Top 10 tips for dealing with debt
Our specialist Cancer Support Advisors have put together the following tips to help you deal with debt. If you would like to talk to us about any of these issues please call our free Support Line on 0808 808 1010. We're open 8am - 8pm 365 days a year.
1. Don't bury your head in the sand
It's important to seek advice from a specialist. They will be able to go through all your options and work out the best course of action. There are lots of places that offer free debt and budgeting advice - find them here.
2. Use a budget sheet
You need to know what money you have before you can work out whether you can meet your current living costs and if you can pay your debt. Download a budget sheet. We're happy to help you fill this in if needed.
3. Can you increase your income?
One of our specialist benefits advisors can check to see if there are any benefits that you are entitled to. You may also be entitled to a payment under an insurance policy or there may be grant that you could apply for. We can also help with basic money management and planning ahead.
4. What are your outgoings?
Creditors are more likely to negotiate if they can see that you are struggling and have done your best to reduce what you are spending.
If you are spending a lot of money on something related to having cancer, such as heating, fuel travelling for treatment or new clothes because you have lost or gained a lot of weight, make sure that you explain this to your creditors.
5. Deduct your outgoings from the money coming in
This will tell you whether you have any money left over to pay your debts. If you have less money coming in than you have money going out, you need to seek advice from a debt advisor urgently - find them here.
6. What are your priority debts?
Priority debts include:
- Your rent or mortgage - If you do not pay these then you are at risk of losing your home.
- Your gas and electricity - If you do not pay these then your supply can be cut.
- Your council tax arrears - Councils can arrange for bailiffs to come to your home and seize your property. Some councils take bankruptcy proceedings if your debt is large enough, if you own your home then this would also put that at risk. If you get a letter saying that a bailiff is going to visit you, or one comes to your property, seek urgent advice from a debt specialist.
- Court fines - If you do not pay your court fines then bailiffs can come to your home to seize your property. You may also be at risk of imprisonment.
- Tax arrears - You can be sent to prison for not paying VAT or Income Tax.
- TV licence (if you have a television) - It is a criminal offence not to have a television licence and you could have to pay a large fine.
- Child/ex-partner maintenance arrears - If you do not pay them then a bailiff could come to your home to seize your property and you could be sent to prison.
7. What are your non-priority debts?
These are your other debts such as catalogue debts, credit card debts, debts from doorstop lenders, benefit over payments and water (and sewerage) debts.
You cannot be sent to prison or lose an essential service for not paying these. However, your creditor could take court action against you and may be allowed to take action which could place your belongings and even your home at risk.
8. Negotiate with your priority creditors
Work out how much you can afford to pay your priority creditors and negotiate with them. If you do not have enough money to cover the amount you have to pay each week or month, you should seek immediate advice from a specialist debt advisor.
If you can make your expected payments and are able to pay something off the arrears as well, then you should try to agree an amount with your creditors. Do not agree to something that you are not going to be able to afford later on, otherwise you are storing up problems for yourself in the future.
If you are able to agree an amount to pay them make sure you stick to it and that you pay them when you agree to. If you think that you are going to miss a payment or will pay late, make sure that you contact your creditor to explain. If you do not let them know what is happening, then they may cancel your agreement.
9. Send holding letters to your non-priority creditors
You cannot negotiate with your non-priority creditors until you know how much money (if any) you have left over to do this.
Your non-priority creditors may be charging you interest so you should write to them and ask them to freeze the interest while you are sorting out your finances. Some creditors will give you a deadline and they will start charging interest again after this time. If you are approaching the deadline and you still haven't sorted out you priority debts, write again and ask them to agree an extension.
When you have negotiated with your priority creditors, you can then focus on your non-priority creditors. Ensure that you make any offers on the condition that your creditor freezes interest on your debt - otherwise you will never manage to pay it off. Please also note that you will probably have to send your budget sheet to your creditors or complete one of their own.
10. What's next?
- Writing off your debts - If you have no money to pay your debts and you have good reasons for this then your creditors may agree to write off your debt. This is normally only done in exceptional circumstances so consider explaining to your creditor why you have got into debt, for example if you had to leave work because of your health. Your creditor may look more sympathetically upon your request if they can see that you intended to pay the money back when you took out the loan but that you circumstances have changed.
- Make a token offer of payment. You could offer your non-priority creditors a small token amount such as £1 each.
- Make pro rata offers. Divide the amount of available money that you have left over after steps one to nine by the amount of creditors that you have. You can then offer them that amount.