When you are drowning in debt you might feel like there is no solution to your financial worries. But even people with uncontrollable debts can take action to improve their situation, and eventually get out of debt.
We have created this guide for anyone drowning in debt. Our guide is generic and some pieces of our tips might not be relevant to your exact situation. But there should be something for every debtor to take away from here.
What Do We Mean by Drowning in Debt?
Drowning in debt doesn’t necessarily mean you have big debts worth thousands of pounds or lots of individual debts. It is a phrase used to refer to people who have debt they simply cannot cope with. If you have debts that you can’t keep repay and they seem to be growing, this step-by-step guide is for you.
Drowning in Debt… What Next?
#1A: Make Them Prove the Debt
If you have a lot of debts you are struggling to pay back then it is also likely you have a lot of debt letters landing on your doormat. These are usually scary letters that ask for full payment or face legal action.
The truth is this is not likely your only options (more on that later) but there is something you can do before looking for debt solutions.
You can ask them to prove you owe the debt. Send a letter asking your creditors for proof that you owe the debt. Only signed agreements and contracts will classify as proof.
Without proof, you don’t have to pay right now.
#1B: Or Claim Statute Barred
The only time you won’t need to send a prove the debt letter to your creditors is if the debt qualifies as Statute Barred. But what is Statute Barred first of all?
It is a legal loophole that prevents creditors from chasing debts that are six years old or more. If you have old debts that you haven’t paid or owned up to in writing for a long time, these debts may be no longer enforceable by the courts.
The end result? You can never be forced to pay.
So, instead of sending a prove the debt letter, you can download a Statute Barred letter template from a debt charity website and send that instead (only if you qualify).
#2: Get Help from a Debt Charity
If you can’t use the Statute Barred loophole on all your debts, you will still need some help at tackling the existing ones.
The best way to get free assistance is by speaking with a debt charity. You can get free debt help from a debt management company, but these businesses may have commercial motives. That doesn’t make them bad, but starting with a charity is arguably the best first move.
What Will a Debt Charity Provide?
These debt charities will assess your specific situation by asking you to provide information on your finances, expenses and outstanding debts. With this information, they can make recommendations on what you can do to make your debts affordable and lead a life working towards becoming debt-free.
In other words, they suggest debt solutions that fit your situation and will allow you to repay your debts over time.
#3: Obtain a Debt Solution
Sometimes the debt solutions that are most applicable to your situation can be obtained by yourself or with the help of a debt charity at no cost. But if you have a more complex situation or lots of debt, you might need to pay a debt management company for their help.
Some debt solutions are legally binding and can only be actioned by insolvency practitioners. If you need one of these solutions then you will pay fees, sometimes ongoing fees, to the debt management company.
What Types of Debt Solutions Are Available?
There are solutions for almost any situation when drowning in debt, including:
- Debt Management Plans – ideal for different situations with debt below £10,000 approx.
- Individual Voluntary Arrangements – ideal for people with multiple bigger debts and more disposable monthly income.
- Debt Relief Order – ideal for low earners with less than £20,000 of debt.
- Bankruptcy – a last resort but sometimes the right thing to do.
The debt solution you need is dependent on your exact situation. But these options make repaying all your debt affordable so you can live your normal life. Some of these solutions will even wipe some or all of your debts.
You can find out more about each of these debt solutions on our dedicated debt options page.
#4 Avoid Future Debts
Once you have a debt solution agreed and you are back on track to becoming free from debt, you should also make an effort not to get into more debt.
Sometimes events beyond our control cause more debt, but financial literacy and budgeting can help prevent other debts from materialising.
UK debt charities can also help in this regard.
Drowning in Debt? What NOT to Do!
If you have a lot of debt there is one thing you must not do. You shouldn’t ignore those scary debt letters and calls. You can take action by asking for debt proof or telling the creditor you are currently assessing your options and will be in touch soon.
Understandably, you would want to hide from your debts, but if you ignore communication from creditors, they could take you to court. And this may even end with bailiffs at your door.
More Help for People Drowning in Debt on MoneyNerd!
If you want more information that can help UK debtors, stay tuned to MoneyNerd. Our debt help articles are 100% free and written so you don’t get confused by technical jargon.
Debt can be isolating and scary, but know that there are people and groups out there that can help you get through it.