Wednesday, 25 May 2011

Dealing With Debt

Debt is a problem affecting millions of people across the UK. Debt has a negative impact on a person’s financial, social and mental well being. Therefore, it’s unlikely anybody would want to be in debt. So, If you don’t want to be in debt, how can you resolve your debt problem?
Our step by step guide, provided by a qualified debt advisor, to resolving a debt problem will give you the tips to take control of your financial situation.

Step 1: Organise your Statement of Affairs (Income & Expenditure)

You can either create your statement of affairs on a computer or on paper. Firstly, record your income (combined if you live with a partner) including wages, child benefit, tax credits etc.
After you have recorded this please total your monthly expenditure, including your mortgage/rent, council tax, gas and electricity etc.
Once you have your total income and total expenditure, please deduct your expenditure from your income. Any money left after deducting your monthly expenditure from your monthly income is known as your disposable income.

Step 2: Your Debts

Now, please make a list of each debt except for anything secured on to your house. Record which company you owe money to, the type of debt (credit card, overdraft etc) and how much you owe.
Afterwards, please total the debt up. You should now calculate the monthly contractual payments you should make to each debt. Please add up your monthly contractual payments separately.
If your monthly contractual payments are more than your disposable income then you may need some professional debt advice from a debt advice charity.
The next step if you feel you need debt advice is not to contact a for profit company but to contact a not for profit charity. A charity will not charge you for their service whereas a for profit company is likely to request a fee. 
If your contractual payments are less than your monthly disposable income, then you are not insolvent, however a debt payment plan may help you. For example, a Debt Management Plan or a Debt Arrangement Scheme may be suitable. Again, a for profit company will charge for these services whilst a charity will offer them free of charge.

Step 3: Making the decision
Once you have spoken to the advice charity and they have given you the solution it is up to you to decide you wish to proceed, if you think it is suitable. A debt charity will be able to help you with the advice, explain the debt solution and ensure you are dealing with a reputable debt solution company.

Step 4: Enjoying the rest of your life
Once you have completed your debt solution, and it may take a number of years, you will then be debt free. The money you were paying towards the solution will then be yours and you will no longer have any debt to credit card companies or banks. The process should help your budget your finances. There are excellent money manager organisers which can help you control your finances in the future and avoid future debt problems.


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