DO you have an unopened bill or six hidden away in a drawer?
Don't we all.
But please do all you can to stop things escalating. It's easier said than done of course, but there is help available.
I recently contributed a feature on bankruptcy to Able magazine and wanted to include the experience of someone whose mental health had suffered because of the debt they were in.
I'm reproducing this article here in case it is of any interest.
When you owe money and you feel there is nowhere to turn, you may consider declaring yourself bankrupt. In 2009, according to figures from the Insolvency Service, there were around 35,000 bankruptcies in the UK, with 86 per cent initiated by the people who owed money but couldn’t pay.
These figures are rising. That’s a striking toll of financial despair. For every personal bankruptcy, there will be a toll of a feeling of failure and desperation behind it.
If you find yourself in dire straits wondering where to turn, you must find the right advice for you. Investigate possibilities of alternatives and understand exactly what bankruptcy means before taking this life-changing step.Many people believe bankruptcy is the only option. But if you seek help early you may find that there are other choices.
However, you should also remember that bankruptcy itself need not be the end of your world. If you owe people money, you can aim, with the right advice, to make arrangements to pay them back when you can. According to www.directgov.uk, the Government website, these alternatives to bankruptcy can include:
• Informal agreements - you write to your creditors and try to agree a repayment timetable that you can afford, with the support of a personal budget
• Debt management plan - you make one payment each month to a company that sends the payments to your creditors for you; you can get a free debt management plan, so get advice first
• Debt relief order (DRO) - your debts could be written off after 12 months if you owe under £15,000, have assets worth below £300 and have spare income of below £50 a month
Adam Williams, 43, from Wolverhampton, is a father of two whose design business folded in 2008 and his house was repossessed in 2009.
He says bankruptcy is the worst thing that could have happened to him and nearly a year on, is struggling with the consequences.
He was declared bankrupt in the spring of 2009 and says the shock and reality of the move, “knocked him for six.”
Adam says: “I never knew I could get that low. Please if you are considering bankruptcy, look at all the options first or even better, don’t bury your head in the sand as you get further into debt, tackle it head on, face up to it and don’t think by ignoring them, your problems will go away.
Peter Sargent is president of the Association of Business Recovery Professionals. He says: “An individual would declare themselves bankrupt when they could find no other solution to pay their debts and the pressure from creditors became intolerable. It is essential that professional advice is obtained ideally from an insolvency practitioner who can point the individual in the right direction.”
Explaining what bankruptcy actually means for the individual, Peter adds: “In general when someone is made bankrupt they lose control of their assets, but they are also no longer responsible for paying their liabilities. However, there are exceptions on both sides as basic domestic assets can be retained, pensions are generally exempt and low value cars can also be kept. Certain creditors are exempt including fines, matrimonial debts and student loans.
"The debtor may also have to pay a regular contribution to the Insolvency Service which is used to meet the costs and pay creditors; this is usually for three years and is dependant on income. Going bankrupt will affect their credit rating and may prevent them from being able to borrow in the future.”
To declare yourself bankrupt, you would need to go to the local county court and ask for the necessary forms, the process can also be done partly on line.
As it is a momentous step it should not be done without taking professional advice from someone experienced in dealing with insolvency.
Peter warns: “Do not rely on advice from well-meaning friends, unless they are a licensed insolvency practitioner of course!”
Usually, benefits are not affected, but may be taken into account with other income when determining an income contribution to creditors.
So what are the pros and cons of declaring yourself bankrupt?
Peter says: “The upside is you are no longer responsible for your debts, with exceptions, the downside is that you lose your assets, again with exceptions. It could affect your employment prospects depending on what you do and you can't be a director or be involved in the management of a limited company.
Your ability to borrow money in the future will be affected, but will improve with time. It could seriously affect your relationship with a partner; debt and divorce often go hand in hand.”
Peter’s advice is that bankruptcy is a good idea if no other debt solution will work, you are deep in debt and have little or no possessions of value.
But if you own your own home or have other valuable assets, you should find other ways of settling your debts.
Also think long and hard about how your life will be affected. What about your job? And how will your future prospects be hit?
If you are disabled and want to start the process of declaring yourself bankrupt, you can ask the Insolvency Service to visit you at home. They may conduct interviews over the phone.
