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Tackling debt.

Tackling debt can be an exhausting and frustrating process and it is difficult to know where to turn for help.

At Vauxhall Community Law & Information Centre we have an experienced Debt Advisor who can help you tackle your debts.

Threatening letters and phone calls can occur regularly with all types of debt, but with a helping hand, a genuine desire to repay, and with frequent communication, creditors will more than likely be willing to accommodate people with unfortunate circumstances.

What options do I have for debt relief?

Debt Management Plan (DMP)

A DMP is essentially acknowledging with your creditors you cannot meet your monthly payments due to your financial circumstances. You will then begin the process to negotiate lower monthly repayments and/or a freeze on interest rates and charges.

A DMP can vary depending on the willingness of the creditor, but in most circumstances, with simple communication with them, they will be accommodating to your situation.

What can I do?

If you are in between jobs, and are actively looking for employment, a creditor will most likely accept a token payment on your debt.

A token payment is essentially a small sum, as low as even £1 to show your creditor that you want to pay your debt. In general, your payment should always be what you can afford, and by communicating this to your creditor, they will be much more accommodating than if you were to simply ignore them.

By communicating with your creditor, and in difficult times setting up a token payment plan, you can ease the stress and anxiety of debt while pursuing more essential matters in your life such as finding new employment in the meantime.

What are the benefits to a DMP?

· It is not a legally binding contract

· Payments can be adjusted whenever depending on what you can afford at the time

· Property is at much lower risk of a charging order, or an order for sale

Debt Relief Order (DRO)

A DRO is a way of dealing with your debts if you can’t afford to pay them. It means you don’t have to pay certain kinds of debt for a specified period (usually 12 months).

At the end of the DRO period, the debts included in it will be written off (‘discharged’) and you won’t have to pay them.

Eligibility for a DRO:

  • Have debts of £20,000 or less

  • Own assets that are not worth more than £1,000 in total (essential household items such as bedding, and furniture are excluded as are tools or other equipment that are essential for work. In addition, one domestic vehicle worth no more than £1,000 is excluded from the asset criteria)

  • Have no more than £50 surplus income each month, after paying tax, national insurance, and normal household expenses

To further note: this eligibility is subject to a proposed change with accepting debts of over £30,000, assets not worth more than £2000 and many other positive changes.

If you don’t meet the criteria for a DRO, another option is to apply for bankruptcy.

Further debt relief options

In May 2021, the government will introduce the Debt Respite Scheme or ‘Breathing Space’.

There are two types of breathing space: standard breathing space and mental health crisis breathing space. Both typesgive legal protections from creditor action, and both last 60 days minimum.

Mental health crisis breathing space is only available to those who are receiving mental health crisis treatment. This breathing space lasts as long as this treatment continues, no matter the length of treatment, with another 30 plus days.

Who can apply for a standard breathing space?

Anyone who is eligible can apply to a debt adviser.

Eligibility is wider, and less strict than a DRO, and can be accessed by providing evidence that you are unable to pay a debt.

Eligibility will be dependent on an interview with a debt adviser, specifically ‘whether a client is capable of meeting their ongoing financial obligations (including regular expenditure and debt repayments). If clients are unable to pay their debts as they fall due, they should be eligible for a six-week breathing space.’

Who can apply for mental health crisis breathing space?

If you are receiving mental health crisis treatment, you will be required to present evidence from an AHMP (Approved Mental Health Professional.)

Once this evidence is presented to a debt adviser, they can help you to apply for a breathing space.

To make matters more flexible for those receiving mental health crisis, there are a range of persons whom they are eligible to apply to a debt adviser on behalf of them:

· Any debtor receiving mental health crisis treatment

· The debtor’s carer

· Approved Mental Health Professionals

· Care co-ordinators appointed for the debtor

· Mental health nurses

· Social workers

· Independent mental health advocates or mental capacity advocates appointed for the debtor

· A debtor’s representative

How can we help?

While we, at Vuaxhall Community Law & Information Centre do not currently offer breathing space, we can point you in the direction of debt advisers who can help you with the process once we have exhausted any better options for you.

At Vauxhall Community Law & Information Centre, we are committed to helping those with debt problems. With the solutions above, we can either help you directly, or assist you in finding those that can.

To view more information see our debt page here and to get in touch click to view our contact details here.

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