If you are having trouble paying off debts or even find that your situation is deteriorating, the world can be a difficult and lonely place, especially if you are being regularly chased for payment. Sometimes, the problem has crept up on you, or you were doing fine until you lost your job and have been out of work for a while.
What can you do to protect your family? Take out a loan consolidating all your debts? Surely one loan is easier to handle than several? Are you contemplating selling your remaining assets, including the house, as you’ve fallen behind with the mortgage? A professional advisor can help pick through the problems and find solutions. Taking advice as early as possible often leads to a better outcome, and you need never face these problems alone.
An ICAEW Chartered Accountant can help you with a wide range of debt issues, offering advice on how to control your spending and deal with the repayment of your loans. In simple terms, managing debt can be broken down into a number of logical steps.
Make a list of everything you owe – the people you owe money to are known as your creditors. If you owe money, you are known as a debtor.
Organise your debts in order of importance – the most important debts are known as ‘priority debts’. If you don’t pay these, serious action can be taken against you. Priority debts include things like mortgage repayments, secured loans, rent, Council Tax, utility bills, taxes, and court fines. Non-priority debts include credit card and store card payments, bank loans, overdrafts and money you've borrowed from family or friends. You can't ignore these, but you don't need to deal with them as a first priority.
Work out a personal budget – a weekly or monthly budget will show you how much you can afford to repay and where you can save money.
Get advice on the different ways to deal with your debts – there are many options for dealing with debts and it’s important that you seek independent advice.
Talk to your creditors – once you know what you can afford to repay, talk to your creditors about your situation and what you intend to do about it. A debt adviser can do this for you, and some will do it for free.
You can also get free and independent advice from organisations like Citizens Advice and the National Debt line.
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Bankruptcy is one way of dealing with debts you cannot pay. Bankruptcy proceedings free you from overwhelming debts so that you can make a fresh start – subject to some restrictions – and make sure your assets are shared out fairly among your creditors.
Anyone can become bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves. An ICAEW Chartered Accountant is equipped to offer guidance across a wide range of bankruptcy issues, including:
- Dealing with a bankruptcy petition.
- Cooperating with the official receiver.
- Handling insolvency practitioners.
- Your duties as a bankrupt.
- Payments to creditors.
- Managing and disposing of your assets.
- What happens to your home.
- Your pension.
- Your life assurance policy.
- Work related registrations, licences and permissions.
- Your business.
- Your wages.
- The restrictions on a bankrupt.
- Becoming free from bankruptcy.
There are, of course, alternatives to bankruptcy, and an ICAEW Chartered Accountant will be able to advise you on informal arrangements, administration orders, Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs).
A list of organisations providing free advice can be found on the Insolvency Service website, along with useful guides to bankruptcy. There are also many other organisations that can provide advice and set up debt management plans and IVAs, but they may charge a fee for their services. You should always check this when you contact them.