How I went from being £36,000 in debt and on the verge...
Debt and money related letters: what to do and how to respond
An official-looking letter drops on to the welcome mat. It looks decidedly unwelcoming. It could contain some very bad financial news; you’re scared to open it. But which letters are actually just an inconvenience, and which letters should you sit up and take note of straight away?
The most important advice we can give you is this: open all your letters. Don’t ferret them away or promise to open them later. It’s important that you read and understand everything you receive as it could have a significant effect on your financial wellbeing for years to come.
So you’ve taken our advice and opened the letters. Well done. What does it say? What does it mean for you? What should you do next?
Following on from our press release, and a report from MoneySupermarket found that 1 in 4 of us live in fear of bills we’ve focused on the unwanted surprises you could get, and what to do.
So in reverse order, from irritation to imperative*, let’s investigate (an unlucky) 13 types of letter you could receive, and answer the three questions above for each.
13. Private pension statement
In these uncertain times it’s important to remember that old adage that stocks “can fall as well as rise”. If your pension statement says that your projected annuity has gone through the floor in the last year, there’s little you can do. Contact a pensions advisor and find out if you can move to a different plan.
12. A parking or speeding fine
You were caught flouting the law and the local police force or council have written demanding money. You would be wise to pay within the correct time period to reduce the chance of the fine being increased. If you wish to contest the fine then research on the web for more information on defending your case.
11. Your utility costs are going up
As EDF Energy become the latest in a long line of utility companies to raise their prices significantly, this is a letter that a lot of us have received recently. Your gas and electricity bills will rise in the future unless you do something about it. Read our guide to reducing your heating bills.
10. You’ve underpaid tax
The taxman has checked how much tax you paid during the last financial year and unfortunately it wasn’t enough. While it’s up to you to have the correct tax code, the problems HMRC had last year mean that they accept that if you owe £1000s you probably can’t pay it back straight away. Your taxcode will be altered during the next full tax year to claw back the money owed. For more information read their guide to underpayment. If you’re going to struggle as a result (especially if you’re now a pensioner), contact us.
9. Bank and credit card statement/overdraft charges
If you’re in the black, or don’t use your overdraft regularly, any charges tend to be a hindrance rather than a game-changer. If you are regularly being charged for your overdraft or for late payments then read up on bank charges, or contact StepChange Debt Charity for more information on what to do.
8. Declined loan
You wanted to consolidate your loans, but “computer says no”. This type of rejection letter is a warning sign that your credit rating could be poor and that you need help with your debts. Try our online debt help service and see if you need a more formal solution to your money problems.
7. A letter from the CSA
You can go to prison if you don’t pay your child maintenance so it’s important to come to an arrangement straight away. Contact the Child Support Agency immediately.
6. Lost benefit entitlements
If you rely on benefits or tax credits this can cause a considerable income loss. You may be able to contest the decision but this can be a lengthy process and you’ll need to get some expert advice from somewhere like Citizens Advice. If it’s not contestable you’ll need to look at other ways of maximising your income.
5. Tax credits overpaid
If you’ve received too much in child tax credits the HMRC will ask for the money back. This can be a substantial amount, and similar to a loss in benefit entitlements (above) it could mean a big change in circumstances. If you’re no longer receiving the tax credits you need to come to an arrangement to pay it back at a rate you can afford. If you’re still in receipt of the benefit it’s likely that they’ll reduce your money. You’ll need to deal with this in the same way as a loss of benefit entitlement.
4. A red letter
A payment is now well overdue and it’s quite likely you’ve missed or made a late payment. If it was because a few birthdays came at once or the boiler broke and you can now manage to get back up to date, just let them know and hopefully it’ll be easy to come to an arrangement. If it’s a bit more serious and you’ve been juggling payments and falling further and further behind, this is a good point to get debt help.
We’ve blogged before about what defaults are and exactly what they mean. This will be marked on your credit file and it’s important to get impartial advice to stop the situation spiralling out of control. People often think that debt consolidation is the answer but more often than not it isn’t. Contact us for to see what your options are
2. Mortgage arrears
Not maintaining payments to your mortgage provider can lead to repossession. If you’re focusing on the credit card bill over your priority bills you need to follow our four steps towards a debt free future now. If you’re struggling and the house is no longer affordable there may be options available to you. We have a specialist mortgage advice team that can help you get back on track.
1. Statutory demand
Some collection agencies issue statutory demands as a way of enforcing bankruptcy. In some cases these are used as collections tactics and it’s very unusual for creditors to actually enforce them. However, statutory demands should never be taken lightly and you should always seek expert advice straight away, otherwise the you could be made bankrupt!
No matter what the letter holds inside, it’s better to find out and deal with it sooner rather than later. And if you need guidance on what to do next, you should know where we are by now!*Of course, our listing ‘by importance’ is subjective. The precise text of an individual letter may be different and all types of letter can be important depending on the context.