Dealing with debt problems
If you're in debt and finding it hard to cope, it's important to deal with the problem straight away. The longer you ignore your debts, the worse the situation becomes. Learn the basic steps to help you deal with a debt problem.
Step one - make a list of everything you owe
You should sort out exactly what you owe and who you owe it to. The people you owe money to are known as your creditors. If you owe money, you are known as a debtor.
Step two - put your debts in order of importance
The most important debts are known as priority debts and they aren't always the biggest ones.
Priority debts are ones where serious action can be taken against you if you don't pay what you owe. For example, you could lose your home, be disconnected from a service or even go to prison.
Priority debts
Usually include things like:
- mortgage repayments
- secured loans
- rent
- rates
- utility bills
- taxes
- court fines
You need to sort out payments on your priority debts first.
Non-priority debts
Include things like:
- credit card and store card payments
- bank loans
- overdrafts
- home-collected credit - where the agent collects payments weekly
- catalogue repayments
- money you've borrowed from family or friends
You can't ignore these, but you don't need to deal with them as a first priority.
Step three - work out a personal budget
Work out a weekly or monthly budget to see what your income and expenses are. It can also show you where you can save money.
A budget will help you decide what you can reasonably afford to repay your creditors. So it’s important to be realistic.
There are self-help packs and online tools you can use like budget planner.
Step four - get independent advice
There are lots of options for dealing with debts. For example, arrangements you can make with your creditors. Or more formal ones that debt specialists can organise for you.
There are sometimes extra costs involved and conditions you have to agree to.
It’s important you get independent advice to help you find the best way to deal with your debts.
Free and independent advice is available face to face or over the phone from organisations like Advice NI and the StepChange Debt Charity.
Step five - talk to your creditors
Once you know what you can afford to repay, you can talk to your creditors about your situation and what you're going to do about it. A debt adviser can do this for you and some will do this for free.
Be realistic about what you can afford to repay and don’t assume you’ll be able to pay back more in the future. It's important to follow up a phone call with a letter confirming what has been agreed.
Make sure you deal with your priority creditors first. You may have little or nothing left to offer your non-priority creditors, but you should still talk to them, explaining the situation.
You may be able to tell them that you will pay them back at some point in the future. But don't make promises you can't keep.