Debt
| As a child or young person, you cannot normally be taken to court for debt. This is because you cannot be legally held to a contract you make when you are under 18. However, there are some exceptions to this rule. You can be held legally responsible for any debts you run up to buy things that you need like food, shelter or clothing. No matter how old you are or what your level of debt is, it's important to understand how debt can mount up. It's also important to know how to deal with debt problems if you ever face them in the future. |
People who are in debt often make the mistake of ignoring the size of the problem, hoping it will just go away. Unfortunately, debt has a habit of hanging around and getting worse, so it's important to recognise the warning signs at an early stage.
If you're always short on cash, or you're constantly close to your overdraft limit on your bank account, then you should think about taking some action straight away.
Ask yourself where you'd find the money if you had to make a big payment at short notice or in an emergency. If the answer is simply extending your overdraft, then you could be in danger of getting into serious debt.
The earlier you start to tackle the problem, the easier it will be. If your financial situation is in danger of becoming serious, do something about it now.
The worst thing you can do if you're having money problems is to just ignore the situation. It's often the case that people assume they'll be able to pay off their debt in the future when they start earning more money.
But anything could happen. Interest charges and late payment fees could mean that you're faced with a debt that's a lot more than you expected - sometimes double the amount you originally owed.
If you are worried that you may be getting into debt, the National Debtline will be able to give you free advice (www.nationaldebtline.co.uk/) telephone 0808 808 4000. Or the Debt Advice Foundation (www.debtadvicefoundation.org/) with their useful debt analyser tool (www.debtadvicefoundation.org/personal-debt-analyser).
If you are in debt, it might be that you've lost grasp of your finances. For example, do you know exactly how much money goes in and out of your bank account and how often?
You can make a start by looking at your recent bank statements and finding out where you are spending money on things you could easily do without. By getting rid of these, your cashflow situation will get better quite quickly.
If your situation is a little more serious and you owe money to a number of people or companies, you'll need to start planning a budget and organising your various debts.
Once you know exactly how many debts you have and the total of each one, you can prioritise the most important ones and start to pay them off.
Hopefully, your new budget will mean that you can allocate some money every month to meet your debt demands. But if you're still finding it difficult, talk to the companies that you owe money to.
It's important to do this as some lenders are willing to accept smaller monthly payments once they are aware of your particular circumstances.
Negotiating with creditors can be daunting and can take up a lot of time, so you may find that contacting a specialist adviser can make things a lot easier for you. You should make sure that any advice you get is free, independent and covers the whole range of possible solutions to your problems.
Your local Citizens' Advice bureau (www.citizensadvice.org.uk/cabdir.ihtml) will be able to help with the majority of debt problems, or you may also want to contact a Money Advice Centre or local Law Centre. You can find a contact number for these in your local directory.
As well as helping you overcome your debt problems, these organisations can advise you of your legal rights if you've been sent a court summons.
Bills are a fact of life; they only become a problem when you become overcommitted and your income can no longer meet the bills coming in. However, by careful budgeting and planning and by being realistic about what you can afford, you can avoid debt problems and make the most of your income.
It is easy to become overcommitted; every time you sign up for a new service (for example, cable TV, gym membership, or a mobile phone contract), buy something on hire purchase or add to a credit card debt, you add to your monthly commitments.
Another reason for over-commitment may be a change in personal circumstances that leads to a drop in income - for example, if you:
lost your job;
had an accident that meant you had to stop work;
separated from your partner.
Any of these events could cause a drop in income and mean that you have to change your spending priorities. If something unexpected does happen, it's important to review your budget as soon as you can.
By working out a budget you'll know how much money you have for essential living expenses (for example, household bills, rent or mortgage and food) and how much you can afford to commit to other plans (for example, buying a car, taking out a mortgage, going on holiday or saving for the future).
By prioritising your commitments you can make sure your basic needs are met and then you can decide what else you can afford, and what you may have to save for or do without.