Debt in itself doesn’t have to be a problem. Most of us will borrow money at some point in our lives, and pay it off without any problem. It can be long term to help buy a house or short term to help when we need to buy something that we don’t have the cash for at the time we need it.
Debt tends to become a problem when our circumstances change and the income that we had disappears for some reason, or our expenses increase. It can be due to a divorce or separation, loss of a job or an illness that stops us working. Or it can be because we didn’t properly calculate the cost of borrowing the money in the first place, and the payments just wreck the monthly budget that we had in place to control our spending (see pages 14 and 15 for the best way to put together a plan to help you budget every month).
And it can become a problem very quickly, and without us really realising that it has happened. A payment that you are due to make becomes difficult so you decide to leave it until next week, or next month, or your bank account has less money in it than you think and so a direct debit is returned unpaid by your bank.
If it happens to you, or you think it is going to happen then the first thing to do is let your creditors know that you have a problem. In fact this is easiest if you do it BEFORE you miss any payments. If you think that you are going to get behind with any payments, or that you won’t be able to pay your bills then pick up the phone to your creditors. It’s always an awful lot easier to deal with problems before they become problems. And it’s an awful lot easier if you approach your creditors and tell them you might have a problem rather than waiting for them to write to you to tell you that you definitely have a problem.
It’s easy to ignore debt as well and hope it will go away, or that your creditors won’t bother asking you for their money back. It won’t go away and they will ask you! So you need to know how to respond when they ask you, and what options you have if you are not able to make the payments that are due when they become due.
There are a wide range of options available when it comes to dealing with your debt, and some are a lot more suitable than others. The Scottish Financial Health Services website includes great advice on all of the options that are relevant, as well as links to loads of people and organisations that can help you with your debt.
And looking for help when it comes to dealing with debt is really important. Debt is really difficult to deal with on your own. It can really get you down, so don’t try to deal with it on your own. Talk to someone else about it. But make sure that you talk to the right people. There are lots of people who are trained to deal with all sorts of situations where people are in in debt. And your case won’t be the worst that they have seen so don’t be embarrassed about picking up the phone to talk to them.
Remember that you don’t have to pay for debt advice. And if you are being asked to pay for it then you are probably looking in the wrong place.
You will only be able to work out which solution is best for you after you have told someone the details of your own situation. It may be that an informal solution, such as a Debt Management Plan, is available where you are able to reduce your monthly payments and repay your debt at a more affordable rate. It may be that you need to make a more formal arrangement with your creditors and that something like a Debt Arrangement Scheme will be suitable for you, or it may be that your debts are at such a level that bankruptcy is the most suitable solution for you.
It’s difficult to know which option is best for you until you have spoken to someone about your personal circumstances, including why the debt has arisen in the first place. So the starting point is to take advice. And to take it as soon as you realise that you have a problem.