Notice of defaults: everything you need to know
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Unexpected changes in life, such as redundancy, can sometimes lead to problem debt. Make sure you’re prepared for the future with our blog.
At Debt Advisory Centre, we want to make sure you’re financially prepared for the future. That means having an awareness of what can lead to problem debt so that you can avoid it or know what your options are for getting out of it. From our experience of helping those with problem debt, we know it’s often an unexpected change in circumstances that can land people in trouble when it comes to their repayments.
Redundancy is one example of a change in your life that can trigger money worries. If you’ve been made redundant or if you are concerned that you soon may be - don’t panic. In this blog we’re going to explore what you should do if you’ve been made redundant and where that leaves you in terms of your finances.
What exactly is redundancy?
Redundancy means that you’ve lost your job because the company or your employer no longer needs the role you fill. This could be because the business is closing down altogether, or because it’s changing the way that it operates in some way.
In some cases, an employee can volunteer for redundancy, or for early retirement, and this is called non-compulsory redundancy. If you’re not given a choice and told you are no longer needed, it’s known as compulsory redundancy.
Although employers are perfectly within their rights to make someone redundant, they must be able to show that the role will genuinely no longer exist. So it isn’t right for a company to make someone redundant and then to hire someone else to fulfil exactly the same role.
If your employer is making someone redundant, they must have a fair reason for doing so. An employer can decide to make someone redundant because they lack the relevant skills or aptitude for the job or have a poor disciplinary record. However, it would never be OK for them to select people in a way that was unfair to a particular group – even if it was by accident.
So, it would be unfair for your employer to make you redundant because you are:
• pregnant, or taking maternity leave
• taking parental leave
• acting as a representative for all employees
• a part-time employee
• choosing to join or not join a trade union
• a certain age, sex, sexual orientation, going through gender reassignment, or practising a certain religion.
What are your rights?
If you’ve been made redundant, you do have certain rights. For example, you may be entitled to redundancy pay. To qualify you must:
• be an employee with a contract of employment
• have worked for your employer for at least two years
• have been dismissed or laid off – if you opted for early retirement then you won’t be entitled to redundancy pay.
If you want to find out how your employer works out what to pay you, this government page has lots of info.
You are normally given a notice period when you’re made redundant to give you enough time to think through your options and to find and apply for a new job. While you’re working the notice period you should be allowed a reasonable amount of time off to look for a new job. If you’re not given a notice period, your employer must pay you for the time that you would have worked if you had been.
I’m worried I won’t be able to afford my debt repayments
If you’re worried you won’t be able to afford your unsecured debt repayments because you’ve been made redundant, it’s important to put a plan in place before it becomes a problem.
The first thing you need to do is create a budget. It vital to have an accurate idea of what your living costs are so you know how long your redundancy pay or any savings you have can cover your regular outgoings.
You should also apply for Jobseeker’s Allowance to give you a little extra cash while you’re looking for work.
Make sure you update your CV, contact recruitment agencies and sign up to job websites, like Reed and Monster. The sooner you start looking for another job the better - some employers may even like the fact that you can start work almost immediately.
If you’re not getting any redundancy pay, it’s worth contacting your lenders, utility providers and other service providers to let them know the situation. They may be willing to give you a payment holiday until you find work again, which means you won’t have to worry about finding the money to cover these bills while you’re between jobs.
If you have a mortgage, again its important to speak to your lender as soon as possible. They may let you just pay the interest for a short while, whilst you find a new job, rather than your full monthly payments. Alternatively, they may let you take a payment holiday – although be aware that the interest on your loan will keep building up during this period so your monthly bill may be a little higher when you start to receive one again.
If you lose your job you should definitely check to see whether you've got insurance that could cover you. You may be paying for Payment Protection Insurance (PPI) – it's an insurance that you can sometimes have on mortgages and other unsecured debts that is designed to cover you if you lose your job for any reason and find yourself unable to meet your payments. You should be able to find out whether you have PPI by looking at a statement or by contacting the lender and asking them.
Pay the right bills first
As well as having a clear idea of your budget it is really important to prioritise your bills. Things like your rent (or mortgage), council tax, and utilities are bills you must always pay – they are known as priority bills. If you can’t pay everything and you need to make a choice then credit card bills, unsecured loans, storecard debt and so on are the ones to miss.
If you’ve already contacted your lenders and not got anywhere, or you are still concerned about how you are going to cope financially, then it makes sense to seek help from a money or debt advisor – like us. We’ve helped over 400,000 people with problem debt in a wide range of circumstances. Use one of the options to the left of the page and one of our advisors will be happy to take you through the options that are available to help you.
by Christine WalshBack to blog home