What can you expect from a debt advice service?

By Marianne Curphey

If you are struggling with debt, don't despair. No matter how dire your circumstance may seem, there is likely a way out of it. One great solution: debt counselling. Debt advisers can help you assess your situation, work with your creditors and form plans for the long and short term to get you back on track.

According to an August 2014 report from the government's Money Advice Service (MAS), debt advice works for nine out of 10 people struggling with serious financial problems. An independent evaluation of debt advice funded by the MAS in England and Wales showed that 76% of clients who received face-to-face debt advice from its partners in 2013 reduced or cleared at least some of their debts within three to six months of receiving advice. debt-counselling

In addition, 88% of clients went on to take action, such as making reduced payments to creditors, or setting up a household budget to address their debt situation. 

How to know if you need debt advice
If you're at all worried about your financial situation, get debt advice as soon as possible, says Chris May, debt advice programme manager at MAS. Otherwise, the situation will likely get worse and you could find yourself in dire circumstances.

"Generally speaking, we would define someone who is over-indebted as having missed three payments in six months and finding their debt a heavy burden," May says. Whether you're behind on your bills because of a job loss, sickness or just plain lack of budgeting skills, do not be ashamed or hesitant to seek help. May says many of his clients could be in better shape if they had only done that sooner.

"A lot of people who are coming for advice turn up at the last minute -- for example, they have had a visit from bailiffs or they have an eviction notice," May says. "It is better for everyone if you get help as soon as possible rather than leaving it until it is an emergency."

And advice is available for no charge. Many non-profit debt organisations -- such as Stepchange, National Debtline, the Money Advice Service and the Citizens Advice Bureaux -- offer free helplines and advice. You can also use MAS' debt advice locator tool to find debt advice in your area.

What to expect from an adviser
The first thing the adviser will do is gather all possible information about your situation, says Jonathan Chesterman, advice manager at the debt charity Stepchange. That includes income details and living costs (including expenses such as car insurance and prescriptions).

"Then they will look at what you own -- your houses, cars, savings -- and what you owe -- who is it owed to and what type of debt is it?" Chesterman says.

If you don't have all the information the adviser requests or if some numbers are off, don't worry too much. Whatever information you do have will be helpful in giving the adviser a general idea of your situation, so he can assess it and explore the issues you have.

If it's an emergency -- say, you're four days away from eviction -- the adviser will make sure you get immediate help, May says. Then he will look at your outstanding debts and determine which are priorities (such as mortgage, rent and council tax).

After that, the adviser will work through your budget and look at income versus outgoings with the aim of working out what you can afford to pay back.

"The client may be confident enough to deal directly with their creditors, or they may need more support -- the debt adviser may contact the creditors on behalf of the client and might propose a programme of repayment and ask for breathing space for them," says May.

Finally, your adviser will give you recommendations and short- and long-term plans. According to Chesterman, debt remedies might include:

  • An informal agreement with creditors: a repayment plan that shares what the client can afford to pay fairly between creditors;
  • An individual voluntary agreement: creditors agree to accept a proportion of debt over a set number of years, and write off the rest;
  • Bankruptcy: all debts written off;
  • Debt relief order: a way for you to have your debts written off if you owe less than £15,000 and have very few assets.

"It's about finding a way to help people without putting obstacles in their way and making sure the solution is realistic because they will need to be able to stick to it for a few years," says Chesterman.

See related: Making budgets work when money is tight, Are you a candidate for Debtors Anonymous?

Published: 3 September 2014