By far the biggest issues I am asked to help with on a daily basis are those which involve personal debt problems, despite what we see in the news about financial recovery many thousands of people in the UK today are living with huge debts. As far as I can see the problem is in fact getting much worse than many experts have predicted, and I foresee an increase in overall debts problems in the UK in many households in 2016.
So today I am going to give you my golden rules for debt management, no matter how dire the situation may seem there is always light at the end of the tunnel, it may not be easy but it can be sorted.
- Do not ignore the problem, it’s very tempting to just ignore the letters and phone calls when they come, but don’t, if you talk to your creditors they are very likely to work with you on your terms, based o what you can afford rather than what they want you to pay.
- Work out what you can afford in advance, once you realise that you are in trouble it’s time to look at exactly what you have coming into your household versus what you have going out, sit down and write out two columns, money in and money out, then work out what you can afford to pay your creditors once all of the important stuff for living is paid.
- Contact your creditors, don’t wait for them to come calling at the door, pick up the phone or write to them explaining your situation, new rules from the FCA which I will detail below mean they have to listen to you, they can’t take money you simply don’t have.
What can you expect from your creditors?
Last year the Financial Conduct Authority came to life replacing the Financial services Authority and the OFT as the new regulator for all consumer credit products, the FCA has promised to keep the market fair and transparent and has committed to coming down hard on any organisation who does not play by their new strict rules.
But what does this mean for those of you who are struggling with debt problems? Well it means quite a lot and you may be surprised to learn that there are many things out there designed to protect you, here is my must know guide of rules, do’s and don’ts for anyone who is worried about being in debt:
- Affordability, all creditors has obligated to ensure that any repayment plan is affordable; this means that they cannot simply just make demands for payment in full without first looking closely at your current financial position, all repayment plans must be based around what you can afford to pay once all of your living expenses have been taken into account.
- Priority Debts, if you have arrears with priority creditors such as, Rent/Mortgage, Council Tax, Child Support, Court Fines, TV Licence or HMRC, creditors must suspend their recovery action until you have had sufficient time to make arrangements to get your priority payments back on track with an arrangement, this is usually a minimum of 30 days.
- Free Money Advice, if you have multiple creditors you must be given something called Breathing Space, this is a minimum 30 day period where all recovery action is suspended, this is to allow you time to seek Free independent money advice from somewhere like Step Change or the Money Advice Service. If you are given breathing space its vital that you use this time to seek advice and help.
- Treating customers Fairly, this is principle six of the 11 principles which the FCA have laid out before all of the companies who are now authorised and governed by the FCA,this is a broad set of rules which simply mean that all of your creditors must act with your best interests at heart, they must handle you with care, never mislead you and always ensure that any arrangement you make with them is sustainable and appropriate. If you have any doubts you can check the FCA web site to see if the company you are dealing with is under their control and report any problems or concerns you may have.
- Your Obligations, even though the new rules are there to protect you against unfair practice, it is vital that you talk to your creditors and give them as much information as you can, the bad old days of debt recovery should now be long gone and companies are now ready to help and assist using the new rules as a guide for good practice, and in most cases they will be very happy to take whatever offer you make as long as it can be proved affordable for your current financial situation.