Being in debt can be one of the most worrying and stressful experiences that you can go through. For many people, having debt problems can be a deeply embarrassing and shameful experience and many do not even tell their partners of the full extent of their problems.
Many people will try and cope alone with their debts for a long time before their situation gets so dire that they eventually seek help or are forced to face up to their situation by their creditors. In some cases people simply feel so unable to cope that they simply decide to walk away from their debts. The principle here is that they cannot pay, they believe that their lenders can’t do anything to make them do so and can’t do anything to improve their situation and they simply don’t see any alternative.
This is, however, never a recommended course of action. You cannot simply hand over the keys of your home to your lender if you cannot pay your mortgage and expect to walk away free and clear. You cannot tell your credit card provider that you can’t pay off what you owe and not expect them to do something about it. Even if you cannot pay then you still have to take responsibility for the debts you have run up. And, if you don’t take responsibility then your creditors will try and make you do so.
Let’s take a look at what could happen to you here.
- Your mortgage – if you simply stop making your mortgage payment and hand back the keys to your lender then you might think that that would be the end of it. This is not the case. Your lender will then sell your property to get their money back but, if they do not make enough money to pay off what you owe in total, then you will still be liable for the remaining balance. This will be listed as an unsecured debt against your name. You will also impair your credit history as your failure to pay your mortgage according to the terms of your agreement may be listed on your credit record.
- Secured finance – if you have a secured loan in your name and try to walk away from it then your lender has the right to use the property that you used for your initial guarantee to recover your debt. As you will have most likely used your home as security in this instance this could ultimately see your home repossessed to raise the necessary monies.
- Unsecured finance – if you do not meet unsecured loan commitments such as credit card debts or unsecured personal loans then don’t assume that your creditors can’t chase you for their money. It’s a common misconception here that you can walk away from these debts safely because they aren’t secured against your assets. Failure to pay here could see your lenders get debt collection agencies involved to try and get their money back. If you do not pay at this stage then they can take you to court and try and get a CCJ against you to force you to pay. Even if you did not use your home as a guarantee an unsecured creditor can then ask a court to put a Charging Oder against your home so that they can get their money back next time your home is sold if you do not meet your CCJ obligations. Again, this will have a negative effect on your credit record.
- Council Tax bills – if you fail to pay your Council Tax then you could face serious consequences. You may be forced, for example, to make repayments directly from your salary or your benefits payments. You may have your assets seized and you could even face a jail sentence.
Even if you feel that there is nothing else to do in this kind of situation walking away from your debts is not ever going to be a good solution. It is far better to realise early on that you need help and advice. Creditors are, in the main, extremely helpful when they are told that you are having repayment difficulties or may be doing so in the future.
So, in most cases simply talking to your creditors could help you find a more acceptable repayment schedule, for example. It is also worth looking at getting some specific debt advice at this stage if your debts are more than you can cope with. There are a range of different informal and formal debt management solutions that could make you feel much better and give you a better route to sorting out your finances.