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Worried about debt? Top tips for lone parents
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January 2008
Download a PDF of this information
At this time of year many people, whatever their income, find themselves worrying about how to manage debt that has built up. Debt costs money in interest charges and fees, as well as causing stress. Being honest about debt and taking steps to deal with it can limit the potential costs and make you feel more in control and less anxious about the future. We hope the following tips will help you to do this.
Ask for help
Do not put off dealing with your debts. A specialist money adviser will not make judgements about the reasons why you are in debt and can give you lots of information, advice and practical help. They can help you to draw up a realistic picture of your financial situation and look at ways that this might be improved, as well as help you deal with your creditors. Just talking to a money adviser means that you are facing up to your debt and taking practical steps to deal with it. See Further help and information.
Deal with emergencies first
If bailiffs are about to call, you have received an eviction notice, you have to go to court or your gas or electricity are about to be disconnected, you must take immediate action. Contact a specialist money adviser (see Further help and information) - they may be able to get the creditors to hold off on any action until they have helped you to make an arrangement about repayment.
Get all your paperwork together
Collect all the details and papers that relate to your debts, arrears of payments and current payments. You may need to contact your creditors for copies of loan agreements, to find out the total balance or the amount of interest and/or penalty charges. This will help you to get a realistic picture of your situation and is necessary for either you or an adviser to draw up a repayment plan.
Make sure you are the one liable to repay the debt
It pays to get expert advice about whether the debt is yours to repay, particularly if the debt built up while you were in a relationship. If you had loans or other credit agreements in joint names, you may still be liable for the outstanding debt, but different types of loans are treated differently so get specialist advice. If your partner has died you may not be liable to repay some loans taken out before the death. If a debt has been unpaid for many years, get advice before contacting the creditor - it may be that the debt is no longer legally enforceable.
Look at your income - is your family getting all it should?
Make a list of all your current sources of income - you will need this to draw up a budget (sometimes called a financial statement) and a repayment plan. Make sure your income is as high as it can be. Check that you are receiving all the benefits and tax credits your family is entitled to and that they are being paid at the correct amount. If you are not receiving child maintenance, consider applying to the Child Support Agency for maintenance to be calculated and collected on your behalf.
Think about whether you have any assets you wish to sell and whether you could let a spare room in your house. You can earn up to £4,250 a year (£81.73 a week) renting a furnished room before you have to pay tax, but you may need permission from your landlord or mortgage lender. You may lose some Housing Benefit and/or Council Tax discount, and your contents and/or buildings insurance might be affected, but get advice about this and work out how much better off you would be overall.
Look at your expenses - can these be reduced?
Draw up a full and honest list of all of your outgoings - you will need this to draw up a budget and repayment plan. See if any of your expenses can be cut or reduced. You may get a discount on fuel, utility or other bills by paying by direct debit. Spreading the payments evenly will also help you to budget.
Check if you are entitled to any help from charitable trusts who help people who are unable to pay fuel or water charges. You can also save money on fuel bills if your home is properly insulated. Your landlord may be responsible for this or you may qualify for a grant (see Further help and information).
See if you could pay less for your telephone calls and line rental by switching suppliers and/or making calls during cheap-rate periods. If you are repaying a Social Fund loan or an overpayment of benefit, it may be possible for the amount of your repayments from your benefit to be reduced. Make sure you aren't paying too much Income Tax and check if you can reclaim tax, for example if you were unpaid or were paid less during your maternity leave. Check also that you are getting any Council Tax discounts you are entitled to, for example a 25 per cent discount if you are the only adult living in your household. A specialist money adviser can look at the list of your outgoings and may have other suggestions about how they can be reduced.
Prioritise your debts
The debts that are most urgent for you to deal with are those to do with the essentials and those where you might face fines or imprisonment if they are unpaid: housing (rent arrears, mortgage arrears, other secured loans), gas, electricity, telephone, water charges, Council Tax arrears, benefit overpayments, unpaid court fines or Income Tax and National Insurance contributions. A specialist money adviser can help you to make a list of the debts that must be dealt with first.
Negotiate repayment with your creditors
Now you have a clear picture of your income, outgoings and which debts are the most urgent, you can see how much money you have available to offer your creditors, even if it is a small amount. A specialist money adviser can help you to negotiate with creditors on your behalf and provide them with your budget or financial statement to show that the amount you are offering is reasonable. In some cases it may be possible to not make any payments and/or have interest and other charges frozen for a certain period of time.
Further help and information - Read our factsheet Dealing with debt. Printed copies are available from our Lone Parent Helpline on 0800 018 5026.
- Call National Debtline on 0808 808 4000 (Mon-Fri 9.00am-9.00pm) for advice and to get a free self-help information pack. They can also refer you to a local money advice agency.
- Contact your local Citizens Advice Bureau or other money advice agency and make an appointment to see a money adviser.
- Contact the Lone Parent Helpline on 0800 018 5026 for advice on benefits, child maintenance and many other issues. We can also give you details of your local Citizens Advice Bureau or other relevant local or national agencies who can help.
- Check if you are entitled to any help from charitable trusts who help people who are unable to pay fuel or water charges.
- Find out if you can get help to insulate your home by contacting Warm Front on 0800 952 0600 if you live in England, Home Energy Efficiency Scheme on 0800 316 2815 if you live in Wales, or Warm Deal on 0800 316 6009 if you live in Scotland.
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