BBC Breakfast presenter Charlie Stayt and his wife’s company are in danger of going bankrupt.
Here are ten signs that you may be falling into a debt trap or going bankrupt… without even realizing it. Plus tips on what you SHOULD do to get out of the red.
1. Not paying a bill is the first warning sign of a debt problem.
When you get a not-so-friendly reminder or red letter in the mailbox, ask yourself, “how did this happen?” It may be a mistake, but be honest with yourself if the real reason is that you were strapped for cash and ignored the question.
If you are missing reminders, you need to address the problem, if only to stop being lazy with paperwork. Make sure letters are not left unopened, but kept somewhere in plain sight until paid so they are not accidentally thrown away.
This is an early wake-up call. If bills go unpaid, it can eventually end with a bailiff knocking on the door.
BBC Breakfast presenter Charlie Stayt and his wife’s company are in danger of going bankrupt
2. Juggling your bills is another early warning sign that trouble is brewing – and that more money is going out than coming in every month. An example might be delaying paying one bill, such as an energy bill, so that you can afford to pay another – perhaps the mortgage or rent.
Sara Williams, founder of consumer website Debt Camel, says: ‘There’s no need to panic, but when one month of juggling turns into two, and then three, get help. Now is the time to get support before it’s too late.”
Make an appointment for a one-on-one conversation with Citizen Advice. Williams added: ‘Most people think about getting help when they are already deeply in debt, but it is crucial to seek support before this crisis point. Citizen Advice not only offers free debt advice, but can also contact banks and lenders on your behalf.’
3. You start to worry about money. When thoughts about how to afford to pay bills come to mind, they need to be addressed, not ignored. Telltale signs include trouble sleeping and arguments with your partner, family and friends because you feel stressed – even if you don’t realize money is the cause.
Williams says, “You need to discuss your concerns with others. Couples should not hide – or bottle up – money worries from each other. No matter how uncomfortable it feels, you need to make time to sit down and discuss your shared finances.
‘Honesty is required. It will not be an easy process and may lead to uncomfortable conversations, but it is essential to resolve issues before they get out of hand.”
National Debtline on 0808 808 4000 is a free service provided by the charity Money Advice Trust which aims to provide practical help and support. For businesses, the charity offers a Business Debtline service on 0800 197 6026.
Charlie Stayt’s £2.3 million home. One sign of possible impending debt problems is if mortgage payments or rent start to hurt
4. Credit cards charge interest because you don’t pay them off every month, or because you have to use overdrafts to settle their balances.
If you find yourself in this position, consolidating debt can help you lower your interest payments.
With the help of a free service such as the charity Step Change (0800 138 1111), it is possible to repay the money owed in affordable installments. Step Change says: ‘We can create a debt management plan. You pay us once a month and with this money we arrange the payment of your creditors for you. Interest and charges on your debts are then often stopped.’
Such free help should not be confused with making an individual voluntary arrangement where a debt company might charge you fees to consolidate debts.
5. Mortgage repayments or rent start to hurt and make it harder to pay other high priority bills such as council tax, energy and car finance.
Alice Haine, personal finance analyst at wealth manager and tax expert Evelyn Partners, says: ‘Contact your mortgage provider at the first sign of problems with mortgage payments. Last year, a new Mortgage Statute came into effect, which means that mortgage providers must try to support borrowers in financial difficulties. It may mean that you switch to an interest-only deal with a lower interest rate or that you have the existing mortgage term extended. Don’t stop paying off your home loan, but make an appointment to discuss how they can help you.’
6. You go into denial – or even spend more – because it temporarily relieves the debt worries that are starting to weigh you down. “Burning your head in the sand like an ostrich hoping your problems will go away is a common response to a looming debt crisis, but unfortunately one that will do more harm than good,” says Williams.
You are better off sharing your concerns with others and arranging a debt repayment plan with the help of a debt charity. Specialists willing to offer free support include Citizens Advice, Step Change and National Debtline.
7. You are suddenly rejected for financing, such as credit cards and loans. This could mean that growing debt will give you a poor credit score, causing you to be seen as a risky borrower who a lender may not repay. Get a free credit score from a company like Equifax (with Clearscore), TransUnion (Credit Karma), and Experian.
These not only provide details that provide an incentive to get your finances in order, but can also show that you have a bad credit score through no fault of your own.
For example, a previous resident where you live had a bad credit score and this relates to your own record. Once you spot any errors, they can be resolved.
8. If buying the groceries becomes a challenge and you can no longer afford treats or vacations, this is another indicator that could soon lead to a problem with mounting debt. Perhaps you are living beyond your means or you suddenly receive an unexpected bill, such as car repairs or the boiler needs to be replaced.
‘Try an online grocery service to see if that works out cheaper. When you walk the aisles of the grocery store, you may end up buying more than you need,” Williams says.
‘There is no point in putting on sackcloth and ashes and eating porridge. Give yourself small free or low-cost rewards for saving and reducing debt, such as a picnic for a day out. It can also help to view budgeting as a challenge to be met, rather than just a chore.’
9. If you are unable to keep an eye on the subscriptions, it is an indication that you are losing track of your finances and budget plans.
It’s time to go back and get rid of all the services you don’t need. TV and music streaming services are classic examples where you sign up to watch a particular TV show, using a service like Apple TV+, while also paying for competitors like Netflix and Amazon Prime.
When you have finished watching a series, cancel your subscription and only stream with one provider at a time.
Giving rarely used gym memberships is also an easy way to save money. Consumer group Which one? says: ‘Sharing streaming subscriptions within your household is one of the fastest ways to save money. For example, Spotify offers a Premium Family plan for £17.99 per month, saving up to six users £575.40 per year compared to individual plans.”
Sit down at the kitchen table with the family to review all your monthly expenses so you can cut back on unnecessary services and reduce debt.
10. You have considered bankruptcy. This option to solve your money problems should not be taken lightly – and should ideally be avoided.
Bankruptcy occurs when an individual or company seeks relief from paying outstanding debts in the hopes of starting over with a clean slate.
Haine said: ‘Individuals apply for bankruptcy online at gov.uk/apply-for-bankruptcy for a fee of £680. You will need to provide details of any assets and liabilities, and include supporting information, such as letters from a bailiff. Someone who owns their home may have to sell – and also sell other valuables, such as cars and jewelry, to pay off their debts.”
The positive aspect of bankruptcy is that it creates distance between the debtor and his creditors, with a third party making the decisions. Usually, after one year of bankruptcy, you are released from any unpaid debts.
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