Take Action and Manage Your Debts!

I used to struggle managing my money. It requires fingers from both hands – and probably my toes as well – to count the number of financial crises I’ve found myself in. I’ve missed payments of rent, my credit cards, had to pawn jewellery for some quick cash, have tried payday loans – even had a prepayment electricity meter installed in one property a number of years ago because I’d been so bad at managing my energy accounts.

Now I’m back on track and have a pretty solid grip of my accounts and budgeting, but my past experiences are part of the reason why I started this blog – to offer tips and advice to others who’ve found themselves struggling to manage money.

So trust me when I say I’ve been there and know how scary it can be facing financial ruin.

This article will explore the options available for anyone unlucky enough to find themself in a pretty ropy situation financially – especially hard at this time of year.

Face the Truth and Prioritise Your Debts

It can be hard, but you need to make a list of everything you owe and make contact with the people you owe the money to and see what payment plans they can offer you. It’s also worth making a list of the most important debts (and by that I mean the ones you can wind up in prison for not paying, or can result in you losing your home) and get these paid off first, over the ones that won’t result in prison or the loss of your home. An example of a few debts that you should prioritise include: your mortgage; income tax or VAT arrears; TV licence; court fines; council tax arrears.

Debt Relief Order (England and Wales)

Anyone can apply for a debt relief order, but you have to meet certain criteria to prove you genuinely cannot afford to pay back your debts. If your application is successful it means the people you owe money to can’t try to recover it from you without the court’s permission, and debts are usually cancelled after 12 months.

This does sound a little too good to be true for most people, and it is, as a debt relief order is only offered in extreme circumstances. For example, you have to prove you have less than £50 spare income each month, and that you have less than £300 in assets.

You also have to have lived or worked in England or Wales within the last 3 years, so that may rule out many Scottish residents of the UK.

Trust Deeds and Sequestration (Scotland)

A trust deed is available for anyone really struggling to clear their debts, and allows you to write off a large portion of it and instead make affordable monthly repayments, meaning you could be debt free within a few years. There are certain criteria you need to prove to qualify for a trust deed, and you need to apply via a trusted and reputable debt management company, such as Scotland’s Trust Deed.

Sequestration (or bankruptcy as it’s perhaps better known) is an option for Scottish residents, and is available for those who are unable to pay off debts they can’t afford. Like with the DRO available in England and Wales, a successful application would mean any requests for repayments or interest on your debts will be stopped. However, it also means you have to give up any assets you own, and often these are sold and the money given to the people you owe money to.  If you have a job, you may be required to make monthly payments to help clear the debt. Sequestration normally lasts for a period of 12 months, and after this time the debts are cancelled.

There are numerous advantages and disadvantages to sequestration, and it’s definitely worth seeking further advice and for a reputable debt management company before you make the decision to apply.