Missed repayments on loans, credit cards etc.
If you’re aware that you’ve missed repayments on unsecured debts (credit cards, store cards, loans etc), seek professional advice to assess your financial situation. You may feel that you’ll be able to cope next month, or that you’ll get the money from somewhere, somehow, but be prepared with some advice. Chances are, if you’re income isn’t increasing in the near future, or there is no windfall on the horizon, then you’re going to continue the current trend of missing repayments.
Is it a big deal if I’ve missed repayments?
Missing repayments on your unsecured debt alerts your creditors to the fact that you may be having money problems and may mean that a creditor will take a more aggressive route to recover their money, before things get any worse. Your creditors may request payment in full of the outstanding debt, as they are lawfully allowed to do so in the credit agreement you will have signed. If you continue to miss payments, a creditor may also pass the debt to a debt collection agency, or try and claim the money owed through the County Court system.
How can McAlister & Co help if I’ve missed repayments on my credit cards or loans?
McAlister & Co offer free initial debt advice and you are able to talk to a member of our team regarding any worries you may have for the future. Even if you managed to borrow money from a relative or friend for this month’s payments, do you know where next month’s repayments are coming from?
You may feel think that you can still afford your repayments, but if you’re struggling to get the money together each month to make them, take this as a warning sign. At McAlister & Co we talk you through assessing your finances realistically and discuss any solutions that are available now, or will be available if you continue to find your debts unmanageable.
The most important thing to do is to keep communicating with your creditors. This reassures them that you are acting responsibly despite being in a difficult situation and your creditors will be far more open to negotiation.
If you are eligible for a debt solution such as an IVA or a DMP, we can deal with your creditors on your behalf, meaning no more piles of unopened red letters of dodging phone calls from unknown numbers.
How can an IVA help if I’ve missed some of my credit repayments?
If you’re in arrears with your any unsecured debt, you may qualify for an IVA arrangement. An IVA can make your debts a lot more manageable. Your financial situation is assessed and we work out how much you can afford to pay towards your unsecured debt as a whole each month; we then draw up a proposal and present it to your creditors. Once accepted, and as long as you are sticking to the terms of the agreement, your creditors are not permitted to contact you for further payments and you are legally protected from any possible legal action. An IVA will typically last for five years, at the end of which any outstanding debt is legally written off.
How can a DMP help if I’ve missed repayments on my unsecured debt?
A DMP will reduce your monthly repayments to all creditors, giving you room to get back in control of your finances.
If you qualify for a DMP, we can contact creditors on your behalf with a reduced repayment proposal. Once accepted, you simply pay a single affordable payment into the plan and this is distributed amongst your creditors. Once you are in an improved financial position, you will start to make your normal payment amounts again. An added bonus of A DMP is that most creditors will be willing to freeze interest on the debt for the duration. A DMP does not reduce the total amount of your debt, but it gives you a break to get your finances together during a temporary sticky patch.
What about filing for Bankruptcy or a DRO?
Bankruptcy and Debt Relief Orders may also be viable options if you cannot afford to meet your repayments.
Bankruptcy will wipe the slate clean financially, but comes with more severe restrictions and consequences than an IVA or a DMP. If you own your own home, this will usually be sold to repay your creditors, and so will any valuable assets. Depending on your profession, you may have to make your employer or professional body aware of your bankrupt status and you may have to leave your job. Once discharged from bankruptcy, usually after twelve months, you may have problems obtaining credit and opening bank accounts, or becoming a director of a company.
A Debt Relief Order carries similar restrictions to Bankruptcy, but is used if your debts are below £15,000 and if you do not own property or assets and have very little disposable income each month.
Will my credit score be affected by an IVA, DMP, missed repayments or other debt solutions?
A concern of many people enquiring about debt solutions is the effect it will have on their credit rating. If you have missed repayments to your creditors, unfortunately the damage is already done and the best thing to do is prioritise managing the debt and not worrying about the effect on your credit score.