Priority Bills
In the current recession many of us are faced with the dilemma of what bills to pay when we have insufficient income to pay everything. Debt Problems are a common occurence.
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We tend to pay the creditors who send us the most threatening letters or phone us most frequently or aggressively or who call to our home or who shout the loudest. We make pressurized decisions but are they the right ones?
The answer is to prioritize debts under the banner of food and shelter. Everybody must eat and drink, have somewhere to live and have clothing, heat and light. Everything else should have a lower priority. It follows then that payment of the mortgage or rent, payment of utilities such as heat, light and water and payment for food and clothing for our family must rank ahead of all other bills. These are the ‘must-pay’ bills because they are for the ‘must-do or ‘must-get’ items. We cannot afford to lose our home and be put out on the street. We cannot afford to have our utilities cut off. We cannot live without food, drink and clothing. What about the bills that we cannot pay? The first thing to do is to look at the household budget. Write down the items with a ‘must-pay’ tag and the monthly cost of those. Write down the household income. This provides the bones of an Income and Expenditure Statement (I&E). Now we flesh out the I&E by filling in the cost of the less essential living expenses. We also list any additional benefits we receive on the income side – such as tax credits, child benefit, housing benefit, rental income from a lodger and so on. |
It may seem simple but this is how we work out how much money is ‘left over’ to pay off our loans, credit cards, overdrafts and other unsecured debts. We call this ‘money left over’ our family disposable income (DI). If our DI is big enough to service our unsecured debts (paying the contractual monthly amounts of course), we have no problem. If it is insufficient, the tricky bit is firstly to split it up fairly between all the creditors and secondly to reach agreement with these creditors on the amount of our monthly payments.
If we cannot do this then the next best step is to obtain professional advice. A reputable Insolvency Practitioner (IP) will determine if we are insolvent or not and assist in compiling an I&E Statement so as to calculate our DI, at no charge. Furthermore, all options explained. Options could include Bankruptcy, an Individual Voluntary Arrangement, a Debt Management Plan, a Debt Relief Order, an Administration Order, Debt Consolidation or some other financial solution. We can make up mind if we want to proceed further. We have to commit to nothing at this point and can walk away and ‘sort out’ our own finances.
To explore any of this further please contact us at National Debt Relief.
About National Debt Relief
National Debt Relief belong to a firm of leading chartered accountants who are one of the largest insolvency practices in the UK. We offer a complete portfolio of personal insolvency services in relation to IVA, Debt Management Plan and Bankruptcy. All our debt advice is free, confidential and with no obligation.
Call us on 0800 043 5135 or 028 71 376854 or email enquiries@nationaldebtrelief.co.uk
