Your Finances

Debt is defined as unauthorised money, which is left unpaid. Types of debt include arrears in rent, outstanding fuel bills, fees, repayments, personal loan arrears, and . Debt occurs for many reasons, but for most students it is because there is not enough money available to them to cover their basic living and studying costs. Due to this, a large number of students accumulate debt whilst at University.

This section is not only useful to students who are currently in debt, but also for students who may have a limited amount of money available, and may be interested in understanding debt so that they can prevent getting into such a situation.

This section aims to provide some basic information on debt and guidelines for dealing with debt. It covers information on understanding debt, prioritising debts, financial analysis and negotiating with creditors.

Although your initial perception of debt, may be that of confusion and panic, you can control the situation by utilising four steps. These can be summarised as:

• Maximising your income
• Calculating your expenditure
• Organising your debts into a priority order
• Negotiating with your creditors

When dealing with debt, the first thing that you need to make sure of is that you have checked all of your entitlements, and are maximising your income to its full potential. A variety of sources of income are stated below that can be utilised. These are worth considering if they have not already been explored.

Income Source Description Maintenance Grants Check with your to see if you may be entitled to an additional . Student Loans If you have not already applied for the maximum , you should utilise this source of income as it is practically interest free. Access Funds Each university has some money that they award to students in financial difficulty. If you can prove that you are in difficulty it is likely that you will be able to claim some money. Bank Overdrafts Banks will offer interest free overdraft facilities for student accounts. If you are in need of an increase to your overdraft limit, you can speak to your bank manager to increase the allowance. This may be subject to a review of your bank account usage. Benefits It is worthwhile contacting your Local Council to see if you are entitled to additional benefits such as or , which may be able to help. Overpaid Income Tax If you have had a job previously and have paid , you may be entitled to a rebate. You need to contact your local for further information. Part-time Work Due to the financial commitments that students now have, most will find that it is a prerequisite for them to gain employment to afford the living costs associated with studying at . If you do not already have a part-time job, it is worthwhile considering employment to supplement your income. This should only be considered if you seriously believe that you will be able to cope with the additional commitment whilst at University. To find out more about part-time jobs, you can speak to your university Student Employment Offices () who offer information on a wide range of jobs from casual part-time work to holiday work experience. It is important that any work undertaken does not exceed 15 hours a week as more hours could have an impact on your studies. Please note that you can give your employer a (holiday time) or a (term time) Tax Form so that they will not deduct income tax from your wages.

Although the above sources of income may not be applicable to you, they may provide some additional prompts to maximising your income.

After maximising your income, it is important that you obtain a good understanding of your cashflow, (incoming and outgoing). This will help you understand how much money you have available to pay your creditors.

The most effective way of doing this, is by taking your total weekly income and deducting the total weekly expenditure. Do not include the amount you owe to creditors, as these are debts that will need to be negotiated. The calculation will tell you how much you have available. Alternatively, your expenses may exceed your income. In this case, you will need to identify by how much you need to increase your income to break even. You can use the Calculator to assist you.

Having calculated how much you have available, you need to make a list of the amount you owe to each creditor.

Although all debts are important and need to be paid at some stage, some debts have greater consequences if they are not paid. Those that have the most severe consequences need to be dealt with first. It is because of this that it is important to prioritise your debts.

The table below aims to provide you with some guidelines as to what can happen if some priority debts are not paid.

Type of Debt Most Severe Consequence Mortgage or Rent Arrears You could lose your home or be evicted. Gas, Electricity and Water Arrears Supply disconnected Court Fines Goods collection by bailiffs, sent to prison for non-payment. Hire Purchase Bailiffs can repossess goods. Telephone Can be disconnected. University Debts Could be suspended or may be prevented from graduating.

With these types of debts, it is crucial that they are dealt with promptly. So if you are threatened with disconnection, court summons, eviction orders, etc, it is important that you contact the creditor immediately and negotiate a plan that is right for both of you.

