Government Help with Debt Consolidation | Get Free Debt Advice

There are situations where you struggle to pay back your debt as your financial condition is poor. In this scenario, you need help with debt to make your situation a bit stable.

Fortunately, there are solutions that can help you deal with debts when you can hardly afford to make payments for them. While some of the solutions involve expert debt advice which is essentially free, but if your situation is really that critical, you may need solutions other than advice.

Take Help From Debt Advice Agencies

The first thing that you can do to get help with debt UK is to take advice from a reputed debt advice agency. There are many agencies that do not charge for debt advice. They will work on your current situation like your monthly income, the amount that you owe, the amount that you can afford and tell you what you should do to make your situation better. But before you approach any debt advice agency, you need to have some information on whether they can provide you the best solutions. 

Information That You Need to Collect

You must provide the debt advice agency with all the details about your living costs and the amount that you spend to pay the arrears. You need to provide them with details regarding living expenses, food and housekeeping, travel, household services, housing and utility bill. Along with this, you have to show them your income that includes tax credits, pensions and benefits, and all the details about your debt, so that they can work on these properly and provide you the best solutions.

Where to Find the Details of Your Debts

The best way to get up-to-date debt balances is to contact your creditors. There are also three credit reference agencies from which you will be able to collect a copy of your credit report. Those agencies are Experian, Equifax, and TransUnion (previously known as Call Credit).

You can get all the reports and credit history from these three private companies and you can get a free service or trial from most of them. In case you want to get a paper copy of your credit file, you have to pay them £2 for each copy.

How to Save Your Home From Getting Affected

We know home is the most basic thing that you do not want to lose when you are thinking about a debt solution. Do not worry, there are many debt solutions with which you can prevent your assets from getting affected.

When you are not able to repay your debt in time, you are then insolvent. In this situation, there are some solutions like releasing some of the equity, remortgage or sell your home to pay off your debts. It depends on your situation. However, you will get to know all about all the available debt solutions according to the situation, during the debt advice session.

What to Do When You Are Not Able to Pay Council Tax Debt

When you are not able to pay your arrears, there can be serious consequences. It is the same for council tax bills as it is a priority debt. When you are struggling to pay your arrears, you must get help with council tax debt.

In this situation, you must get free debt advice from an expert. Local authorities of England, Wales and Scotland earn almost a quarter of the amount from council tax. You have to pay council tax for most of the households. But the amount that you have to pay for council tax depends on the following:

  1. Your age,
  2. Who else is living with you,
  3. Your earnings, and
  4. The value of your house.

Is It Possible to Write Off The Council Tax Arrears?

Only councils have the right to write off your arrears. However, you can make them do that with severe hardship. Each council follows its own policy to do so.

You will also be able to write off your council tax arrears if you are in bankruptcy or debt relief order (DRO). There is a possibility to include your council tax arrears in the IVA, i.e., if you apply for an Individual Voluntary arrangement (IVA). The council tax arrears can be written off in this way as well.

However, you need approval from your creditors for your IVA application. And there is no surety that your council will agree to write off these debts.

Council Tax Reduction

You can reduce your council tax provided you meet certain requirements.

  • If you live on your own, you will qualify to get a 25% single person discount. There is also a chance to get a 25% discount if you live with someone who has a severe mental illness, is a full-time student or apprentice. 
  • The amount that you have to pay for council tax is going to reduce in case you are above pension age.
  • Your council tax may be reduced by one band in case there is a person in your household who is disabled and the property has been adapted.

You must let your local authority know, in case your circumstances change for better during the year. They are going to send you an updated bill in this situation.

Government Help With Debt

If you want to deal with your debt in ways prescribed by the government, there are the formal debt solutions that the UK and Scottish government provide. Based on your current situation, government help with debt consolidation can be of different types.

  • Bankruptcy (in Scotland it is known as Sequestration and Minimal asset process)
  • Debt relief orders (DRO)
  • Individual voluntary arrangements (IVA)
  • Debts Arrangement Scheme (DAS). You can only apply for it if you live in Scotland.

