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.
Recognising debt
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 of cash or you're constantly close to
your overdraft limit on your bank account, 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.
Doing
something about it
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 on 0808 808
4000. The Debt Advice Foundation
with its useful debt analyser tool can help too.
The Debt Support Trust offers
immediate telephone and internet-based advice. Its opening
hours are Monday - Friday, 8am - 7pm.
Find out more about getting out of debt at Directgov's
Debt - Where to get free help and advice.
What
you can do
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 size of
each one, you can prioritise the most important ones and start to
pay them off.
Starting repayments
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 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 should be able to find phone numbers 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.
Avoiding
overcommitment
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.
Changes in
circumstance
Another reason for overcommitment may be a change in personal
circumstances that leads to a drop in income - for example, if
you:
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.
Priorities and
plans
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.