Debt Pack

Uncontrolled debt is frightening often people keep these and other debts a secret because they are ashamed and fearful that friends/family or colleagues will judge them. Often as a result of this secrecy these debts spiral further out of control due to increased interest charges, which leads to further anxiety pressure and stress, often known as the Ostrich effect, ‘if I don’t deal with it then it’ll go away.’

The information provided will help to alleviate the pressure and stress, allowing you to take responsibility for the debts you have incurred, and will help you to stay in your house, however if you fail to use the advice given you will continue to be pursued by your creditors and nothing will change.

Along with the above you will need to look at how you budget and spend the money you earn, as often people with debt adopt spending patterns which increase pressure and stress and often lead to further debt.

1. Steps to deal with debt

Establish how much money you have coming into your home weekly / monthly (whichever you prefer).
NB. This must be done honestly, a creditor who finds out you have been untruthful will never trust your figures and will constantly request verification of your Bank/Building Society accounts.

2. Work out your priority outgoing i.e.

· Mortgage/rent

· Council Tax

· Water Rates

· Gas

· Electric

· TV Licence

· Maintenance

· Court Fines

· VAT/Income Tax/National Insurance

· Hire Purchase

Once you have prioritised each of your creditors above, you will usually find that if contacted, they will have a department set up to help people to pay off their debts.
However before you make any approaches to your creditors above, you will usually find that if contacted, they will have a department set up to help people to pay off their debts.
However before you make any approaches to your creditors you must first fill out the income and expenditure form 2a) included.

3. Fill out your income and expenditure form.

Section 1: Income

Please note you have to be totally honest about how much money you have coming into your house.

Mortgage etc. each of these sections needs to be filled in accurately, you can not guess at these figures you must be totally clear and concise about these figures, as when they are added up these will be subtracted from your income so that you can then decide how much to offer your priority debts in No 3.

Section 2: Priority Debt

In this section again you must be totally accurate with this information, remember this will be photocopied and sent to your creditors so that they can see you are being totally

4. Living Costs

As you can see there is a list of living costs starting with honest with them regarding your financial situation, (at this stage do not fill in the column ‘Payment Offer’ as there is a simple mathematical formula used to establish the amount you should offer for payment).

5. Non-Priority Debts

These creditors are normally loan companies / credit card Companies / or to your local loan companies / loan man.

Often these are the companies most difficult to deal with as They are sometimes quite insistent that the debt needs to be Cleared as quickly as possible, so you will feel pressured into making an agreement with them, often this agreement is unrealistic so don’t ring or contact these people until you are fully prepared.

Again preparation is they key to successful negotiation, you Need to fill in this column and be accurate don’t guess at the Level of your debt, ask each creditor to send you your total Debt in writing, once you have received this information Place it in the correct column. Again do not fill in the Column  ‘offer of payment’ as there is a mathematical     Formula used to establish the amount you should offer for payment.

HOW DO I WORK OUT HOW MUCH TO OFFER EACH CREDITOR

First let us assume that following your income and expenditure statement you are left with £100 to clear both priority and non-priority debts.
First put 20% aside to make offers to your none priority creditors in this case you would put aside £20 as this is 20% of £100.00.
In this example you will then have £80 to offer your priority creditors.
So for example if you owe: –

1) Rent arrears £600
2) Gas arrears £300 Total debt £1700
3) Council tax arrears £800

You follow this mathematical formula to work out how much to offer.

Amount available £80 x the debt £600 ÷ total debt
£1700 = offer.

In this example you would offer = £28.23 Rent
£80 x £300 = £24,000 ÷ total debt £1700 = £14.12 Gas
£80 x £800 = £64,000 ÷ total debt £1700 = £37.65 C.Tax
£80.00
You then offer the rest of your non-priority creditors a token offer of say £5, with a promise the review once the priority debts are paid. Once the priority debts are paid then we apply the same formula to non-priority debts.

National Numbers

Step Change

0800 138 1111

http://www.stepchange.org/

Job Centre

www.gov.Uk/contact-jobcentre-plus

Turn2us

0808 802 2000

www.turn2us.org.uk

Regional Numbers

Hull

Citizen advise bureau – 01482 224608

Council – 01482 300300

Luton

Citizen advise bureau – 01582 486632

Council – 01582 546000

Wigan

Citizen advise bureau – 0844 826 9713

Council – 01942 244991

Free advice on debt based on what’s best for you – 0800 138 1111 www.stepchange.org/