Debt counselling - A solution for arrears of rent and service charge?

Although it is a small minority of people who really have problems and need professional help many others would be helped by some simple guidelines. For example if you keep on spending when you are in debt and do not make inroads into your debts sooner or later there will be a serious problem. Making a budget and sticking to it is the first step forward. Research has shown that the higher the income the harder the fall. If you are faced with financial difficulties showing your creditor, your Landlord or Managing Agent that you have approached the matter in a sensible way will save the threat of legal proceedings and lead to a speedy solution.

The most sensible way to face a debt to the Landlord or mortgage lender is not to bury your head in the sand but to give good notice to the creditor of the problem and put forward a constructive debt repayment programme. Obviously if things go beyond such arrangements you are then thinking about the possibility of an individual voluntary arrangement through the Courts. Bankruptcy is not an attractive option and may well amount to a breach of your lease. An individual voluntary arrangement or an IVA as it is called is a way of paying off something and avoiding full bankruptcy. It works most effectively for debtors who have some assets. If you add up all your debt repayments for one month excluding your mortgage and your total payments are more than 20% of your net income most advisers would tell you it was time to pull in the reins. What matters is not how much you owe as an absolute sum but what you owe relative to your own income. As a general rule borrowing is not the best solution to reducing debt although it may in certain circumstances be the only effective option.

There are a number of debt counselling agencies which offer help. Debt management companies which merely restructure your debts are not the same thing and will probably cost you more at the end of the day. Re-mortgaging can be a solution if there is enough equity in your home. If you need help the Citizens Advice Bureau is one easy port of call. National Debt Line is a national free confidential and independent telephone advice helpline funded by the DTI and the Financial Services Industry and here you can get advice by phone with follow up self help packs and advice on how to set up a debt management plan. Over the phone advice avoids travelling and embarrassment and keeps you in control. This advice is for individuals not small businesses.

With Christmas approaching strains on the family budget increase. The average debtor profile is believed to be something like this – a person with about 10-12 credit cards and more than £12,000 of debts. The Consumer Credit Counselling Service is a charitable foundation and a reasonable alternative to a repayment specialist.

Landlords and Managing Agents are not looking for trouble and do not really want to get involved in chasing Lessees for arrears. Obviously if any number of people in a block were not to pay then there would be a serious problem in maintaining the services. A prompt and reasonable approach to any short term debt problems will avoid any unnecessary costs and breakdown of relationships.

Should you help someone in such a debt position by offering a guarantee the debts will be cleared? When it comes to guaranteeing other people’s debts remember the wise definition of a guarantor – a fool with a pen in his hand!