There are a number of ways in which you can deal with debts. Below is some information on different options that might be available to you, but a professional adviser will be able to help you figure out which one is most suitable for you.
Voluntary payment plan: You may be able to negotiate an agreement to pay back arrears in affordable instalments, including interest rates being frozen and payments lowered until your circumstances improve.
Debt management plan: Set up a free plan whereby an independent company will distribute a sum of your money between your creditors each month.
Bankruptcy: Applying to declare yourself as bankrupt will normally erase your debts, but bear in mind that it has serious long-term consequences, so always seek advice before you make any decisions.
Debt relief order: This is a declaration similar to bankruptcy but can only be applied for by those on a low income, with debts up to £15,000, and not all debts can be included in this. Seek help from a specialist adviser if you would like to make an application.
Administration order: These are available if you have received one or more County Court judgements, and have debts of less than £5,000. Depending on your circumstances, you will have to make an affordable monthly payment to the court either until the debt is paid off or just for an agreed length of time.
Individual Voluntary Arrangement: An IVA can be arranged if you have debts of £15,000 or more, with monthly payments normally starting at £150. An IVA will need to be drawn up by an insolvency practitioner.
Dealing with creditors
Seek advice: There are free debt advice services available that can give you advice on creditors. Try searching online or calling a helpline directly.
Divide you money between creditors: Your debt adviser will be able to help you divide your money between creditors based on the priority of the bills. Try to pay all creditors even just a small amount each month, as paying one but not another might make it harder for you to negotiate.
Work out what’s best for you: Creditors can put a lot of pressure on you to make payments, especially those who may know they’re a lower priority. Once you’ve worked out a plan of action with an adviser, stick to it and focus on the debts you’ve identified as the highest priority.
Know your budget: Once you have drawn up you Financial Statement, make sure you are familiar with it and able to answer any questions creditors may ask you. You might need to justify certain spending habits if creditors doubt whether they are necessary.
Open a new bank account: If you are overdrawn on your main bank account, try switching to a basic account with another bank. You will be able to have your wages or benefits paid into this account, and any debt owed on your old account can be treated as a lower-priority debt. This way, the bank that is owed money will be unable to take control of your income.
Make payments manually: Cancel any direct debits you have set up if your bank account is overdrawn or you don’t have enough money in the account to cover payments. This will avoid you losing money on charges.
Stick to your plan: Once you have worked out a payment plan with your adviser, follow through with it. Be consistent; if you pay off a large amount of one debt in a single payment, your creditor might expect you to always be able to afford that. Instead, make smaller regular payments that you can afford, and if you have any money left over put it aside for emergencies or finishing off payments when you’ve saved up enough.
Dealing with bailiffs
In most cases, a creditor will need to obtain a court order before they can use bailiffs against you. If a bailiff comes to your home, do not let them in. The majority of bailiffs are not legally allowed to force entry unless they have a warrant to evict you. Bear in mind that they are able to enter ‘peacefully’, which might include an open door or open window.
If a bailiff does enter your home, they are only able to repossess items that belong to your creditor, and are not allowed to confiscate essential items such as beds, fridges, or any property belonging to children, but goods can include cars or other vehicles. If a bailiff visits your home to collect magistrates’ court fines, they will have wider powers but should still not take beds or clothes.
In most cases, a bailiff will offer a payment arrangement as an alternative to confiscating your goods. If you choose this option make sure you only agree to payments you can manage. If you have any doubts, see if you can find an adviser to help you, and send the bailiff company a copy of your financial statement so they can see you’re making payments you can afford.
Every bailiff must be registered and should follow a code of conduct set out by professional bodies. If you feel threatened or harassed by a bailiff you can complain to their managing company; a debt adviser will be able to help you with this.