreds of thousands of people every year and will understand the situation you are in. They are highly trained and will be able to give you the support you need to manage and reduce your debts. If you choose a fee-paying provider, be aware that all Debt Management Plan providers must be authorised by the Financial Conduct Authority (FCA) to ensure they meet agreed standards.