TALKMONEY Week 2021 – Opening up the conversation around debt

The COVID-19 pandemic has affected our lives in many ways – and for many that includes their finances too. Many people have found themselves unemployed, on reduced wages or unable to work due to on-going childcare or health issues. With schemes such as furlough now finished and pandemic support for individuals and businesses largely over, some people will find themselves worrying about making repayments on those debts.

This is where opening up and having a conversation about those debts becomes so important.

1. Contact your creditors informally.

The best way to prevent issues from escalating is to speak to the people you owe money to.  If you are facing short term difficulties, such as your hours being cut in work, or an unexpected payment because your car has broken down, picking up the phone and explaining the situation will often lead to better outcomes than ignoring the problem.

2. Seek independent legal advice

If you are being threatened with Court or other legal action, you should see a solicitor early on.  A solicitor will be able to advise you of the legal consequences and possibly be able to negotiate a settlement to prevent action continuing.  The solicitor may have a legal avenue to prevent the creditor from taking any action at all.

3. The Debt Respite Scheme

If you are suffering from problem debt, the Debt Respite scheme gives you 60-days breathing space which will prevent your creditors from pursuing enforcement action and will free most charges and interest.

If you are suffering with mental health difficulties, you may also be able to obtain breathing space.

You cannot apply for the breathing space by yourself- you must do so by speaking with a specialist debt advisor. They can then make an application on your behalf.

4. Consider insolvency

There is a stigma attached to entering insolvency arrangements, but if your debts are too large to manage and you have tried informal steps already, formal insolvency may be the best option available.  There are many different insolvency options, including Debt Relief Orders, Individual Voluntary Arrangements and Bankruptcy.  Each option has different benefits and consequences.

You should seek the advice from a professional insolvency practitioner on what the most appropriate option would be for you, based on your individual circumstances.

5. Seek help

The most important advice is to seek help.  There are professional advisors and free services such as Debt Charities and the Citizens Advice Bureau that can assist, help you budget to better manage your expenses and advise you where appropriate to do so.

Burying your head in the sand will only make matters worse. Engage early with lenders and specialist support agencies and it is much more likely that you will receive a sympathetic ear and come away with a plan to help you get out of debt.

William Watkins is a specialist in debt recovery and commercial litigation. He heads up the Debt Recovery team within our Dispute Resolution department at Harding Evans. If you need Debt Recovery advice get in touch on 01633 244233 or hello@hevans.com.