The average UK household debt is now almost £60,000. People in the UK now owe combined total of £1.6 trillion. We are a nation living in debt, and unfortunately debt has an inextricable link to mental health problems. Many people are dealing with problem debts and while it’s tempting to just not think about it, sorting out money problems can have hugely beneficial effects.
How do people get into debt?
If you are on a low income or benefits, you may find that you don’t have enough money to cover what you need to spend. When things are bad in the economy, you are more likely to lose a job or to have to make do with less benefit money.
How can I start sorting out my debt?
However much you owe – the sooner you begin to tackle it, the sooner you solve it. First of all, tell someone you trust about it. This could be a friend, relative, colleague or someone from your mental health team. They can help you to feel less powerless and more hopeful – and can put you in touch with people who can help you out.
Debt and mental health
When trying to recover a debt, creditors may be entirely unaware of a mental health problem. They can act in inappropriate, and sometimes distressing ways. You will need to decide if you want to tell your creditors about your mental health difficulties.
Remember:
- Don’t ignore debt – it will only get worse
- Explain your problems to someone you trust
- Be sure to get expert independent advice (a collection of debt help agencies is listed below)
- Take control of your money and spending
There are some common events in life that can push you into debt or make an existing debt worse:
Major life changes
You may lose your job, lose a loved one, break up with your partner, or there may be times when you have to borrow money, or stop paying bills, to cope with a new situation.
Staying unwell – or getting worse
Mental or physical illness can push someone into debt. If you lose your job – or have to spend time off work – you won’t have so much money and you may actually have to spend more on paying for prescriptions, travel to health services or trying to find work.
Living on a low income
If your income is below the average, you are more likely to get into debt in the first place. If you have to live on a low income for a long time, debts can mount up because you have to replace essential items. Eventually, you may find that you just can’t get by without borrowing money.
Ignoring the bills
If you are mentally unwell you may stop seeing people, find it hard to concentrate, find it hard to communicate or just find it too much to think about money and bills. You can easily get into debt from just ignoring paperwork and bills.
Pressure from outside agencies
A bank, or a loan company or even a loan shark can encourage you to take out another loan, perhaps even to pay off an existing debt or to get a credit card. If your credit card limit then increases, you may feel that it’s safe to spend more.
The Next Steps:
Repay the debt
If you have any available income, you can make a repayment offer (but only one which you can realistically meet). If you do this then a creditor should be asked to freeze any interest on the debt.
Park the debt
If you have very little available income, you can make a nominal/token repayment (e.g. £1) or request payment suspension.
Full and Final repayments
This is when creditors may accept a lump sum offer which is smaller than the original debt.
Debt Management Plan
You make a single monthly payment to a debt management agency which then pays several creditors for you (you may have to pay a fee for this).
Bankruptcy
This is an option if you owe a large amount of money and don’t have any assets. Bankruptcy lasts for up to a year (with restricted access to financial services). After this, debts are usually written off. However, the bankruptcy is registered with credit agencies for 6 years and can make it hard to get financial services in the future.
IVAs
In England, “Individual Voluntary Arrangements” involve you paying agreed amounts over 3-5 years. The remaining debts are written off. This is an option to consider if you are able to make sizeable payments.
Sources of help for your debt:
Citizens Advice: Numbers for your local service will be listed in the phone book. National Advice Line: 0344 77 20 20
National Debtline: For free specialist advice. Tel: 0808 808 4000
Step Change Debt Charity: offering free debt advice and free debt management. Tel: 0800 138 1111
NHS Stressline: practical information and advice from trained health advisors: Tel: 0300 123 200