Debt and mental health often go hand in hand. Poor mental health can have a big impact on your ability to pay back your debts.
This article is for you if you’re interested in learning more about how debt and a mental health condition are related, what difficulties you might face, and whether your loans can be forgiven due to poor mental health.
Debt & Mental Health – How Does Debt Affect Mental Health?
Carrying personal debt and money problems can weigh down a person in more ways than one – it often comes with serious mental health problems but can also lead to physical health problems.
If you’re behind on payments, constant money worries, and the thought of unachievable debt can be suffocating. People who are in debt have said that, because of their financial troubles, their mental health has gotten worse.
Research shows debt and mental health can be incredibly damaging to one’s self-esteem, making them feel worthless and powerless which makes mental health issues worse. Aside from that, many people suffer from continuous anxiety, sadness, and dread as a result of mental health issues from their financial difficulty.
“Debt stress” is a medical term coined to describe the mental health impacts of being in debt.
Problems like loss of focus, hypertension, irritability, feel guilty and attention issues may arise from an already existing mental health problem.
If you suffer from a mental illness, can your debt be written off?
It is possible to have your debt written off if you can prove that mental illness prevents you from paying it off, but there are a few things you should know before taking this route.
Let’s look at each of these situations in further depth.
Getting Creditors to Accept a Debt Write-Off
If you believe that your mental illness is making it difficult for you to handle your bills, you might want to notify all your creditors and ask them to write off the debts.
Whether you want to notify your creditors about your difficulties is entirely up to you, but it might assist you with your negotiations if you do.
Though it is improbable, your creditor writing off your entire debt is not outside the realm of possibility. They may be understanding of your circumstance and offer a variety of options to help you out.
Creditors may agree to temporarily stop asking for payments, which is known as a grace period.
During this time, you will still owe the debt, but they may not:
- employ debt collectors
- bring in specialists to deal with the situation.
- give you extra time to deal with your situation
- contact you only at specific times
Notice of Correction
If you have difficulty managing your mental health, it could be beneficial to include that information in your credit reference file. Doing so would give potential lenders and creditors an idea of the circumstances surrounding any debts you might have.
A notice of correction is an explanation for your credit rating or any other relevant information that you want to be included in your credit report. For example, if your bad credit score is due in large part to your mental health illness, you might want to list that as the reason on your credit report.
Having a bad credit score can be tough, but if creditors understand that your mental health is the reason behind your poor score, they may offer financial alternatives or other arrangements to make debt more manageable for you.
Debt & Mental Health Evidence Form
This form helps your creditors understand any mental illnesses you are experiencing. To put it another way, this enables your creditor to obtain information and updates from a health professional about your mental illness. This is done with your permission, you can also provide medical evidence.
The form is an excellent way to update your creditors on your current situation.
Writing Off Debt Using Insolvency Solutions
You still have available solutions such as debt relief orders, individual voluntary arrangements, and bankruptcy.
Let’s take a closer look at each of these alternatives one by one:
Debt Relief Orders
A debt relief order, or DRO for short, is designed to give you a period where neither your creditors nor debt collectors can chase you around for debt.
The basic details of the arrangement are as follows: once approved, your debts go on hold for 12 months and unless your circumstances change, your debts are legally written off. However, a DRO only applies to certain types of debt and may take quite a hit on your credit score.
If this looks to be the best solution for you, you can contact Stepchange Debt Charity.
Individual Voluntary Arrangement
An IVA, or individual voluntary agreement, allows you to pay your loans back in instalments over a specified period.
The duration of an IVA is generally five to six years. You make a manageable monthly payment for the duration of your IVA. Once the IVA has been completed, all your debts are legally written off regardless of how much money has been paid in.
If you want to file for an IVA, there are very strict conditions that you must meet. The majority of your creditors- those to that you owe at least 75% of your loan value must agree to the terms and conditions set forth by the IVA.
An IVA also affects your credit rating, as all debt solutions do.
Become Debt Free specialises in IVAs – contact us for free advice. We offer free debt counselling.
Bankruptcy
If you can show that you don’t own the required assets to pay off your debts, your loans will be written off in bankruptcy.
Once you have filed and it is granted, your assets are seized and utilized to reimburse your debts and ease your financial situation.
Once your assets have been used to contribute to repayment, any amount you still owe is written off and you don’t have to worry about it anymore unless you have to make monthly payments (usually 3 years)
Conclusion
I hope the data provided today helps you in making an informed choice regarding your financial independence. Contact us for confidential advice.
Make certain you get expert advice before making your decision and explore all debt solutions accessible to you and help you become debt free.
If you have a problem debt and require debt advice on available solutions contact us by leaving an enquiry or speak to one of our friendly team on 0113 237 9503.
Face-to-face support is available but if you would like to have a conversation through WhatsApp contact us on 07762 145 581
