Post-Christmas Debt Check
Each year around this time, the Isle of Man Office of Fair Trading (OFT) sees many new customers for its Debt Counselling Service. It’s easy to understand why - many of us get carried away with Christmas spending. But so often, the excitement of Christmas gives way to the desperation of debt. If you can answer ‘yes’ to some of the following, you may be on the verge of encountering serious debt issues.
- You need to get a credit card or increase the spending on your current cards;
- This month you will need to use one credit card to pay off another;
- You’re making the minimum payments on your credit cards out of necessity and not choice;
- You can’t bring yourself to add up your total debt, because it frightens you;
- You are keeping your financial situation hidden from your partner or family;
- You’ve had to start paying for regular household expenditure such as food and utility bills with a credit card;
- You panic when faced with an unexpected expense such as a car repair;
- You are having sleepless nights because of money worries
The Office of Fair Trading Debt Counselling Service is here to help, so please read on…
Firstly, don't ignore the situation. If you are facing financial difficulty, then the vital thing is to talk to someone. The worst thing you can do is let it run on and ignore it. The longer you leave the problem the bigger and more daunting it will become, the more interest and other charges you will incur and the more likely it is that you could face legal action. As hard as it may seem, the first thing you must do is talk to the people you owe money to - don't just stop payments without explaining why. People and businesses you owe money to can sometimes be more understanding than you'd expect.
Prioritise. The next thing to do is to work out which debts are your priorities - mortgage, rent, tax, child maintenance, utilities - and pay them first. Don't fall into the trap of paying whoever shouts loudest first. Work out a budget that covers all your income and essential out goings. Only offer to pay off debts at a rate you can keep up - it is easy to be panicked into offering more than you can afford.
Beware of a quick fix. A classic response to debt problems is to borrow more money to pay off the debt. This is rarely the best option. If you are having financial problems, you should at least investigate ways to deal with your difficulties without borrowing more. Be particularly wary of companies that offer to lend you money to 'solve' your debt problems, especially if they want you to take out a second mortgage or a high interest loan.
Get advice. The OFT has a free Debt Counselling Service with fully trained staff who will discuss your problems with you, totally confidentially, guide you in sorting them out and liaise with your creditors to organise your debt repayments.
What happens if I am threatened with legal action? First of all, don't panic. The courts try hard to distinguish between those people who can't pay and those who won't pay. If you are facing genuine difficulty, then you will normally be allowed to repay your debts at a rate that you can afford. Telephone the OFT on 686510 for advice. The debts will still have to be repaid but the important thing is that you tell the court about your situation.
Any other tips? If your difficulties are caused by a reduction in income, check whether you are entitled to any help through social security benefits. Many people miss out on additional income just because they don't check their entitlement when their circumstances change. Then, make a list of all of your spending and look critically through it to see where you can make savings.
The OFT’s website has a self-help booklet that gives you more information and a budget sheet to work with as well as a series of interactive tools which you can use to help you manage your debts. But remember, this does not mean you are on your own; the OFT is still here to help if you need more advice or you need help writing a letter. Please call 686510 to make an appointment.