Worried about debt - advice could help you!

Mr Smith works in manufacturing and earns £19,000.  Mrs Smith cares for the two children aged 3 and 5. They have a number of credit cards  with a running balance on each. A personal loan of £5000 was taken out to pay for a new kitchen.

Like 3 in 10 households, the Smiths have no savings. 3 months ago Mr Smiths overtime was cut. Expenditure had risen because of the overtime, and the family is now slipping into debt.

They have received letters from their credit card companies asking for payment of the full balances. The Mortgage Company has written to them, as their last payment was not the full amount due. They have incurred overdraft fees at the bank.

The stress is taking its toll on the relationship.

• A friend suggests they go to an advice organisation.
• The adviser gets a full picture of all income, expenditure and debts. All creditors are contacted requesting that no further action be taken whilst a strategy for managing the debt problem is devised.
• A benefit check reveals that the Smiths are entitled to Tax Credit of £115.19 per week.
• The adviser produces a financial statement to send to creditors.
• The adviser negotiates with the Mortgage Company to pay the arrears off over the remaining term of the loan.
• After living expenses and priority expenditure the remaining income is distributed on a pro rata basis amongst the credit cards and personal loan.
• All but one of the creditors accepts the arrangement.  The adviser negotiates on the Smiths behalf with this creditor, GE Capital Bank

GE Capital threatens to take the Smiths to court.

• The adviser writes to the creditor stating that as a reasonable offer has been made and refused the advice organisation would defend any court action on the grounds that the creditor has unreasonably issued court action and so incurred unnecessary costs.

GE Capital Bank accepts the offered payment, subject to review in six months.

The Smiths now feel in control of their situation, as all their creditors now accept offers of repayment.

• The entire process has taken three one hour interviews, with telephone calls and correspondence to all the creditors undertaken by the advice organisation.

Mrs Smith writes to the advice organisation:

“ Thank you so much for all the help, advice and time that you have so generously given to me over the past few months.  I do so appreciate all that you have done for me and my family.  I feel a “load” has been lifted off my mind”.  

Produced by Herefordshire Citizens Advice Bureaux