Does the class system apply in debt?

A myth with debt is that it only happens to people in the lowest socioeconomic groups in society, but it is little more than a myth. It has become apparent in the last few years that debt affects everyone regardless of class or background.

I have previously discussed an ePetition that was set up to get Financial Education into schools to help the next generation try and avoid the situations that the current generation find themselves in. in actually fact financial education wouldn’t solve everything as many find themselves in unaffordable debt due to something happening that is out of their control.

Before the recession hit in 2009, many were able to borrow more freely as they had regular incomes, whether they were employed or self-employed. They were able to meet the monthly outgoings as well as paying their credit commitments.

As the recession hit lots of self-employed people found themselves struggling to make ends meet as business became harder and harder. Many bigger businesses also struggled during this time with thousands of people, in different professions, finding themselves without a job after being made redundant.

As people’s incomes disappeared and credit sources dried up, those who had previously been living comfortably suddenly found themselves with nowhere to turn. This happened to people from all walks of life and backgrounds.

Does this sound familiar to you? We want to hear how you coped.

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Preparing for your credit card statement.

A recent study by Visa found that one in five of us plan to fund this Christmas on credit cards, meaning many will be expecting the bill to drop of their door step any day now.

If you are one of those people, then we are urging you not to panic and follow these simples steps to make sure it doesn’t get the better of you.

If you have kept track of your spending you should already have a rough idea of how much you will owe, if not try to gather all of your receipts together so that you can eliminate the element of shock.
Work out your income and expenditure to calculate how much surplus you have left once everything has been paid out.
If you have a 0% interest on purchases credit card then you can calculate your surplus to pay this back in instalments until the offer expires.
If you are being charged interest, try to work out your payments in order to repay it as quick as possible, but still affordable to you. Or you could look for a new card that offers you a deal on balance transfers.
If you are struggling with other debts you can contact Payplan for free and impartial advice on how to deal with your debts and finances.

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Is Bankruptcy the easy way out?

On many occasions I have encountered people who say that bankruptcy is the “easy way out” of debt.

Some people think that bankruptcy wipes off 100% of debt, and you can be completely debt free within 12 months. Unfortunately this isn’t always the case and, therefore, bankruptcy should never be viewed as the easy way out.

Bankruptcy is a form of insolvency and is one of the many options available to people who are in financial difficulty. Contrary to the belief of some bankruptcy is a complex, and sometimes difficult, solution to your financial problems.

A bankruptcy petition currently costs £525 with a further £175 in costs towards the court fee. Once a bankruptcy petition is filed an Official Receiver is assigned who will go through a person’s finances, assets and debts. If there are valuable assets such as a house, motorhome, jewellery or a car then they will look at selling them in order to pass the funds to the creditors.

As well as assessing assets, the Official Receiver will look at income and expenditure; if a person has a surplus left once they have accounted for all of their monthly outgoings then they could be requested to pay what is called an Income Payments Order (IPO).

An IPO is where a person pays any surplus income towards their bankruptcy for a set period of time, usually three years.

In addition, Bankruptcy will normally remain on a person’s credit file for six years from the date they were made bankrupt.

If you are looking into bankruptcy you may be able to get help with the fees, click here to for more information.

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Selling your home to repay for debts?

For some people in debt selling their home is an option to raise the funds to pay off their creditors. If you are a home owner with equity in your property this could be an option for you.

If this is a route you think would be suitable for you read our top tips for what to do:.

Get together all of your creditor balances and confirm how much you owe to each of them.
Contact your mortgage lender and get up-to-date balances on your outstanding amount. Then you are in a position to instruct a surveyor to determine the value of your home. From this you can see how much equity you have.
Do not forget to calculate the fees that are involved in selling a house.
If, once your house has sold, you have enough funds to clear your debts in full you can arrange payments with them.
If your funds do not cover all of the debt then you can contact Payplan and we can look into offering your creditors a reduced settlement or a Full and Final IVA.
Remember to calculate the costs of moving into your new accommodation. If you are moving to a rented property you will need to have funds available to offer as a deposit.

Selling your home in order to repay your debts will prevent creditors from forcing the sale of the property or them going down the bankruptcy route , however you should always consider all options before making any major decisions like this and seek appropriate advice.

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