Be careful of who you speak to for advice.
The mental health charity Mind also has some excellent advice for people who are struggling financially. They say: “ Keeping track of your finances can be difficult at the best of times. When life gets stressful, paying your bills and managing your money can become even more of a challenge.
"What matters is that you do something as soon as you begin to find it difficult to cope. Financial problems can lead to or be caused by:
• anxiety
• stress
• depression
• social exclusion
• low self-esteem
• problems with relationships
• problems at work
A Mind spokesman adds: “If you are in financial difficulties and are experiencing mental distress, you may find that you start to avoid dealing with the financial issues, because you think they will only create more stress for you.
However, avoiding them, and not being open to those you owe money to, is very likely to make things worse.”
Adam Williams agrees.
He says: “When I lost my house and had to be declared bankrupt, it was the worst blow of my life, I never would have seen it coming. But my health suffered too and I had to go and see the doctor. I was prescribed anti-depressants and nearly a year later, although the mist is clearing financially, I am still on medication. “I feel so guilty for letting my family down.”
Some of the best advice for avoiding this terrible situation is the most straightforward. Adam says: “I should have been more organised.
"If you keep all your financial papers in one place it makes it easier.
"Bills need to be dealt with all together. But I started to not open letters that looked like they were important, I hid them in drawers or left them by the door.
“I wish I could turn back the clock. Please if you are worried about your finances, speak to someone who can help before it’s too late.
“After almost a year I’m soon going to be able to have my own bank account again and that’s a start, but I wouldn’t wish the last year on anyone.”
How to find out more Benefit Enquiry Line 0800 882 200 Citizens Advice Bureau www.adviceguide.org.ukDirectgovweb: www.direct.gov.uk Information on government services, including the areas of money, tax, benefits, disability, employment and carers.
National Debtline 0808 808 4000 www.nationaldebtline.co.uk Free advice on managing your debts Insolvency Service information line 0845 602 9848
* Adam’s name and details of his company have been changed.
My ex and I had debt for several years and I do think it affected my mental health hugely and exacerbated my PMDD. When we split we were able to pay off our debts, but for tat first 5 years we managed our repayments through CCCS (Consumer Credit Counseling Service). They are a government funded charity and provide their services for free.
The CCCS take away ahuge amount of anxiety as soon as you speak with them. We owed £24'000 and managed to pay £6000 of that off over that 5 years even though I had to finish work due to depression and PMDD, and we had two small children to care for.
I would recommend them to anybody who seeks an alternative route to bankruptcy. I know of two other people who are with them now and who are very happy and hopeful.
CCCS helped us deal with our creditors both during our time with them, and after we separated and sold our house.
They give impartial advise, are there at the end of the phone and really really understand. They're also known and respected by creditors and the whole thing worked very smoothly.
I know this might sound like an ad for them LInda, but I've been there, and these people can really help and there are absolutely no fees.
http://www.cccs.co.uk/
The Citizens Advice Bureau were also very helpful.
Posted by: Jo Beaufoix | 04/17/2010 at 03:53 PM
Don't worry about sounding like an ad Jo, it sounds like they do an amazing job and the piece should have included more on them in the first place - thank you for writing so fully about your experience. x
Posted by: Linda | 04/17/2010 at 06:33 PM
Debt and mental health I can understand that !!
Posted by: Ed Butowsky | 09/20/2011 at 08:03 PM
If you can control your finances you can control your mental health.
Posted by: Hearing Aide Doctor | 09/20/2011 at 08:06 PM
Depression is not a hidden disease any longer speak up the more we find out the more we learn.
Posted by: ed butowsky | 10/03/2011 at 08:55 PM
Debt today is not only a few on the list, it is so many so it would not be a social stigma today to have to file for debt releif.
Posted by: debbie | 10/08/2011 at 11:21 AM
Debt and mental health sure do go together. My husband got sick at a very early age, he had to go on disability which was like a 3rd of his normal income........a year folloeing his diability I had a nervous breakdown which in turn left me with no job and no income.......4 years later I am still battleing my illness and so is my husband, he gets help for his medical but my breakdown gets no help except medication I can not afford. Do you know what it is like to not be able to live in your own skin.
Posted by: debbie | 10/12/2011 at 11:50 AM