BBC Breakfast presenter Charlie Stayt and his wife’s company are “on the brink of bankruptcy”.
Here are ten signs you could be falling into a debt trap or facing bankruptcy… without even realizing it. Plus tips on what you SHOULD do to get out of the red.
1. Failure to pay a bill is the first warning sign of a debt problem.
If you receive a not-so-friendly reminder or red letter through the letterbox, ask yourself ‘how did this happen?’ It may be an oversight, but be honest with yourself if the real reason is that you were cash-strapped and that’s why you ignored the lawsuit.
If you’re not getting reminders, you’ll need to fix the problem, even if it’s just to stop being lazy with paperwork. Make sure that letters are not left unopened, but are kept somewhere in plain sight until they are paid, so that they are not accidentally thrown away.
This is an early wake-up call. If bills are not paid, you can eventually end up with a bailiff knocking on the door.
BBC Breakfast presenter Charlie Stayt and his wife’s company are ‘facing bankruptcy’
2. Juggling your bills is another early warning sign that trouble is on the horizon, and that more money is going out every month than is coming in. An example could be postponing the payment of a bill, such as an energy demand, in order to pay for it. pay another, perhaps the mortgage or rent.
Sara Williams, founder of consumer website Debt Camel, says: “There’s no need to panic, but when one month of juggling turns into two and then three, seek help.” Now is the time to get support before it is too late.”
Make an appointment for a one-on-one meeting with Citizens Advice. Williams adds: ‘Most people think about seeking help when they are already deep in debt, but it is vital to seek support before this critical point. Citizens Advice not only offers free debt advice but can also contact banks and loan providers on your behalf.’
3. You’re starting to worry about money. When thoughts about how you can afford to pay the bills start lurking in your mind, they need to be addressed and not ignored. Telltale signs include difficulty sleeping and arguing with your partner, family, and friends because you feel stressed, even if you don’t realize the cause is money.
Williams says: ‘You should discuss your concerns with others. Married couples should not hide their financial worries from each other or repress them. As uncomfortable as it may seem, you need to set aside some time to sit down and discuss your shared finances.
‘Honesty is required. It won’t be an easy process and could lead to uncomfortable conversations, but it’s vital to resolve issues before they get out of control.’
National Debtline on 0808 808 4000 is a free service offered by the charity Money Advice Trust which aims to provide practical help and support. For businesses, the charity offers a Business Debtline service on 0800 197 6026.
Charlie Stayt’s £2.3million home. A sign of possible impending debt problems includes if mortgage or rent payments are starting to hurt.
4. You are charged interest on credit cards because you don’t pay them off every month or because you have to use overdraft services to pay off your balances.
If you find yourself in this position, debt consolidation can help reduce your interest payments.
With the help of a free service such as the charity Step Change (0800 138 1111), it is possible to arrange repayment of money owed within affordable timeframes. Step Change says: ‘We can put together a debt management plan. You pay us once a month and we take care of paying your creditors on your behalf with this money. Interest and charges on your debts are often suspended at this point.’
This free help should not be confused with an individual voluntary agreement in which a debt company may charge you for consolidating debts.
5. Mortgage or rent payments are starting to bite and make it difficult to pay other high priority bills such as council tax, energy and car finance.
Alice Haine, personal finance analyst at wealth manager and tax expert Evelyn Partners, says: ‘At the first sign of trouble with your mortgage payments, contact your provider. A new Mortgage Charter came into force last year which means mortgage lenders must try to support borrowers in financial difficulty. It may mean switching to a deal with a lower interest rate or extending the term of an existing mortgage. You shouldn’t stop making your home loan payments, but rather make an appointment to discuss how they can help you.’
6. You’re in denial – or even spending more – because it temporarily relieves debt worries that are starting to weigh you down. “Putting your head in the sand like an ostrich hoping your problems will go away is a common response to a looming debt crisis, but unfortunately it will do more harm than good,” Williams says.
It is best to share your concerns with others and work out a debt repayment plan with the help of a debt charity. Specialists interested in offering free support include Citizens Advice, Step Change and National Debtline.
7. You’re suddenly starting to get turned down for financing, like credit cards and loans. This may mean that mounting debts are giving you a bad credit rating, so you are considered a risky borrower who may not repay the lender. Get a free credit score from a company like Equifax (using Clearscore), TransUnion (Credit Karma), and Experian.
Not only do these provide details that act as an incentive to get your finances in order, but they can also show that you have a low credit score through no fault of your own.
For example, a previous occupant of the place where you live had a low credit score and this has been linked to your own file. Once you have discovered any errors, you can resolve them.
8. If grocery shopping is becoming a challenge and you can no longer afford treats or vacations, this is another indicator that a growing debt problem could soon arise. Perhaps you are living beyond your means or have had to pay a sudden, unexpected bill, such as car repairs or needing to replace your boiler.
“Try an online grocery service to see if it works out cheaper, since when you walk down the aisles of the supermarket you may end up buying more than you need,” Williams says.
‘There is no point in dressing in sackcloth and ashes and eating porridge. Give yourself small free or low-cost rewards for saving and reducing debt, like a picnic day. It can also be helpful to view budgeting as a challenge to be embraced and not simply a chore.”
9. Not being able to monitor subscriptions is an indicator that you are losing track of your finances and budget plans.
It’s time to stop services you don’t need. Music and TV streaming services are classic examples where you sign up to watch a particular TV show, using a service like Apple TV+, while also paying for competitors like Netflix and Amazon Prime.
Once you’re done watching a series, cancel your subscription and stream only one provider at a time.
Dropping rarely used gym memberships is also an easy way to save money. Consumer group Which one? says: ‘Sharing streaming subscriptions within your home is one of the quickest ways to save money. Spotify, for example, offers a Premium Family plan for £17.99 a month, saving up to six users £575.40 a year compared to individual subscriptions.’
Sit down at the kitchen table with the family to look at all your monthly expenses so you can eliminate unnecessary services and reduce debt.
10. You have considered bankruptcy. This option to solve your money problems should not be taken lightly and ideally avoided.
Bankruptcy is when an individual or business seeks relief to pay off outstanding debts in hopes of starting over with a clean slate.
Haine says: ‘People apply for bankruptcy online at gov.uk/apply-for-bankruptcy at a cost of £680. You must provide details of all assets and debts and include supporting information, such as letters from a bailiff. Someone who owns their home may have to sell it and also sell other valuables, such as cars and jewelry, to help pay off their debts.’
The positive aspect of bankruptcy is that it creates a distance between the debtor and his creditors, with a third party making the decisions. He is usually discharged from any unpaid debts after one year of being declared bankrupt.
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