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Tackling your debts

What will a debt advisor want to know about my situation?

Posted 21 March 2016 by Shelley Bowers

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If you’re thinking of using a debt solution to sort out your problem debts, you may have to answer some personal questions.

If you have problem debts, you may be looking for a way to deal with them. And debt solutions could be just the thing. But what questions will you have to answer to apply for a debt solution and how personal will they be?

When you want to apply for a debt solution to deal with your problem debts, the advisor will need to know a lot about you and your current circumstances – both financial and personal. Now, you may be thinking, I understand why you need to know about my finances, but why do you need to know about my personal life?  

First of all, we’re not just being nosey, we know that having to answer personal questions can sometimes be uncomfortable or, in some cases, drag up painful memories for you. But, it is necessary. It’s necessary so that we get a full picture of what life is like for you at the moment. So, we’ll need to ask you a series of questions that’ll include details about all your incomings and outgoings. Incomings are things like:

·         salary

·         benefits

·         pensions

·         child maintenance

·         any other monies you get from friends/family and so on

Once we know what you’ve coming into your household, we need to know what you have to pay out each month too, which includes:

·         mortgage/rent payments

·         food

·         travel

·         clothes

·         mobile phone contracts

·         credit cards

·         loans

·         utility payments

·         council tax

·         and anything else you need to pay out on a regular basis

Now we have the two amounts, we can work out your disposable income or DI as it’s often called. This is the amount you’ll have left over to send to your creditors to pay off what you owe. This is offered to your creditors and they can decide on whether they think it’s reasonable or not. Most will, as your debt advisor will only send the offer of payment over, if it’s fair for all involved. 

find-my-solution

 

So what are the personal questions for?

When we recommend a debt solution – which you may need to commit to for a number of years – we need to take into account not just your life at the moment, but your future hopes, aspiration and plans.  So if you are planning a baby soon, that is relevant as a new member of the household will change the amount you can afford to put towards your debts. Or, if you a planning on joining the police, or training as a lawyer, that will have an impact on whether we recommend an insolvency solution.  So, some of the questions that we ask won’t be about your finances, but will be more general personal questions.

We’ll also ask you about how you got into debt in the first place; we don’t want to drag up painful memories, but it is important we understand the circumstances, and whether they could occur again.

Be honest

We’re also going to ask things like how much do you spend on entertainment, clothes, food, travel, mobiles and the like each month. We’re not saying you should have a definite figure for what you spend each month, but we need an average amount. And we need you to be honest.

We know it can sometimes be hard admitting that you’re spending more than you really think you ought to be on something, or maybe you didn’t realise how much you were spending until we asked you to think about it. But, this should not be a reason for you to deliberately underestimate the amount you spend on a certain item, as that would more than likely leave you struggling with your debt solution payments each month and possibly make your situation worse.

It’s important to remember that we’re not here to judge, all we want to do is help and telling us the true extent of your spending is a start. It’ll help us advise you on the best way forward for you, so you can maintain the payments decided on for the time needed. If you’re not completely honest, and we then advise on the best debt solution for you based on incorrect figures, the chances of your debt solution failing increases. It’s likely that you’ll not be able to pay for everything you need, if you’ve underestimated what you spend. This will could result in you not being able to maintain the payments to your debt solution and it fails, which will leave you in a worse position than you were before you started the solution. It is also worth saying that our conversations are confidential and are strictly kept between you and us. If you don’t want anybody in your family to know that you’ve spoken to use, that’s up to you.

 

So, we hope this has helped you see why we need to ask about your personal life and also how important it is that we get an accurate picture of what’s coming in an going out of your household. We just want to give you the best advice for your situation so that you can get not just your finances, but also your life, back on an even keel and work your way towards becoming debt free.

by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.