What to do if you run into trouble

Having problems paying your credit card bills? Overdrawn at the bank? Rent and electric/gas bills in arrears? Don't know what to do? Maybe if I ignore it this month, I will be able to pay next month if I don't go out on the weekends. Or perhaps I could borrow some money to pay off what I owe and to give me some spare cash for the holiday I want.

STOP! Act now!

• Contact the people you owe to try to work something out. The earlier they know you have a problem the more sympathetic they are likely to be.

• Don't ignore letters or demands for payment. You may be charged for these adding to what you already owe. Sort things out quickly to stop these costs piling up.

Take stock of your financial position.

• Are you getting all the income you are entitled to?

• Could you get a part-time job?

• Check if there are any social security benefits you could claim.

• Do you qualify for an emergency award?

• Look at where your money is being spent. Separate essential outgoings (rent, gas/electric, food) from things like alcohol, clothes and other non-essentials.

How much do you owe?  

Some debts are more serious than others. Deal with the most important first. Make a list in order of priority.

• Rent arrears - Court action can be token to recover the debt and you could be evicted - the debt is still owed even if you walk out. Ultimate sanction - EVICTION and COURT ACTION.

• Council Tax arrears - Full time students are exempt providing they complete an exemption form at their place of study. Ultimate sanction - IMPRISONMENT.

• Fuel and water charge arrears - If you arrange a manageable payment scheme you can avoid being cut off. Ultimate sanction - DISCONNECTION and COURT ACTION.

• Telephone arrears - Ultimate sanction - DISCONNECTION and COURT ACTION.

• Credit or store card - if you can’t make payment STOP using your card and agree with the provider a payment scheme you can afford. Ultimate sanction - COURT ACTION.

Hire purchase debts - Your rights vary depending on how much you have paid.

• If you have paid a third of the amount owed a trader will require a court order to repossess the goods. However you will still be liable for any short fall in the amount owed after the sale of those goods. Ultimate sanction - COURT ACTION.

• (If you are buying a car on hire purchase and you need it to travel to college this would become a priority debt.)

• Loans - Inform the lender that you are having difficulties and to try to work out a solution such as a longer repayment period or a temporary halt on payments. Ultimate sanction - COURT ACTION.

• When you have listed both your income and your spending, compare the two and this will give you the amount of money you have left over to offer your creditors. If you spend more than your income where else can you make savings?

• If you inform them of your situation they may well be more willing to help you. Send them a financial statement showing your income and outgoings to show what you can afford to pay.

• A small regular payment is better than no payment or one than you can’t keep up. If your situation is very difficult some companies will freeze the interest on loans/credit cards but you must ask them to do this. All payments then go to paying off the original amount owed.

• Be committed to your offer, don’t be put off, make payments even if the creditors say the offer is too low.

REMEMBER to:

• Keep copies of all letters sent to each creditor and their replies.

• Make a note of all telephone conversations with the date and the name of the person you spoke to.

• Follow any arrangement made by phone with a letter stating what has been agreed.

• Stick to any arrangement made about reduced payments.

Don't borrow money to get yourself out of debt. You will only end up deeper in trouble. Consolidation loans can be more expensive than your original debts.

GET ADVICE if you feel you cannot resolve your problems on your own.

• Talk to the Student Union counsellor

• Contact your local money advice centre