Steps for Dealing with Personal Debt Problems
Credit Counselling, Review Income and Expenditure & Priority Debts
Mar 9, 2009
Money problems have increased dramatically over the past 12 months. The Citizens Advice Bureau (CAB) dealt with an average of 4,760 personal debt problems each day during 2008. It is important to review income and expenditure in order to categorise priority debt.
Conduct a Review of Income and Expenditure
A review of personal finances is fundamental to becoming debt-free. Personal debt problems come in many varieties so it is vital that both income and expenditure are reviewed to identify priority debts. Priority debts include mortgage payments (repossession), rent (eviction), utility bills (disconnection) and council tax and other miscellaneous taxes (imprisonment).
Many individuals with debt problems are tempted to pay smaller personal debts first, but this can exacerbate money problems. Since the Water Act 1999, disconnection is illegal, but water bills should still be paid before other unsecured debts. Non-priority debts include credit card debt, unsecured loans, personal overdrafts and hire purchase agreements.
Tackle Personal Debt Problems with an Extra Income
The classification of priority debt allows someone to concentrate on the payment of critical bills and addressing any short-fall. Before proceeding with a debt solution, try to identify savings on household bills or where further income can be generated. For example, is it possible to make extra income, work overtime or sell excess clutter on eBay to boost income?
Unenforceable Personal Debts
Those that took out credit agreement prior to April 2007 should check to see if they have unlawful credit card debt, personal loans, car loans or hire purchase agreements. It is estimated that as many as 60% of credit agreements may not stand up in a court of law. It may be possible to write-off personal debt and become debt-free within months. Ask a solicitor to look over existing credit agreements to see if they can assist.
Solving Money Problems with a Debt Solution
There are many debt solutions available to help people overcome money problems and personal debt. Unsecured debts can be tackled with a debt solution, such as a: debt management plan, Individual Voluntary Arrangement (IVA), Debt Relief Order (DRO) or personal bankruptcy. Always seek credit counselling from a qualified debt expert before proceeding with a debt solution.
No matter how awful personal debt problems may seem, there is always an answer to money problems. Always pay priority debts first and tackle other unsecured debts with creditor negotiation or a debt solution. There are a number of free credit counselling services, such as the Citizens Advice Bureau, there to help.
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