Bankruptcy

With the help of this form of insolvency, you will be able to write your debts off, if the amount that you have to pay is unaffordable for you. Then you will be able to start fresh. If you hope that you can pay your debts within a reasonable time period, this legal process is suitable for you.

You will be able to write off almost all of your unsecured debts by declaring yourself bankrupt. However, you should not take bankruptcy lightly as it has serious consequences.

Advantages of Bankruptcy

  • You will be able to write off most of your unsecured debts and it gives you a fresh start.
  • No legal action can be taken by your creditors against you to recover the debts.
  • Your creditors will not be able to add interest or any other charges.
  • The creditors will not have any right to contact you anymore.

Disadvantages of Bankruptcy

  • Bankruptcy might include your assets like home and car.
  • If you are working with a legal or financial organization, bankruptcy can affect your job.
  • Your credit file is going to be impacted negatively by bankruptcy and it is going to stay on your credit file for six years.
  • Your bankruptcy is going to be there on a public register as a record that anyone can access.

Debt Relief Order (DRO)

When you have only a few assets and a low amount of debt, you will be able to write off your debts with the help of a debt relief order. For 12 months, interest on your debt and all the other charges will be frozen by a DRO. All of your debts that the DRO includes will be written off in case your financial situation does not change after this 12 months.

Advantages of a DRO

  • DRO is an alternative to bankruptcy that you can get with a low cost.
  • For 12 months, you do not have to pay any amount for your debts. After that you will be able to write off the debts that the DRO includes.
  • Your creditors do not have the right to contact you during this 12 month period.
  • You do not have to go to court.

Disadvantages of a DRO

  • You can only apply for a DRO if the amount that you owe is less than £20,000.
  • If you are eligible for it, you have to pay £90 fee to the Insolvency Service.
  • If you own a house, you will not be able to apply for a DRO.
  • The DRO is going to have a negative impact on you as it is going to be on a public register as a record.

Individual Voluntary Arrangement (IVA)

You can pay the amount that you can afford to clear off your debts with the help of individual voluntary arrangement (IVA). The time period of an IVA is normally over five or six years. If there is any unsecured debt left after your IVA finishes, you will be able to write it off. It is a suitable solution for you when your situation is like help me with my debt.

Advantages of an IVA

  • You have to pay the amount that you can afford over five or six years.
  • If you own a home, you will be able to keep it. For that you have to keep paying for your mortgage and if there is any secured loan on your property.
  • You do not have to pay any setup charges before getting your IVA.
  • The monthly payments for IVA include the fees for it and your creditors are going to set it.
  • You will be able to pay a fixed amount as full and final settlement in case you are able to offer a lump sum. Or you will need to pay a fixed amount monthly.
  • All of your unsecured debts that remain will be written off after you made the final payment. And your creditors will not have any right to ask you for payments.

Disadvantages of an IVA

  • You will have to try to remortgage if there is equity in your home. For that, you may have to pay a higher interest rate.
  • You are able to make a maximum of 12 extra payments in case you are not able to remortgage. Or you can get an offer from a third party that is equivalent to the equity.
  • An IVA is going to affect your credit ratings negatively.
  • Your IVA can get rejected by your creditors.
  • Only the unsecured debts that your IVA includes will be written off. Other debts that are not included will be outstanding.
  • You IVA is going to be there on a public register as a record.
  • Until your IVA ends, there will be restrictions on your spending.

Debt Arrangement Scheme (DAS)

Debt Arrangement Scheme is only available in Scotland. With this scheme, you will be able to apply for a debt payment program (DPP). With which you can repay your debts with monthly payments and you have to pay the amount that you can afford. 

Advantages of a DPP

  • With the help of DPP, you can repay your debts with monthly payments and you need to pay the amount that you can afford.
  • You do not have to pay any extra charges or interest from the time you apply for your DPP.
  • Your creditors will not have any right to ask you for payments.
  • Your debts will be paid in full after the DPP completes.

Disadvantages of a DPP

  • Your details are going to be there on the DAS register when you are on a DPP. Anyone can access this online registration.
  • Your DPP is going to be there on your credit file for six years.
  • The DPP is going to fail in case you do not keep up the payments. In this situation, your creditors can take legal action or add interest charges.