Unsurprisingly, the impact of the pandemic has been felt most by those who had the least.  It has left many people on low incomes struggling to cope.  Sometimes this has resulted in them building up arrears on essential bills and debts.  Now, the COVID19-specific relief measures have been withdrawn and people on low incomes need to find a way forward.

Are you solvent?

Although it may seem like a harsh question, currently, it’s arguably the best starting point for finding a path into the future.  In simple terms, if you have enough money to make the minimum payment on any debts and meet your essential outgoings, then you’re solvent.  If you can’t, you’re insolvent.

For clarity, being insolvent is different from being bankrupt.  Bankruptcy is one form of insolvency.  There are many others.  If you determine that you are insolvent, then you need to get professional help immediately.

Professional does not have to mean paid-for.  There are charities that can offer assistance.  You may, however, get to the head of the queue quicker if you can pay.  Realistically, this is particularly likely given how much pressure charities are under just now.

Can you get a better deal on your debt?

If you’re solvent, you will be expected to pay back what you owe.  You may, however, still be able to get a better deal on your debts.  If you have managed to keep up at least the minimum payments on everything you owe then your credit record should be in fairly good order.  You might be able to leverage this to make your debt easier to handle.

For example, if you may be able to consolidate your debt into a personal loan with a monthly repayment you feel you can manage comfortably.  This doesn’t mean that you will necessarily wind up paying less.  In fact, you may end up paying more.  It does, however, mean that you can get yourself some breathing space in the short term.  You can always review as your situation improves.

Be prepared to look outside the box here.  For example, credit unions may be more flexible than regular commercial lenders.  Even with regular commercial lenders, some may be more flexible than others.  It could definitely be worth speaking to a professional for guidance on which lenders to approach.

If you’re not able to move your debt to a better deal, you may still be able to get a better deal from your current lender.  Remember that lenders still have an obligation to help borrowers in financial difficulties, especially if they are in persistent debt.  Your lender will probably want to see details of your financial situation before they offer any assistance but if you qualify they are obligated to assist you.

Do you need a debt breathing space?

The debt breathing space scheme comes in two forms, standard and mental-health crisis.  Each of these has its own qualification criteria and process.  With the standard form, if you qualify, the clock is stopped on arrears for 60 days.

This means that fees and charges are frozen and any recovery action in process against you must be paused.  For example, if your landlord has started eviction proceedings, these will be put on hold.  You will then work with a debt counsellor to come up with a path forward out of your debt.

While the breathing space is active, you must keep up with your minimum payments on all debts.  If you do not, then your creditor(s) may apply to have the breathing space revoked.  If you cannot make the minimum payments on your debts, then you are insolvent and a breathing space is not the right course of action for you anyway.

Please contact us for help and advice.

 

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