Debts & Loans

As Credit Crunch Bites, Government Launch Campaign To Help Brits In Financial Trouble Don't Panic Or Hide Away When Money Woes Mount-Get Expert Help Free From The National Debtline PILES of unopened envelopes, ignoring the phone, constant worry and sleepless nights - these are just some of the symptoms of debt denial.

Each month brings new reasons to hide further under the duvet and simply hope for the best.

But a rise in the price of food, gas and electricity, the banks putting a squeeze on lending and spiralling mortgage payments are all reasons to fear the worst. People find themselves in debt for all sorts of reasons, from redundancy to mounting credit card bills.

And with Christmas just around the corner it's little wonder many Brits feel at a loss. But a campaign by the Government is urging people to seek help before it's too late by contacting the National Debtline, run by the Money Advice Trust - the charity which aims to make sure anyone with debt problems can get free, independent advice.

They want to empower people to take action to tackle debt before they lose their house or face bankruptcy.

Home repossessions have doubled since the start of the credit crunch and an estimated 45,000 homeowners in Britain will lose the roof over their heads in Britain this year. But there are steps people can take to avoid this, if they deal with the crisis sooner rather than later.

Debt advisors are trained to assess the situation and provide impartial and confidential advice.

They can work out a personal budget and make sure you tackle priority debts first - to prevent you losing your home or having your gas or electricity cut off. They can speak to creditors for you and work out reasonable repayments - creditors prefer a small amount regularly rather than an offer you can't afford.

Here we look at four real examples of people falling into debt whose situations might have seemed hopeless until advisors found a solution.

REDUNDANCY

JOHN and Susan Andrews feared the worst when John lost his job in the oil industry and Susan's call centre wage couldn't cover their monthly outgoings, never mind their £42,000 on unsecured debts.

Their local advice centre performed a full benefit check and discovered the worried couple, who have a 12-year-old son, were entitled to several unclaimed benefits each week.

But this still didn't cover their outgoings and every month they had anegative balance of £253.

The advisor contacted the couple's mortgage company and arranged a one-month holiday to be followed by interest-only payments, then wrote to all lenders requesting they freeze interest and charges until the couple found a solution.

Luckily, John got a new job the following month, boosting their disposable income to £480.

And after consulting their advisor they agreed to a debt payment programme to pay off all their arrears within seven years to prevent bankruptcy and extra charges.

BEREAVEMENT

WHEN Joan Thomson's husband passed away she realised she could no longer afford the repayment plan on the £12,000 loan they had taken out to consolidate a number of small debts.

They had not taken out payment protection insurance so when Joan, 57, defaulted she became liable for the full amount and charges - more than £14,000 including interest.

Joan lived in rented accommodation with no assets, had no savings and only a part-time job in a local factory so lacked any disposable income.

An advisor did a benefit check and discovered Joan was entitled to £24.40 Working Tax Credits. She was also entitled to apply for a Low Income, Low Asset Bankruptcy.

There was a £100 charge for this but Joan was told it was unlikely she would have to make any contributions to her debts, which would be written off, and she would be discharged after 12 months.

NEW BABY

AFTER Sharon Brown had baby Aaron she changed her secretarial work to a job share, taking a cut in hours and wages.

But it meant she could no longer make the payments on her credit card and loan debts of £45,000.

Sharon wasn't eligible for extra benefits and, with a disposable income of £200 a month, it would take her 14 years to meet her debt repayments - which everyone agreed was unreasonable.

Sharon and her partner Alan equally owned their house, which had a mortgage of £60,000 but was worth £100,000 - giving them equity of £20,000 each.

The advisor arranged a meeting with an insolvency practitioner who told Sharon that paying the £20,000 of her assets (after remortgaging their home and releasing the equity) to a Protected Deed Trust would be acceptable to her creditors.

This would write off the remaining debt and also safeguard her home from repossession.

RENT ARREARS

GEORGE and Helena Sutton rent their home from their local authority, but had mistakenly been overpaid extra housing benefit which they had not refunded.

When the local authority began deducting the money owed, George didn't realise this meant not all his rent was being paid and he was sliding into arrears.

He received a Summary Cause Summons from a sheriff officer, demanding the £498 in arrears and saying he faced eviction.

George went to his local advice centre, who spoke to the local authority and convinced them to reduce the deductions from George's housing benefit from £8.10 to £3 a week.

It left George with enough money to make extra weekly payments to cover the shortfall and his home was safeguarded.

10 CHRISTMAS MONEY TIPS

1 Be realistic about what you can afford. The worst way to do Christmas shopping is at the last minute, in a panic, pushing everything on to your credit card.

2 If you can afford to pay cash, don't take out credit unless it really does work out cheaper.

3 If you're using credit, shop around for the best deal and check the repayments are within your budget. Be wary of "buy now, pay later". Are you sure you'll have the money then? There are usually heavy penalties for late payment.

4 Study the terms and conditions of any credit agreement. Ask if anything is unclear before signing.

5 Store cards are usually more expensive than credit cards. Some charge 30 per cent interest.

6 Don't run up an overdraft without talking to your bank. This will be much more expensive than if you OK it beforehand.

7 Remember gas and electricity bills often arrive in January and February, just when you're feeling the pinch after Christmas - so allow for these in your budgeting.

8 When it comes to paying bills, prioritise mortgage or rent, gas, electricity and council tax.

9 Are you a lone parent, on a low income, unemployed, or a pensioner? Are you getting all the benefits you are entitled to? Citizens Advice Bureau can help you check.

10 If you're in over your head financially, never ignore it or hope it will go away. It won't. Get free, confidential and independent advice from CAB.

AS we brace ourselves for Christmas in the wake of the credit crunch, everyone has different ideas about getting through the festivities...

More than 18 million (39 per cent) UK adults intend to recycle old presents.

Forty per cent plan to spend less on presents. The average amount spent by Britons is set to reduce from £384 last year to £301 this year.

Almost 30 per cent say they'll celebrate Christmas as they usually do and think about the financial consequences in the New Year.

Nearly a fifth (18 per cent) will buy on credit.

Eight per cent will go overdrawn.

Almost a quarter (23 per cent) will dip into their savings account to pay for presents.

'Trained advisors can work out a personal budget and make sure you tackle priority debts first'