One of the reasons people avoid solving their debt problems, or sometimes even looking into how to solve them, is because the task of sorting through them can seem longwinded and quite daunting. For this reason, before you even think about tackling your debts we would recommend that you organise yourself and get together every piece of information you can on all of your current known debts.
From there, the step by step guide below will take you through some easy hoops to jump through before you make any appointments to consult a professional for specific debt advice:
Step 1: Make a List of your Debts
First of all you should compile a list of all the different debts you might have. This may include things like contracts, bills and statements; make sure you have as much information on these debts as possible. Some examples of debts you may have include:
• Rent arrears
• Credit card debts
• Council Tax arrears
• Maintenance and Utility Bills (e.g. Energy and Water bills)
• Any personal loans from friends or family.
Once you have done this, you will need to add further details; for example, when you missed your first payment, how much money you owe in total (you might find this in a recent statement), your account/reference number (which should be at the top of any recent statements), who your “creditor” is (or who you owe the money to) and finally, what the creditor has done so far to get their money back; perhaps they have sent you reminder letters or suggested they may need to take you to court?
Step 2: List your Living Costs, Income and Expenses
As well as creating a list of all the debts you have, when consulting a debt advice professional you will also need to provide details on all of your different living costs and expenses, as well as your income. Costs can include things like housing and utility bills, household services, travel expenses, food and housekeeping expenses and living expenses.
Details on your income will also need to include things like pensions, benefits and tax credits. If you’re struggling to complete this list of costs and expenses, you can read our budgeting guide for a comprehensive breakdown of all the different categories of cost you need to bring with you to your debt advisor.
Step 3: Find your Credit Reports
A credit report is a document that shows what money you’ve borrowed and paid back. You should always have copies of your credit reports on hand, as you’ll need them to check whether you have the right details for all your debts. For an up to date and free copy of your credit report, you can go to one of three credit agencies in the UK: Experian, Equifax and TransUnion;
Asking one of these bodies for your “statutory report” will provide you with the details that you need. However, for the most consistent and up-to-date credit report information we would recommend getting a report from all three companies, as they sometimes have slightly differently noted data.
Your credit reports might not have all the details for your debts, so you should also look at all the information sent to you by your creditors. Credit reports can sometimes miss out vital pieces of information, including council tax arrears, unpaid income tax, money you owe to family and friends, money you owe to tradespeople and any benefits overpayments you may have received.
Step 4: Contact your Creditors
When contacting your creditors, you should let them know that you’re trying to deal with your debts and see if they can confirm all of the details of your debt with them for clarity. We would also encourage you to ask them if they have any ability to stop adding interest and charges to the debt, so that it doesn’t get even bigger and spiral out of control. Whilst this is of course at the discretion of each individual creditor, some may be willing to work with you to make your debt as manageable as possible
Whenever contacting a creditor, a good tip is to try to keep a record of anything they say to you; and this is most easily achieved by contacting them though letter or an email.
For many types of debt, the time limit for your creditors to take you to court to repay a debt is 6 years; however this time limit can restart if you write to your creditor or if you make a new repayment- although if you haven’t received any formal court papers after six years, a creditor often can’t then simply decide to take you to court. The limitation timeframe may vary country to country, please contact an independent non-fee charging debt advice service for more information.
If you follow all of these steps you should have more than information for your debt advisors to get the best debt advice possible. You should try not to worry about your debts; especially if the list you compile through step one is bigger than you originally thought it would be, or if you simply have no idea how to actually deal with any of them. For more information on how to start dealing with your debts, you can read our guide on How to Deal with Debt.