Dealing with debt

The following points apply to both personal and business debt. If you are a director of a limited company, then the company is classed as a separate legal entity to you and so the business and household debt should be kept separate.

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  • Be extremely cautious when considering borrowing money to pay off debts, it is usually only worthwhile if you are borrowing at a cheaper rate of interest.
  • Check you are claiming all the benefits and tax credits you are entitled to. Families with a joint income of less than £72,000 may be entitled to some form of benefit.
  • Work out your business and household budgets. This may help you identify areas where you can reduce spending and will also be of use when you are negotiating with creditors.
  • Write to your creditors at the first opportunity. Sample letters are available from organisations such as Business Debtline. Keep copies of all correspondence.
  • Deal with priority debts first. Debts which could result in you closing your business, losing your home or having your electricity or gas supply cut off are priority debts. You may be able to get help with the interest on your mortgage from government.
  • Work out how much money you can reasonably afford to put towards your debt each month. It is better from a creditor's perspective that you repay smaller amounts than agree to an amount you cannot afford.
  • Contact all of your creditors, explain the situation and attempt to reach an agreement. Do not be deterred if creditors become difficult to deal with.
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