Last week I met with an old friend, somebody I'd known for over 20 years and knew very well, but I didn't know this about his finances.
He and his wife got married 4 years ago, purchased a house and are both working full time. Their combined income was over £60,000 per year and they had no assets like stocks, shares or bonds. They both had a car on a conditional sale agreement.
My friend telephoned to say he had "a little debt" which he wanted to resolve. So, we met and discussed the situation. We reviewed his income, expenditure, assets and debts to understand the full picture.
He confessed he didn't really know the extent of his debt problem, so it was a shock to him when he realised he owed £16,000 to 4 credit cards, a personal loan and his overdraft. He was only making the minimum payments. No matter the level of debt, there is always a route back out towards financial freedom. The couple had a disposable income - the amount they could realistically afford towards their debt - of £350 per month.
It was then onto the debt advice. He had heard of a Trust Deed before and thought this option would be his best option. The Trust Deed is an ideal debt solution for some people, depending on their circumstances. It lasts 4 years and you pay what you can reasonably afford each month. At the end of the solution any remaining debt is written off.
My friend would not be best entering a Trust Deed and I explained why. If he were to pay £350 per month he would be debt free in under 4 years in a debt arrangement scheme. This option freezes interest, charges and protects the property from creditors. All of the debt is repaid and I could ensure he would enter a fee-free debt arrangement scheme. After some discussion of the advantages and disadvantages of the solution, he agreed the debt arrangement scheme would be the best option.
All in all, the process took about 20 minutes.
Helping a Friend in Debt
It's not the first time I've spoken to friends, and family, about their money problems. I doubt that I'm unique in this scenario but what can you do for the best to support a person dealing with debt?
My Top Tips for dealing with debt are:
- Don't panic: The first feeling when a partner, friend or family member tells you they have a debt problem is to worry that there's no solution. There is always a route back out of debt.
- Take an income, expenditure, a list of assets and debts: Put the kettle on, make a cup of tea and grab a pen and some paper. Set aside 10 minutes to jot down the household income, expenditure, the value of any assets (and any secured loans that are outstanding) and a list of the debts with the outstanding amounts.
- Reassure the person in debt: The person who has been managing the debt will have been doing so for some time. It's likely to have caused them sleepless nights, trouble focussing on at work and in relationships and could have affected their eating habits. Let them know you're going to support them through the money problems - a problem shared is a problem halved.
- Seek professional advice: When it comes to the advice it's often best to talk through the options with a professional debt advice organisation. You can visit your local citizens advice bureau or receive telephone help from Debt Support Trust on 0800 085 0226.
Contacting a Charity
Debt Support Trust is available to provide debt advice Monday to Friday 8am to 7pm or you can take the debt test to give you an idea which debt solutions may be suitable.
You can call the charity on 0800 085 0226 where a friendly debt advisor will be able to help.
Stuart Carmichael is the Chief Executive of Debt Support Trust which is open 8am to 7pm Monday to Friday and supports people with advice about and solutions to their debt problem.