- Personal Finance
Dealing with Debt
Denial is the last thing you should do when it comes to debt. It’s hard to be in it, I’ve been there. The darkest time of my life. You have to face it dead on because the fact is, if you acknowledge it, you can and will get out of it.
There are many reasons people fall into debt. I went through a divorce and was left with it all. I found it too exhausting trying to get money from my ex to help me with it. I had to own my part in the debt and get out of it. I remember some friends telling me not to let him off the hook. It wasn’t about that. The fact was, I was in debt and I had to own it regardless. I had to take responsibility in the part I played to get into that debt and deal with it and get it under control. This is a list of what I did to finally get it under control.
I had to just stop spending and by that I mean I had to do some serious cutting down. You might think there is no money to even spend, I thought that but then I realised a few things. Money was going out in so many forms and there were some things I could do without. The first thing I did was hand back the keys to the HP Vehicle. This cut down on insurance, tax, MOT and servicing. I cancelled the television subscription and went back to free view. I didn’t need it. It was an unnecessary expense. My mobile phone contract was coming to an end so I didn’t upgrade and instead went on to pay as you go. I even cut down on the food bill by shopping at Aldi and Liddle and also by getting the supermarkets own brand, I also cut down on luxuries. This had to be done. Always remember that this is not forever so don’t be disheartened if it comes to this. Things do change; I’m living proof of this.
Ring all creditors
I rang all the creditors and told them the truth about my finances. This helped me for six months. If they are regulated they should offer you an option to pay what you can afford. They will often send you an income and expenditure form so you can work out how much you can afford to pay. Sometimes you might not even be able to pay much, but anything makes a difference even if you offer as little as £5. This shows you are making an effort and not ignoring the debt. If you have a mortgage, depending on the type of mortgage you have, you can ask to be put onto an interest only plan for a while. This will lower the payment amounts and might make things a little easier.
Speak to a debtline service or Citizens bureau
This was extremely helpful to me as they gave good advice on how to handle creditors and they will make you aware of your rights. If you really can’t pay the debt and you are considering bankruptcy they can help you before you make this decision. Bankruptcy should only be the last resort and should not be taken lightly.
Hold your hands up and surrender
Sometimes you get to the point where the debt is just too overwhelming and you have to surrender. The banks were closing in on me, threatening me with legal action and my home was under threat for repossession. I had done everything in my power to keep on top of things. I answered the phone, responded to letters but it wasn’t enough. I remember the bank saying they wanted a large chunk of the money that I just couldn’t pay. Their response was that they were taking me to court. At that point I surrendered and accepted, because no matter what I did, I just didn’t have the money.
Going to court
Going to court twice, first for the house and second for a bank loan was the best thing that happened to me. I had evidence that I was paying what I could. I showed the judged that I was willing to pay the debt but didn’t have enough money to cover it all. I showed him statements, letters and agreements that had gone between me and the creditors. The judge took all this into consideration and ruled in my favour.
The house was to remain in my name and the overdue amount was consolidated into the property. This way it brought me out of the red. It will take me an extra two years than the original time to clear the mortgage. This was better than loosing my home and being chased by the bank.
As for the bank loan, the judge removed all court and solicitors fees from the debt. He froze the interest on the debt, meaning they could no longer charge interest on the outstanding amount. I only had to pay what I owed and I was to come up with an affordable monthly payment plan and the bank was to accept it. I was so relieved. This was five and half years ago and things are so different now.
The bottom line is this; no matter how hard it is don’t ignore the debt, because like in my case, if you ever go to court, a fair judge will take into consideration everything you did to try and clear the debt.
All the best.