For most people, admitting that they have a debt problem in the first place is the most difficult part of getting out of debt. We spoke to David Rodger, Managing Director of debt advice charity, Debt Advice Foundation about the importance of facing up to your financial problems:
“Here at Debt Advice Foundation, our research shows that a significant number of seriously over-indebted people that have sought debt help, do not end up taking the advice that they’ve been given. You’d think that acting on the advice that an independent advisor has given them should be straightforward compared to taking that very difficult first step of asking for help.
“The problem is that by ‘burying your head in the sand’ and not taking action, you risk either allowing your financial situation to deteriorate to the point where creditor enforcement action (like CCJs, charging orders and your creditors petitioning for you to be made bankrupt) becomes inevitable, or where you experience a serious decline in your standard of living as you prioritise unsecured debt repayments over priority debt arrears and essential living costs.
“Neither of these outcomes is desirable or necessary, so what stops people from taking the advice they’ve been given? Our research revealed that the main reasons were:
- People were scared of committing to a legal process (like an IVA) that sounded intimidating.
- They had received conflicting advice from different advisors and decided to take what they believed was the easier option. For example, if someone had been advised that an IVA or bankruptcy was the appropriate solution for their circumstances by one advisor and then another advisor recommended a Debt Management Plan, the Debt Management Plan would often win out, because the fact that it isn’t legally binding is seen as a benefit to many, even though it would often mean paying back the debt back over 20 years or more, rather than 1 to 5 years.
- Others simply didn’t feel comfortable with the advisor.
“How can you be sure that you can trust the advice you’ve been given? There are a number of websites that will attempt to deceive you into thinking they’re official by using words like ‘national’ and ‘government’ when there’s nothing official about them at all.
“Fortunately, there are a number of rules of thumb that you can use to make sure that your advisor is reputable.
- Has the advisor clearly set out the drawbacks of the proposed solution as well as the benefits?
- Are they licensed to give financial advice by a body such as Office of Fair Trading or Financial Services Authority?
- Can you find a registered business or office address on the website where the advisor can be traced?
- Do they have a formal complaints procedure?
“As long as you can answer ‘yes’ to all of these questions then you can be sure you’re in capable hands. Remember, whatever you decide to do, do something. The longer you leave it, the worse your situation will become.”