Don’t worry about Debt!

It will only make you ill. The most common thing people do when in debt is the worst possible thing –bury their head in the sand, and hope that the problem will go away. So do something about it!

You may say, ‘but what can I do? I can‘t afford to pay it back.’But here's the thing, actually your creditors (the people you owe the money to) do not want you to pay it all back!

What they want is to know that you can and will pay some back on a regular basis. This does not even have to be a large amount. In the meantime they will be very happy to keep adding interest.

Worrying about debt can make you ill. You may still be living and working a normal life; however, the invisible burden of worry may rob you of energy and could eventually affect your health.

What does it take remove the burden of worry about debt?

You’ll notice there are companies who promise to get you out of debt by identifying legal loopholes but this doesn’t always work and even if it does, you may be left with problems getting credit in the future.

The answer which will work for the vast majority of people is to establish a plan to handle the situation and implement the plan. From the moment of doing this, the worry diminishes. The only thing that will bring back the worry is abandoning the plan!

So how do you go about drawing up a plan?

You could analyse your debt situation yourself and make a plan. But very few people can do so, on their own. The government and the Financial Services industry offer help through Charities that are set-up to help people in serious debt. You can contact the charities to fill in an online or paper questionnaire.

But what if you can't manage to do that or just feel incapable of getting started on it? Assuming you want to do something about it, the best solution is to get help from someone who is not personally involved. The best person to help is possibly a complete stranger who has:

1. No personal interest in your affairs 2. The expertise to set up a financial plan 3. Got out of debt themselves

How can Positive Input help?

We have a panel of people who will help each other to confront their debts. We will take you through a simple questionnaire to help get an overview of your situation and work out a plan. You don’t even need to leave home, you can use Skype or a similar service. You will not be expected to pay but you may be asked to help someone else to do the same.

At present this service is only available to subscribing members of Positive Input. Click here to find out more.

If you wish to use one of the official Debt Advisory organisations and fill out the form on your own, the addresses are below. If you make use, or have made use, of either of these services, we would be very pleased to hear about your experiences.

National Debtline
A free telephone-based information and advice for people in England, Wales and Scotland. Call 0808 808 4000 or visit the website: www.nationaldebtline.co.uk

Consumer Credit Counseling Service
A charity funded by the financial services industry and specialising in debt management plans. Call 0800 138 1111 or visit the website: www.cccs.co.uk

A word on Bankruptcy

There is a superficial appeal to the idea of going Bankrupt. In theory anyone can declare themselves bankrupt, which is a legal and binding agreement. Once legally approved the bankrupt enters into a period where their assets are controlled by a Third Party. The main advantage is that once completed, you are discharged from all your debts. However, you will lose control of any assets (and if a house owner could lose equity) to raise money to pay the creditors.

You will need to pay court fees and go to court which can appear very daunting, and so most people are advised to employ a licensed Insolvency Practitioner. This will incur costs over and above the court fees. Whilst you can process your own bankruptcy, the Official Receivers do have a right to inspect every-thing, and dig through your records. For peace of mind it is better to have someone on side to put the best possible case and to ensure everything is done correctly.

Once bankrupt you cannot be a director of a limited company, and will have to declare this on credit and insurance applications, even once discharged.

Bankruptcy is least burdensome on someone who has not got much to lose and is willing to keep a low profile on a low income for a few years.

Individual Voluntary Arrangements (IVA)

IVA’s were introduced by the Government to provide an easier solution to handling accumulated debt.

An IVA is a formal and binding agreement between an individual and their Creditors. It must be arranged and supervised by a licensed Insolvency Practitioner and normally lasts for 5 years. Once the IVA is accepted by the Creditors, interest and charges are frozen.

After 60 months, all remaining debts are written off. The fees to the Insolvency Practitioner are usually included in the IVA’s where there is enough disposable income to offer a minimum repayment in the region of 25% to each of the Creditors. An IVA can only be used for people with a minimum of 15k of debt, spread amongst 3 or more creditors.

All savings and investments will need to be fully disclosed to the creditors. No further credit can be obtained during an IVA.

However, if your circumstances change over the 5 years of the agreement, the terms are still binding. For example, if you are a home-owner, and the value of your home rises during the agreement, the creditors can take 50% of this increase in the final year.

Therefore this is not an ideal solution for anyone who has significant equity in their home or property or whose income is likely to increase over the 5 years of the IVA.