MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
Are you worried about your debts because of mental health issues like ADHD? You have come to the right place.
Each month, over 170,000 people visit our website seeking advice on debt problems, so you are not alone.
In this article, we’ll help you understand:
How debt can affect your mental health
Why there is a link between ADHD and debt
How to ask for your debt to be written off due to mental illness
What to do after your loan is written off
Where to find more help
We know that dealing with debts can be hard, especially when you are not feeling well – many of us have faced the same worries.
But we’re here to help you understand your options and learn more about how you can manage your debts when you are dealing with mental health illnesses. Let’s dive in.
Debt & Mental Health – How Does Debt Affect Mental Health?
When you’re missing payments, the idea of unpayable debt looming over your head can be overwhelming.
Mental health and financial stress are interlinked. Several people suffering from mental health issues have reported that their condition worsened as a result of being in debt.
Owing people money can make a person feel worthless and inadequate, which is a big blow to one’s self-esteem.
Besides, several people face constant anxiety, depression, and fear because they’re drowning in debt.
The relationship between mental health and debt has been so commonly observed that a proper medical term, “debt stress”, has been coined to represent the debilitating mental impacts of debt.
Lastly, being unable to clear your debts may add to your health problems, causing a loss of focus, hypertension, irritability, attention problems, and a host of other mental problems.
The Link Between Debt and Depression
Debt and depression are often linked. You may feel depressed as a consequence of being in debt. You might be struggling to manage your debt because of existing depression.
Either way, debt depression can make life very difficult. The impact of depression on financial decisions is real.
However, it is important to know that you’re not alone in this, and there is always support available to you. If you are struggling with debt depression, there are many reputable charities and resources available to you for free.
For example, StepChangeprovides free and confidential advice to those struggling with debt.
The Link Between ADHD and Debt
Recent research suggests that there is also a strong link between ADHD and poor debt management. It is understood that individuals with ADHD struggle to focus on important and time-sensitive problems.
Consequently, people with ADHD are likely to let small fines and debt escalate into something more serious.
According to the NHS, ADHD is a mental health disorder. And it is legally considered to be a disability.
As such, if you are in debt and have an ADHD diagnosis, it is important that you share this information with your creditors. They may be able to make reasonable adjustments to your debt or repayment plan as required by the Equality Act 2010.
You could also get in touch with a debt charity, such as StepChange, for assistance.
Can you Ask for Debt to be Written off due to Mental Illness?
In general, yes, it is possible to get your debt written off because of mental illness – but there are a few conditions you should be aware of and a few protocols you need to follow.
Let’s look at each of such cases in detail individually.
Convincing Creditors to Write Off Debt
If you think your mental illness is making it very difficult for you to deal with your debts, you may choose to contact your creditors and ask them to write off your debts.
Under the Financial Conduct Authority (FCA) guidelines, lenders are required to treat people with mental illness fairly. Creditors should also consider writing off a debt if you’re unable to pay because of your illness.
Whether you want to inform your creditors of your issues is entirely your choice, but if you do, it may end up helping you with your negotiations.
Your creditor may understand your situation and offer you various options to help you deal with your situation.
Writing off the entire debt, especially if it’s a big sum, is unlikely but not impossible.
However, instead of entirely writing off your debts, creditors may choose to back off for a certain period. They may also agree to:
Not employ debt collectors.
Contact you only at specific times.
Give you extra time to deal with your situation.
Bring in specialists to help you handle the situation.
Notice of Correction
If you’re struggling with your mental health illnesses, it may be a good idea to mention it in your credit report to inform potential lenders and creditors about the circumstances surrounding your debts.
A notice of correction is a passage that explains the reasons behind your credit rating. It also conveys any contextual information that you may want to include in your credit report.
So, for instance, if your poor credit rating has primarily been caused by your mental health illness, you might want to explain it on your credit report.
That way, even if you have a bad credit score, creditors may understand your mental health as being the reason behind your poor score and may offerfinancial alternatives and other arrangements to make debt easier for you.
