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Debt management

Being in debt can be scary. And it often feels that it's much easier getting into debt than it is to get out of debt! But there is help available. If you have problems with your council rent for example, housing officers are trained to listen and give advice in a sympathetic and professional way, suggesting if appropriate, any extra benefit you might be entitled to.

There are websites which can give you good advice such as the National Debtline www.nationaldebtline.co.uk (0808 808 4000) but beware! Some so called 'free debt advice' websites are actually a front for finance companies that offer to help you clear your debts for a fee. Finally the Citizen's Advice Bureau (CAB) www.fulhamcab.org.uk is a fantastic resource offering free, impartial advice on financial and legal matters; helping you draw up a budget, phoning companies on your behalf, and sometimes even getting debt reduced or written off.

The first thing to do is take stock of exactly what you owe and to whom. We've included a budget planner to help make this easier. If you feel overwhelmed or struggle with numbers, enlist someone who you can trust and who can help you. List as much as you can; not just big bills like rent, gas or electric, but also petrol and clothes, for example. Gather all the paperwork together that you can and sort it in to different piles for different bills and debts. It might be easier to attach a piece of paper to each pile which clearly sets out the phone number, contact name and any reference numbers you need to quote when you contact the company.

Try and work out what you can realistically pay back and how often. Creditors (the people you owe money to) will often prefer to accept a small amount of money that you can keep paying regularly rather than a large amount that you can't afford and so causing you to default. Sometimes though, a company will set an unrealistic figure and appear unwilling to compromise – stay calm. Explain that if you agree to the amount they suggest, you are not going to be able to pay it, and you're going to fall further behind. Make a note of phone calls you make and make copies of letters you send.

The worst thing you can do is ignore the problem. It will make you anxious and sometimes even ill, and the problems will continue, often with interest and other charges piled on top of the original amount. Remember, a lot of people, from all walks of life, get into debt. Sadly, some companies do rely on bullying tactics which is why it is crucial to make a note of all the times you contact them and if you really feel you cannot communicate with them ask someone – like the CAB or a relative – to do so for you. If a company behaves improperly or irresponsibly, you can complain either to their own head office, or if that doesn't work, the Financial Ombudsman.

It sounds obvious, but be disciplined and don't take on any more debt or credit and it's never too late to shop around for the best deals. If you have a credit card with a high interest rate, you might be able to transfer the balance to a card that offers 0% interest, which means you can concentrate on paying back the balance without struggling with interest payments. Always try and avoid "minimum payments" - it surprises people but when they work out how long it will take to pay something off using only minimum payments, it can literally take years! Even for a relatively small amount. Pay as much as you can and avoid using your card in the meantime. Everytime you decide to buy something on your card, remind yourself that you will probably end up paying double or more for it, after charges and interest are added on.

And remember, you are in control, even if sometimes it doesn't feel like it…

Golden Rules:

(From the National Debt Helpline)

Don't ignore the problem. It won't go away and the longer you leave it, the worse it gets.
Don't borrow money to pay off your debts without thinking about it carefully. Get advice first. If you own your own home, this kind of borrowing could lead to you losing your home.
If you have lost your job, or are off work because of illness, check whether your payments are covered payment protection insurance. Check your credit agreement.
Check you are claiming all the benefits and tax credits you can.
Work out your personal budget. Make sure you show it or send it to your creditors when you tell them about your difficulties.
Get in touch with your creditors straight away and explain your difficulties. Go and see them or phone or write to them.
Make sure you tackle your priority debts first – for example, debts which would mean losing your home or having your gas or electricity cut off.
Work out a reasonable offer to repay the money you owe. Don't worry if it appears very small if that is really all you can afford. Creditors prefer you to pay a small amount regularly that make an offer you can't afford.
Contact everyone you owe money to. If you make arrangements to pay some creditors but not others, you could run into difficulties again.
If the first person you speak to is unhelpful, ask to speak to someone more senior who may be able to agree to what you want.
Don't give up trying to reach an agreement even if the creditors are difficult.
Fill in the reply to court papers and let the court have all the faces. The court will use this information decided if you own the money and what instalments you should pay.
Always go to court hearings. Take a copy of your personal budget with you. Don't think that going to the country court makes you a criminal; it's not that kind of court. They will not send you to prison and there is no jury.
Always keep copies of any letter or court forms you send or receive.

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I keep hearing about priority debts and that I should pay them first, what is a priority debt?

A priority debt is any or all of the debts listed below. It is generally accepted that these debts need to be paid first to avoid serious consequences. That's not to say, all debts aren't important, but these are the debts that unpaid, could lead to imprisonment, bankruptcy or the loss of your home.

Rent arrears
Mortgage arrears
Council tax and community charge
Second mortgage or secure loan
TV Licence
Gas or electricity
Magistrates' court fines
Maintenance
Hire purchase or conditional sale
Income tax, National Insurance and VAT arrears

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Click here to open the Budget Planner.

Fulham Citizen' Advice Centre

The Pavillion

1 Mund Street

London W14 9LY

Telephone: 020 7385 1322

Shepherds Bush Advice Centre

338 Uxbridge Road

London W12 7LL

Telephone: 020 8753 5910

Local Government Ombudsman

Millbank Tower

Millbank

London SW1P 4QP

Telephone: 020 7217 4620