Redundancy & Debt – A Stressful Time
Losing your job can be a stressful, emotional event that often forces severe lifestyle changes on an individual and their family. It can also have a devastating effect on a person’s finances. Debts can rise significantly as a result. Redundancy and debt go hand in hand for many, and it is a stark worry.
Redundancy & Debt – The Effects
Thus redundancy, and the debts that a lack of a regular pay cheque may cause, can cause problems in a variety of ways:
- Having insufficient funds to pay for general living costs, such as food, rent/mortgage, bills, clothes etc.
- Being unable to make existing repayments on debts – for example monthly credit card and loan repayments.
- Redundancy can have a psychological effect. These show themselves both in terms of the stress it causes and thus even depression and related illnesses. Such afflictions can be linked to the issue of poor financial management. But not always. It’s important to realise that not every redundancy comes with a nice pay-off. Not every person will have plenty of time to find alternative employment.
If you do lose your job and struggle financially, it is vital that you seek expert financial advice as soon as possible.
Redundancy and Debt – Using credit to repay debts
Problems often arise when people try to maintain their existing lifestyle after losing a job. This is despite not having the same amount of income coming in. They may assume that new employment is around the corner so any debts accumulated can always be paid off at a later date. Unfortunately this isn’t always the case. Using credit is seen by many as the only way of maintaining their old standard of living.
Go through your finances. Talk to an expert financial adviser, who has your best interests at heart. Then you can decide what the best course of action is. Those that do receive a redundancy package after losing their job may be able to use this to help make what is known as a “full and final settlement”. This would clear some or all of the monies owed in order to clear all debts.
Redundancy and Debt – Living Costs
Living costs can be greatly affected by the loss of income that inevitably accompanies redundancy. Many will use credit cards, loans and overdrafts to cover this deficit. It doesn’t take long for the debts to build up either, and with it comes increasing difficulties in making the monthly repayments. In addition to this, after redundancy, it has been found that many struggle to prioritise their debts.
And prioritising debts is vital. For example, ignoring mortgage or rent repayments in order to pay other debts could have disastrous consequences. Likewise, a failure to pay council tax could lead to a court summons and severe punishments that could affect your future. Failure to pay a loan or credit card company could result in a county court judgement (CCJ). It is important to sit down and plan how to approach dealing with debts, and prioritise every single one. A CCJ is bad, and it will remain on your credit file for 6 years, but losing your house is worse. Go through your finances. Prioritise payments. Make savings where possible. Make sacrifices – not every monthly outgoing is essential.
Redundancy and debt? Act sooner rather than later
An alternative course of action is to contact your mortgage provider to discuss whether any assistance can be provided by them. Your mortgage provider has a duty of care to ensure that all of their customers are treated fairly. This includes when struggling to make payments, and they will discuss the options available to you. It’s important that you realise that are avenues available to seek help, without you automatically resorting to taking out credit.