Debt and Mental Health Evidence Form (DMHEF Form)
A Debt and Mental Health Evidence Form, or DMHEF form, allows your creditor to receive information and updates about your mental illness from a health professional. This is done with your consent.
I suggest you use this form if you want to let your creditors in on your situation. It also lets your creditors take into account your mental health situation and make appropriate adjustments to their debt collection process.
Be sure to ask your creditors to write off your debt if you feel your mental health condition is causing you not to pay. You should do this in writing and send some medical evidence of your condition. Some creditors may be willing to forgive your debt if you’re mentally ill.
Writing Off Debt Using Insolvency
Let’s talk about your insolvency and mental health issues in the UK.
You can avail of debt relief orders, individual voluntary arrangements, and bankruptcy as legal options to get rid of your debt.
Let’s look at each of these debt relief options for people with mental illness:
Debt Relief Orders
A debt relief order, or DRO for short, is designed to give you a period where neither your creditors nor debt collectors can chase you around for debt.
The basic details of the arrangement are as follows: once approved, you are granted a full year’s worth of time where you can think and plan how to get back on your feet and pay your creditors back.
However, a DRO only applies to certain types of debt and may take quite a hit on your credit score.
The allotted period for which an IVA is valid is around five to six years.
If you still haven’t managed to pay your loans back in time, everything you owe under the IVA is.
An IVA does have extremely strict conditions for qualification, though. The creditors that you owe 75% of your loans all have to agree to the conditions of the IVA for it to be considered valid.
Also, an IVA can badly affect your credit rating, so be prepared for such consequences.
Bankruptcy
Bankruptcy allows all your loans to be forgiven if you can prove that you don’t own the required assets to repay it.
Once you file for bankruptcy and it is approved, your assets are taken away and used to contribute towards the repayment of your loans. However, I must point out that they will not take away reasonable domestic needs like your furniture or work equipment or computer.
Once your assets have been used to contribute to repayment, any amount you still owe is written off, and you no longer have to worry about it.
What Happens After a Loan is Written Off
From experience, after a loan is written off, the debtor originally responsible for repaying the loan is no longer required to repay it.
Get Help
Remember, you don’t have to deal with your debt problems alone. Speak to a debt advisor for free from an organisation such as National Debtline or Citizens Advice.
Getting advice can help you feel less anxious and stressed. That’s how you get control of your life.
Frequently Asked Questions About Mental Health and Debt
Will my creditors be more considerate if I shared my mental health issues?
Yes, it’s a possibility.
Once you inform your creditors of your situation as honestly and clearly as you can, they may become willing to make specific concessions pertaining to your loans.
Also, in some cases, when creditors realize that they’re most probably not getting repayments from you, they may even be willing to write off your loans.
How long before a loan becomes uncollectible in the UK?
For most types of loans, they become uncollectible six years after the point where your creditor last contacted you about the loan or six years from when you and your creditor last acknowledged the loan.
For mortgage loans, however, the limitation period is twelve years after the point where your creditor last contacted you about the loan or twelve years from when you and your creditor last acknowledged the loan.
Can I ignore my debts?
No.
I don’t recommend that you ignore your debts.
If you keep ignoring them, they won’t just disappear. On the contrary, your interest will keep racking up and your credit score will take a hit when you miss your payments.
How far are debt collectors allowed to go?
Collectors may call you or confront you to ask you to pay your debts back.
If they try to be coercive or threatening, you need to know how to avoid them.
They’re not allowed to threaten to take you to court. If they try to do so, it’s considered a form of harassment under UK law.
Can creditors take money from my wages?
Yes.
Creditors may attempt to take money from your wages to contribute to your payments via a court order.
An order of this nature is referred to as an “attachment of earnings” order.
Can I go to prison for debt?
No.
In the UK, you won’t be jailed for not having the money to pay back your debts.
The only situation where you can potentially be jailed is if you’ve actively committed fraud in dealing with your debts.
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.
