If you’re reading on from our How to Prepare for your Debt Repayments guide, this guide will then take you through the necessary steps to actually dealing with your debts.
However, if you’ve not read our ‘Preparing for Debt Repayments’ guide which is packed with for more information on how to get all of your data and information organised and ready for beginning the process of dealing with your debts, we’d strongly recommend that you read that article first, before moving on to this particular guide.
Do your Debts need paying?
If you’ve followed our previous Preparing for Debt Repayments guide, you should have a complete, up to date list of all of your debts and the relevant data to go along with them.
Before starting the process of paying all your debts, you should make sure that all of the debts you have actually need to be paid off; as there are a variety of debts that you’re not responsible for. The debts that you will be responsible for are;
Any that are written into contracts or in the law. These can include things like credit agreements and tenancy agreements (which are written into contracts), and also things like council tax and water charges (these being legal debt responsibilities).
Being responsible for a debt is referred to as being liable; having a legal duty to pay the debt. If you’re not liable then you should be able to challenge the creditor; the person or organisation that you owe the money to.
In terms of the debts that you are not liable for, these include;
Any debts where there has been a gap of more than five or six years since you last made a payment or contacted a creditor. More information is provided below.
You also might not be liable if there were any problems when you originally signed the agreement; a good example of this is if the agreement wasn’t clear when you signed, or if you were pressured into signing it.
You also wouldn’t be liable if your creditor didn’t properly check whether or not you were able to afford the repayments at the time the agreement was signed, or if you were under 18 years old.
Is your debt covered by PPI?
If you have a mortgage, loan or credit card debt, you might have Payment Protection Insurance (PPI). PPI is an insurance product that enables consumers to ensure repayment of credit if the borrower dies, becomes ill or disabled, loses a job, or faces other circumstances that may prevent them from earning enough income to cover the debt.
If you do have PPI, your insurance company should cover your repayments if you are unable to repay the debt for any of the reasons mentioned above.
You should carefully check your credit agreement or mortgage documents to see if you have PPI added to your agreement. However, be aware that PPI will only cover your credit repayments for a fixed amount of time; your specific PPI policy will tell you what you’re covered for and how and when you should make a claim.
Has the Time Limit on your debt passed?
You’ll find that with most of your liable debts, your creditor will have to take action against you within a specific amount of time, or the limitation period. Taking action in this case refers to the creditor sending you court papers.
This limitation period will usually be around six years since you last contacted them or made a payment, and longer for mortgage debts (if your home is repossessed and you owe mortgage money, the time limit is six years for the interest and twelve years on the main mortgage amount).
If the limitation period expires, you can no longer be taken to court to repay the debt, and your creditor can’t take any other action against you to force you to pay the money back. This is known as a statute barred debt. A statute barred debt can develop if you haven’t made any payments towards the debt, contacted the creditor, or if the creditor hasn’t gone to court for the debt, during the limitation period. Please note, the limitation time-frame varies in Scotland compared to England, Wales and Northern Ireland, if this impacts you, you should contact a non-fee charging debt advice service for more information.
How can I challenge my debts?
Now that we’ve discussed liable and non-liable debts, you might be wondering how you can learn which of your debts is which regarding the two categories.
Obviously, you need to find out which of your debts you’re liable for, so that you can make the proper arrangements to begin paying them back. And if you’re unsure as to whether you are liable for a debt or not, you can always challenge it. Below are a few examples of different types of debt, and how you can investigate them further.
Child Maintenance Arrears
If you receive a bill for child maintenance, you should always check how much child maintenance you’re paying and if you’ve told the Child Maintenance Service (CMS) about any changes in your circumstances. You should then ask for a detailed statement and check this against what you think you’ve paid. If the amount is wrong, you should be able to appeal or ask for a review, and you might even be able to get the debt written off if it’s from a missed payment from a long time ago.
Secured or Unsecured Debt
If you signed a credit agreement, then you'll usually be responsible for paying back the debt. You’re not responsible for a debt if you’re not mentioned on the credit agreement or you didn’t sign the agreement. If a creditor hasn’t contacted, you about an agreement within the six-year limitation period they can’t force you to pay it back. They also can’t force you to pay if there were problems with the original agreement, for example if they didn’t include the right information about how the money should be paid back. The limitation period can vary from country to country, please seek independent debt advice for more information.
Council Tax Arrerars
You might be able to challenge a council tax bill if you think the property is permanently exempt from council tax (e.g. student halls), if the property is temporarily exempt, or if you simply don’t think you’re liable for it. However, you will usually be liable to pay the council tax for the property you live in; if you live with other people, then you will be jointly liable for the full amount.
If you signed the mortgage agreement, then you'll be liable for any mortgage arrears. If you signed the agreement with someone else, then you'll both be jointly liable for any arrears. Your mortgage company has to contact you within six years of the house that you took out the original mortgage on being sold to ask you to repay any arrears. If they don’t take action within the limitation period, your mortgage company won’t be able to take you to court to pay the money back. The limitation period can vary from country to country, please seek independent debt advice for more information.
These bills cover things like your gas, electricity and water utilities. If you signed the contract with the gas or electricity company or requested the supply, you'll usually be responsible for paying the energy bill. You’ll be responsible for the water bill where you live, and everyone who lives with you will be jointly liable, even if their name isn’t on the bill. If you think your bill is wrong, you should always contact your utility company and explain why you think it’s wrong.
The emotional side of being in debt
Being in debt is of course not a nice thing for anyone to have to go through, and it can really take its toll on you mentally and emotionally. At any point during the debt repayment process you should make sure to seek help from any avenues you can find; either from debt advisors, friends, family or anyone else you can think of that you think might be able to offer you some emotional support.
Making sure to remain organised and proactive while dealing with debt is another great way to avoid being overwhelmed. For more information on how to deal with the emotional side of being in debt, you can visit the pages listed below which offer some useful advice and resources:
Hopefully this guide has shown how you should approach the repaying of your debts, some of the technical differences between different types of debt (such as whether you are liable or not), and how you can challenge debts that you feel are unfair or unjust.
As a next step, you can read our Guide to Budgeting for more information on how you can create a monthly budget to help out with understanding all of your fixed income and outgoings, and how to manage these alongside your debt repayments