When debts start piling up it can leave people feeling they are sinking and out of control.
I recently lost my job and fell behind on several bills including my council tax, electricity and credit cards.
I’m back in work and keen to start paying off my debts, but can’t afford to pay them all straight away. What should I pay off first?
First off, draw up a list of who you owe money to, how much you owe, and which of these are ‘priority debts’.
Priority debts include your rent or mortgage, gas and electric, and council tax.
These debts should always be paid first as delaying payment can have serious consequences such as having your energy supply cut off, or losing your home.
You can use any spare income to tackle your credit cards and personal loans.
Work out what you can afford to repay
To work out exactly how much you can afford to repay, you’ll need to compare your monthly income to your essential outgoings and see how much money you’ve got leftover to put towards your debts.
Citizens Advice has an online budget tool which can help.
Prepare a financial statement
You’re now ready to start negotiations with your creditors. Put together a letter – otherwise known as a ‘financial statement’ – explaining why your ability to repay has been affected, including a full breakdown of your monthly income and outgoings and what you think you can pay.
Send this letter to your creditors and they will use the information to help settle an affordable repayment plan with you.
Where to go for more help
For more guidance on putting together your budget and financial statement, go to www.citizensadvice.org.uk or visit your local Citizens Advice Bureau.