Debt is a word that no one wants to hear and it can bring with it emotions of anxiety and fear. Unfortunately there are millions of people in the UK who are affected by financial problems. If being in debt is scary, being on the brink of bankruptcy can be terrifying.
The Money Charity discovered that in the UK, 297 people a day are declared insolvent or bankrupt, which equates to one person every four minutes 51 seconds.This statistic is deeply concerning and paints a very real picture as to the financial situations in which some people are living today.
To be made bankrupt a court has to issue a bankruptcy against a person due to three reasons:
- The person applied to the court as they weren’t able to pay their debts
- Creditors applied to make the person bankrupt as they were owed £750 or more
- An insolvency practitioner applied to make them bankrupt due to broken terms of their Individual Voluntary Arrangement
Declaring yourself bankrupt isn’t an ideal situation, either financially or emotionally, therefore these three options should be tried first.
Evaluate what you can afford to get rid of
If you have serious debts that are piling up, you should look to see what assets you have that you can sell. Any money you make can be used to put towards your debts. It may seem like an exhaustive way of trying to pay off your debts, but if it can make the difference between keeping your head above the water or sinking, then it really isn’t one to be ignored.
There are plenty of ways in which you can sell goods. There are plenty of shops that will pay decent money for jewellery, electrical goods and furniture. Likewise, the internet is a great place to sell your items on. Just make sure you use a well-known site that you can trust.
Could you save money using public transport and selling your car? If you rent your home could you downsize to somewhere that would cost you much less? These are all questions you need to ask yourself if declaring bankruptcy isn’t as far off as you had imagined.
It is imperative to do this the moment you realise that you are unable to make payments, as getting behind with your financial responsibilities can only end up leading to further problems.
Cancel any unnecessary contracts
If you are in debt and struggling to make ends meet, yet have a gym membership, a Sky package and a ridiculously expensive smartphone bill to pay for, these really need to be looked at in a bid to save money.
Cancel any services that you can. There may be a notice period involved, as per your contract, such as a month for a gym membership, but even if you have to pay for the notice period, in the long run the savings you can make really will help clear your debts and take you further away from bankruptcy.
With regards to mobile phones, it’s worth comparing plans to see if you can change your tariff to a less expensive one on your existing network. If you are hoping to cancel your contract altogether and move to a cheaper provider, then you must go through your contract with a fine toothcomb to make sure you won’t be hit with any hefty fines. In some cases, it is cheaper to stay with the provider in the long term if there are charges applied when cancelling prior to your contract end.
The same goes for TV packages, such as Sky and Netflix for example, and internet providers. If they are not necessary, or you can save money by downgrading or moving to a different company, then cancel or move. The money saved in the long run will come in very useful in combating debt.
Ask for help
Don’t let pride get in the way of preventing bankruptcy, if you are in a serious financial situation, ask for help. Speak to your lenders and let them know you are having trouble. Most companies would rather get some money off you rather than none and you may be able to come to an arrangement with them to pay off what you owe at a lower rate, over a longer period of time. There are also charities and financial management companies that can provide professional help no matter what your situation may be.
While this may affect your credit rating, mean that you are in debt for a longer period of time, and will cost you more in interest in the long run, depending on the circumstances of your situation, this is definitely an option to think about.