How To Deal With Unwanted Debt

Dealing with debt can be a stressful and worrying time. The dream of being free from these financial struggles can sometimes seem a million miles away. However, there is power in knowledge. Educating yourself in managing debt and how you can deal with debt could be the beginning of your journey to becoming financially independent.

This article looks at the various types of debt and give information about your rights. How you can regain power over your finances and the best options when it comes to dealing with debt head-on. 

Types of Debt

You can break debts down into three main categories:

1. Priority Debts — Debts that have severe consequences if left unpaid, such as council tax, income tax and child support.
2. Secured Loan Debt — A debt that is secured against your home or assets. Putting them at risk if you fall behind on repayments.
3. Unsecured Loan Debt — Unsecured loans are not secured against assets. However, there will be consequences as the creditor has a right to recover the money owed to them.

Debt Collection

When you borrow money, whether the loan is secured or not, or you fail to make your payments under a contract or agreement, the creditor has a right to recover the owed amount. However, you have rights too. So, what can a creditor do to recover the funds owed?

If your creditor is unable to get in touch with you. Or you miss several payments, it may be passed to a collection agency. A debt management agency is a company that specialises in helping creditors retrieve the money owed to them. A debt collector will unlikely visit your home. They will usually make several efforts to contact you for payment or to request that you set up a payment plan.

If you’re contacted by a debt collector, it’s important you respond as soon as possible to avoid your situation being escalated.

What are your rights?

A debt management agent cannot enter your home uninvited or seize goods. They can only request payment or that you set up a payment plan. It is your right to propose a payment plan that you feel you can reasonably afford. A creditor’s main aim is to retrieve the money owed to them. Most will accept a reasonable offer of payment rather than have to escalate the matter.

Bailiffs

Often called Enforcement Officers. Bailiffs have more rights than collection agencies and are usually called in to collect debts. Unpaid council tax, county court judgments (CCJs) or parking fines. Bailiffs can also be used by your creditor as a last resort if they’ve failed to recover the money by other means.

Unlike a collection agency, a bailiff has the right to seize goods to recover the money owed. They will create a list of items to seize and return at a later date if the debt remains unpaid. You can find out more about what a bailiff can do and what they can seize here.

What are your rights?

Don’t forget, a bailiff cannot force their way past you to enter your home. If the bailiff is acting on behalf of the courts. It’s your right to request the courts suspend the bailiff action while you set up a repayment plan. If the bailiff is acting on behalf of your creditors. Contact your creditors and ask them to suspend the action to discuss a repayment plan.

Debt Solutions

Being contacted by debt collectors and bailiffs can feel very daunting and  you may feel that there’s no way out. However, there are debt solutions available that can not only stop creditor and bailiff action but also begin your journey to becoming financially free.

Some of the debt solutions that may be available to you are:

• Debt Consolidation
• Debt Management
• Bankruptcy
• Debt Relief Order (DRO)
• Individual Voluntary Arrangement (IVA).

Find out more about the debt solutions mentioned above.

What Is an IVA and What Can I Expect from IVA Payments?

An IVA is a legally binding agreement between you and your creditors that allows you to pay back only what you can afford in monthly instalments, without contact from collection agencies or bailiffs. All charges will be frozen and no further action will be taken by your creditors.

Your IVA payments will be calculated by your IVA provider by taking your financial situation into account. Your IVA provider will then propose the payment amount to your creditors for approval. You will never pay more than you can reasonably afford.

Your IVA provider will make contact with your creditors for you, and once your IVA has been completed, your debt will be written off. The default registered at the start of your IVA will stay on your credit file for six years after approval, so your credit rating can be affected, but with the money management skills you will have learnt during your IVA, you will be able to build your credit again.

Author Bio

Laura Prescott, Chief Executive Officer at Debt Movement, is a qualified Insolvency Practitioner licensed to act in the UK with over 15 years insolvency experience.

Over the last 15 years, Laura has gained extensive knowledge of operational processes in addition to developing strong relationships with regulators, creditors and their representatives. Laura holds a BA Hons degree in Law, a Masters in Employment Law and is a member of the Insolvency Practitioners Association.

What are your top tips on dealing with debt management? How would you go about saving more money?

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