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Dealing with debt

When it rains, it pours which translates into bad things happening at the same time. We have rising prices, rising interest rates and expected rising unemployment – all bad things. The result is not only increased debts, but also the number of households struggling with debts. Is this a familiar story?

debt

The only way is up

An estimated 10% of households reported that loan and interest repayments were a heavy financial burden. The average monthly loan repayments reached a record £373 in 2021, the highest figure for a decade. Matters will be worse in 2022, given the energy cost increase.

Think first

Before you explore debt solutions:

  1. Know the amount of the debts.
  2. Check which debts need to be paid first.
  3. Check if you can increase your pay by doing overtime or a second job.
  4. Check if living costs (be reasonable) can be reduced.

Take debt action

Talk to the organisations where the money is owed, as informal agreement to pay back the debts are possible. If not, you can use:

  • A Debt Management Plan (DMP) allows debts to be paid at an affordable rate.
  • A Debt Relief Order (DRO) allows debts to be frozen for a year, then written-off if circumstances have not changed. Only for people on a low income with few assets.
  • An Administration Order covers a county court judgment (CCJ) or a High Court judgment (HCJ) for debts under £5,000.
  • An Individual Voluntary Arrangement (IVA) allows paying back at least £70 a month. It lasts for a set amount of time (5 or 6 years). Anything not paid off by the end is written off. A legal agreement with harsh penalties for cancelling it.
  • Declaring bankruptcy, if unable to pay debts and the amount owed is more than owned. The bankruptcy period lasts 12 months. This route is not right for some people. If you don't follow the rules, you can be prosecuted in court.

A short-term option, to give time for debt advice, is a temporary protection from creditors through the government Breathing Space scheme. This includes freezing most interest, fees and charges on debts and pausing enforcement action by creditors.

If you're struggling with debt, you're not alone and it's never too late to seek help. Take the first steps to regain control of your finances and speak to a debt advisor part of a debt charity (online or by phone). Good luck.

ChildMax continues to ensure your salary and pays your take home salary while you’re on 12 months’ unpaid leave, caring for a sick child. It starts from £49.50 or for easy budgeting an initial payment of £8.25 followed by 11 monthly payments of £3.75.

Visit at www.insurewithmax.com or call the UK call centre 0333 323 0098 for more information.

Important - If struggling with debt, talk to a debt charity as they will be able to help in sorting out financial problems.

Sources:

https://www.gov.uk/options-for-paying-off-your-debts

https://www.bbc.co.uk/news/business-61309574

https://www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt/options-for-clearing-your-debts-england-and-wales

https://www.theguardian.com/money/2022/mar/22/uk-households-debts-energy-prices-benefits

 

Date: 08 August 2022 by max robinson