These debts are where the creditor can only enforce limited penalties for non-payment. For example, the most severe penalty that they can enforce is to take action in the County Court. If this does happen, the court will review your financial situation and order you to pay a set amount that is affordable at specific intervals until the full amount is paid. However, if you do negotiate with your creditors prior to reaching this stage you can avoid the aggravation and costs involved in going to court. Please member that if you are ever in this situation you complete all forms as soon as possible and get legal advice.

Non-priority debts include personal unsecured loans; debts; rent arrears from a previous tenancy; debts to the ; or .

Having established the risks involved with each debt and the prioritisation order it is important that you start contacting the various companies to negotiate a suitable re-payment plan.

Priority Debts - The first thing that you need to do is write a letter to your priority creditors first. However, if it is urgent contact them by telephone, make the agreement and then follow it up with a letter. It is important that the letter states how much you can pay back and how often. Even if you can afford only a small amount, it shows your intention to pay back the money owed. To strengthen your case you can include your weekly financial income and outgoing expenses so that they understand that you are doing the best you can.

Please remember that any repayment plan will have to include not only outstanding payment but also maintain any new bills accrued.

Credit Debts - Having come to an agreement with the priority debt creditors, you now need to review any other money available for other non-priority creditors to arrange a repayment plan. It is useful to create a Financial Statement that includes:

• Weekly income
• Weekly expenditure
• Repayment plans made with Priority Creditors
• What you can offer them

Although the above information provides some general advice, it is important that you follow the basic rules outlined below for dealing with creditors.

• Take immediate action
  Do not try to ignore the problem. It will not go away. The earlier you make contact with your creditors to advise them of your financial difficulty, the more lenient they will be with you in arranging a suitable re-payment plan with you.
  You can make contact either by telephone or in writing. In either case it is important that you state how eager you are to sort out the debt. However, if you do make telephone contact, remember to take the representative's name and ensure that you follow up the conversation in writing to avoid any later complexity. If you do write to the creditors, always quote their account reference number and keep a copy of the letter for future reference.
• Do not make promises that you cannot keep
  If an agreement has been made, make sure that you keep it. Check that with your income and expenditure you can afford it. Once you have started the repayments, keep them up on time with the correct amounts. If there is a likelihood that you can not make one payment advise them before the occurrence.
• Regular payments
  It is better to make smaller regular payments rather than occasional large payments, as it is harder to plan and manage bigger amounts. The additional benefit is that if regular payments are maintained the creditors will be kept happier.
• Pressure
  It is illegal for creditors to harass debtors.
• Law
  Although the law gives authorisation to creditors to re-claim their money, there are also provisions made to protect the debtor. For example, you cannot be evicted from your accommodation if you miss one rent payment and have full intention to pay it back. Formal channels and processes need to be followed. If you are concerned of the legalities, please contact your local who will be able to give specialised advice to your circumstances.

When negotiating a repayment plan, it is important to remember that there are a number of payment options available. Depending on the type of debt, different methods may be more effective. Speak to each creditor to find out what options they offer.

Please note that this is only a basic guideline on dealing with debt and may not be applicable to each situation. However, with any process you follow in managing your debt, it is important to remember that managing debt is not a quick fix and it is something that will take time. This will ensure that the chances of returning to the same situation are reduced.

However, in addition to the four steps outlined above, there are some basic rules that you can follow in any situation.

• Do not ignore the mounting debts or hide them - they do not go away.
• Never leave bills and unopened
• Once you have realised that you can't cope, ask for advice before the situation deteriorates.
• Most creditors will talk to you and will be prepared to accept a realistic plan of debt repayment.
• Do not get into more debt to pay other bills. Seek advice first.
• Resist paying more demanding but lower priority creditors large amounts from , , or other income. There is a danger that you will not have enough to cover future expenses such as food and rent, which might take you back into debt.

Initially you can contact either your local , or the University Finance Office for information.

Alternative information and advice on dealing with debt can be obtained from visiting your local or telephoning the National Debt-Line on 0645 500 511. Not only do both of these organisations provide free and confidential advice but they also provide free handouts on self-help debt management guides.

Please note that the above information is only provided as a general guide and it is recommended that with any debt situation, you seek detailed advice from relevant sources as suggested above.