Options for Dealing with Debt

 
 

Finding yourself in debt can be a frightening and bewildering experience. That’s why it’s essential to get advice before choosing to follow any particular path.

Which Path?

Find all the information you need about working with Crosslight including:

  • Our terms of service

  • Details of what we can and can't help with

  • Important information you need to be aware of when receiving advice

  • A summary of some of the options that may be open to you on your journey out of debt

Not all of the options below will be appropriate for you, and it could be that a combination of options will be your best route. The best option will depend on:

  • Your personal and family circumstances

  • Any long-term health issues you may have

  • How much you owe and to whom

  • The nature and extent of any Priority Debts

  • How much you can afford to repay after paying your basic living expenses

  • Any assets you might have e.g. a property, vehicle, savings or investments

  • Your future prospects e.g. if you intend to start working or change jobs

 
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Breathing Space

Breathing space is a government scheme which is designed to give you time to receive debt advice and find a solution to sort out your debt problems.

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Repayment Plan

An agreed arrangement (formal or informal) to repay your debts over time based on an amount you can afford.

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Bankruptcy

A legal process which writes off your unsecured debts.

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Debt Relief Order

An accessible legal process to write off debts of up to £50,000 for those on low incomes who have no assets.

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Individual Voluntary Arrangement

A formal agreement for those with surplus income and/or assets, to repay debts over a 5-6 year period. Some residual debts may be written-off at the end of the scheme.

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Administration Order

A payment plan for debts under £5,000, managed for you by the Court. Some debts may be written off. Must have a CCJ to qualify.

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Debt Write-off

Negotiating with creditors to cancel debts you owe, based on exceptional personal circumstances.

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Full and Final Settlement

Some creditors may be willing to accept an offer lower than the amount you owe to repay your debts.

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Selling Assets

An asset is anything you won that has monetary value. You may be able to release money from your assets to clear some/all of your debts.

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Equity Release

In certain limited circumstances, you may be able to release money tied up in your home to repay your debts.

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Consolidation Loan

Consolidating debt usually means taking out a new, more favourable loan, to reduce the number or cost of your debts.

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Accessing Your Pension Pot

Taking money from your pension pot to repay debts. Only suitable in very specific circumstances.

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Important things to consider

Contacting your creditors
If you give Crosslight authority to contact your creditors - for example to get more information about your debts, or to make a proposal - the creditor may decide to close or freeze any active accounts you have with them, for example an active credit card, overdraft or store account. You should think carefully about this before Crosslight contacts them, and should speak to your adviser if you have any questions or conerns.


Your Credit Rating
In almost all cases, the options contained above will affect your credit rating and may show on your credit record for up to 6 years. This could make running a business, getting a mortgage, renting somewhere to live, or getting credit, more difficult.


Priority Debts
Whenever we give advice about your debts, we will treat 'Priority Debts' differently to other types of debt and will always advise that these types of debts are repaid first, even if that means that other types of debts cannot be repaid as fast/at the same time. Priority Debts are things like Rent/Mortgage, Council Tax, Utilities, Court Fines, Tax debts, Benefit Overpayments, and Fines.


Ongoing Payments for your essential bills
Even if you have arrears, it is important that you continue to make payments for your ongoing rent and/or mortgage, council tax, gas, and electricity in particular. These are priority items and it is very important that you make sure they are paid on time and in full – paying different amounts every so often is not acceptable, especially when it comes to your rent (and may result in possible eviction proceedings being started).


Stopping or Reducing Your Payments
The people you owe money to are not obliged to accept reduced payments or to freeze interest if it is being applied. Stopping or reducing payments to them may therefore result in the debt taking longer to repay or the creditor taking legal action against you. It will also likely result in any active credit facility being withdrawn and your account being closed or frozen.


Contact from creditors
If an arrangement is agreed with your creditors, or you enter a formal insolvency solution (e.g. a DRO or Bankruptcy) 'demand' letters should gradually stop, but this can take six to eight weeks. You will however continue to receive statements from time to time - they are obliged to send you these so that you can see how much you owe.


Your Employment
Some of the above options could effect your employment. Depending on the terms of your employment, you may need to disclose your situation to your employer, particularly if you enter into any form of insolvency (e.g. a DRO or Bankruptcy).


Right of Secured Creditors
None of the options will have an affect on the rights of any secured creditors. If someone you owe money to has taken security over your home or other property (for example a mortgage, secured loan, or certain Hire Purchase agreements), they will still have the right to take possession of your home or goods if you do not repay the debt.


Home Owners
Most credit card debts, loans and store cards etc. are unsecured, meaning the creditor cannot automatically claim entitlement to your home or property if you fail to make payments. However if you are a home-owner, in some circumstances a creditor may be able to ask the court to secure the debt on your home through what’s known as a charging order.