Debt Advice for the unemployed

As unemployment rises and paying debt off becomes unmanageable, Justice Goddard lists the following tips on how to deal with the problem.

Firstly, you are not alone

• The unemployment rate stands at 8.0% the highest rate since September 1996.
• 28.82 million people were in work in the period December to February according to the labour force survey (LFS).

So what advice is there for the unemployed? Do you try and find a new job first or deal with the debt?

The best advice is always to be proactive.

Seek help and advice from family,friends, old colleagues. One student who owed £22,000 after leaving university decided to walk the streets of London with a sandwich board advertising his CV.

He was offered 5 positions within days, with one potential employer commending his creativity.

Now not everyone should go into the local high street and advertise themselves but going out and looking for jobs at employers doors will certainly improve your chances. You have to sell yourself to be in with a chance of getting back into employment.

Once you have made a plan to get back into work, you need to set out a plan to deal with all your creditors.

Step One

Make a list of all your creditors, names and addresses and the balance owed.

Step Two

Put together a monthly budget based on your income and expenditure.

Do not over estimate your income. If you paid bonuses or have fluctuating income, use an average of the last 3 months as your income. Make sure 

Make sure you allow for all of your priority bills. Priority bills are:

Mortgage/Rent

Council Tax

Gas/Electric/Water – visit price comparison websites to take advantage of the lowest cost suppliers in your area

Telephone costs - visit price comparison websites to take advantage of the lowest cost suppliers in your area. Cut down on your mobile package.

TV Licence

Home/Car Insurance

Car HP

Food and basic clothing

****REMEMBER****

 Income – Expenditure = Disposable income (the amount available to pay your loans and credit cards)

Step Three

Write a letter to inform them that you are currently out of work and you cannot continue to maintain the payments and offer the creditors a smaller payment. Request that the creditors freeze interest and charges on all your credit agreements.

If you are able to borrow funds from family or friends to help you pay for essential living costs

Step Four

Get professional advice on how to deal with your debts and do not be afraid of asking plenty of questions. If you are going to solve your debt problem you must first understand where the problems have occurred.

If you have little or no disposable income and cannot see yourself improving your income in the short term then you may be better applying for Bankruptcy. 

However if you can see yourself finding a job in the near future and your position is temporary you may be able to you may be better off applying for a Debt management plan or an IVA.

General Advice

Debt management plans are an informal way of dealing with creditors and will not guarantee the interest will be frozen and that charges will be stopped and will mean the debt will be repaid over a much longer period of time.

An IVA is usually repaid over a period of 5 years and stops all creditor action. You must be in a stable position to apply for an IVA as missing payments on an IVA may result in Bankruptcy.

Financial healing

The consequences of debt are far reaching and do not stop once you have spoken to your creditors. Financial healing is a very important factor is learning to deal with debt.

Call Justice Goddard on 0844 822 0845 to speak to a friendly advisor who will talk you through your options