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What's the best way of paying back my debts?

Paying Back Debts

Donald Findley (Director - DebtDr) gives expert video advice on: What's the best way of paying back my debts?; Under what circumstances would I not have to pay my debt back?; Where can I get advice about paying back my debts? and more...

What's the best way of paying back my debts?

The best way to pay back your debts is to pay them off as quickly as you can. If in fact you can't afford to pay back your debts, then seek advice.

What's an informal repayment plan?

An informal repayment plan is another term for debt management or creditors arrangement. It's where you offer small monthly payments to the companies you've borrowed from.

In general, you can't get legal aid in relation to your debts. However, if a situation is complicated and connected with other issues such as benefits that you haven't received then it is worthwhile checking with CAP or your local law center.

Under what circumstances would I not have to pay my debt back?

You don't have to pay your debts back if you go bankrupt. All your debts get written off if you've got no assets or income, you pay nothing. Also if the debt is very old. If your creditors haven't contacted you for more than six years, the debt may be null and void. I recently had a client who'd had a credit card for twenty years. They couldn't remember signing the original agreement, and it's unlikely that after all this time the bank still has a copy.

What's the minimum amount I can pay back every month?

There is no specific minimum that you have to pay back each month. Really, it's about negotiation. Work out your monthly budget and the amount of money that you can pay and then negotiate with the people you owe money to. You need to bear in mind that there are some debts such as your mortgage, utility, council tax that are referred to as priority debts that you have to pay and others which you may be able to negotiate. Again, you can either do it yourself or you can seek advise.

Where can I get advice about paying back my debts?

You can get advice on paying back your debts from lots of places. You can look on the Net but be aware the information may be out-of-date. Many websites have an alterior motive. You can get advice from free services although you may find that you have to actually do the work yourself but they will give you advice or you can approach a private company who will deal with your debts on your behalf.

Can the loan or credit card company take money from my wages?

Credit card and loan companies may be able to take money from your wages. But they can't simply do it. They have to go to court and seek a court judgement or ask for an attachment of earnings order. However, if you have a low income you simply reply to the court and show how little you earn, then amount that is taken from your wages may be very small.

What do I do if I get a letter serving me with a county court judgement?

A county court judgement is simply the court stating that a debt is due. If you receive papers from the court from a creditor, it's important to respond to it, don't just ignore it. If you're not clear how to fill in the paperwork, get advise.

What is a charging order?

A charging order is an order by the court whereby a loan or credit card or so forth that previously was unsecured becomes secured against your property. And that means that if you re-mortgage or sell your property the debt has to be paid from the proceeds of the mortgage or the sale.

What happens if I get a charging order?

If you get a charging order, it's registered against your property and sits there essentially. Sometimes interest will be charged and sometimes it won't. If you sell your property or remortgage, the funds raised have to be used to settle that debt.

Will I lose my home if I get a charging order?

In general, a charging order doesn't lead to the loss of a home, particularly if the amount of debt is small in relation to the overall size of the property and also, particularly, if you've asked the court for your home to be protected. Interestingly, if you compare what happens when you consolidate a debt by, for example, increasing your mortgage, then can't afford it, you end up losing your home. If instead the unsecured debt had resulted in a charging order, chances are you'd have kept your home.

Is there a way of writing off my debts if I lose my job?

If you lose your job it may be possible to write off your debts by, for example, bankruptcy. But that's only going to be the case if you don't have any assets such as car, house. Again sometimes you can actually turn a bad situation, like losing your job, into a positive thing by using it to sort out your debts. Get some advice.