Credit Crunch

This is the busiest time of year for the debt counsellors at the OFT whose counsellors are busy advising those who have over-spent during Christmas.  If you are having problems here are some expert tips to help you through the next few months.

Don't ignore the problem

It can seem tempting to stuff bills and threatening letters unopened into a drawer but they won't go away.

The longer you leave the problem the more interest you will incur and the more likely it is that you could face legal action.

As hard as it may seem, the first thing you must do is talk to the people you owe money to - don't just stop payments without explaining why. They can sometimes be more understanding than you'd expect.

Prioritise

Work out which debts are your priorities - mortgage, rent, tax, child maintenance, utilities - and pay them first.  Don't fall into the trap of paying whoever shouts loudest first.

Work out a budget that covers all your income and essential out goings. Only offer to pay off debts at a rate you can keep up - it is easy to be panicked into offering more than you can afford.

Beware of a quick fix

A classic response to debt problems is to borrow more money to pay off the debt. This is rarely the best option. If you are having financial problems, you should at least investigate ways to deal with your difficulties without borrowing more.

Be wary of companies that offer to lend you money to 'solve' your debt problems, especially if they want you to take out a second mortgage or a high-interest loan.

Get advice

The Isle of Man Office of Fair Trading has a free Debt Counselling Service with fully trained staff who will discuss your problems with you, totally confidentially, guide you in sorting them out and liaise with your creditors to organise your debt repayments.

What happens if I am threatened with legal action?

First of all, don't panic. The courts try hard to distinguish between those people who can't pay and those who won't pay.

If you are facing genuine difficulty then you will normally be allowed to repay your debts at a rate that you can afford.

The debts will still have to be repaid of course but the important thing is that you tell the court about your situation.

Other tips

If your difficulties are caused by a reduction in income, check whether you are entitled to any help through social security benefits.

Many people miss out on additional income just because they don't check their entitlement when their circumstances change. Then, make a list of all of your spending and look critically through it to see where you can make savings.

The OFT’s website www.gov.im/oft has a series of interactive tools which you can use to help you manage your debts.  There is also a booklet available from the OFT which gives you more information and a budget sheet to work with.

Remember you are not on your own. The OFT is available to help if you need more advice or you need help writing a letter or filling in a court form.