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Depression. Anxiety. Stress.  These are all words we have heard recently regarding mental health.  Covid-19 and now the cost-of-living crisis has provided a catalyst for these conditions to intensify.  So, what happens when mental health affects your life and how do you manage money?

Research shows that  50% of adults who are in debt also have mental health issues.  There is a strong correlation between debt and mental health, and the two often feed on each other, worsening the situation.

What can be done to help people in debt and with mental health problems?  What can a person suffering from mental health and debt do to help themselves?  Please read our guide as we explore everything you need to know about the challenges facing mental health and debt.

What do debt and mental health mean?

Mental health can cover various issues such as anxiety, depression, phobias, and stress.  Having these conditions doesn’t always mean you are not good with your money; however, these issues are likely to make things difficult on how you manage your money.

How can mental health issues affect my money management?

As mental health covers a range of issues, they can affect how we manage our finances.  Here are a few examples below:

·         Depression

If you are suffering from depression, then you might not have the motivation to look after your finances.

Depression may also mean that you might have to take time off work, which could reduce your pay or income.  As a result, this could mean that you might be unable to keep up with your current bills, leaving you in debt.

·         Dementia

If you or your loved one has dementia, it might be impossible to make decisions about the money.  You might assign someone to help you make decisions regarding money.

·         Stress

If you are stressed, your mind might be distracted by other matters, which could cause you to forget to make debt payments.  Or you could be stressed because you are worried about your finances.  All these factors contribute to you making poor money choices.

Should I speak to my creditors when experiencing mental health issues?

It would help if you didn’t have to suffer in silence regarding mental health.  Most creditors will be willing to understand your mental health challenges and how they are affecting you by paying back your debts.

You should reach out and speak to them so they can help offer you possible solutions to your money worries.

Creditors will also need to comply with the law, and in some cases, people with mental health conditions could be protected by the Equality Act 2010.

Each creditor is different, and they will have to follow their guidelines in terms of helping their customers deal with mental health.

There are several things that the creditor can do to help your situation:

·         Agree to put collections activity on hold

People suffering from anxiety and stress might find it beneficial to ask their creditors to give them more time to pay them.

By asking their creditors to put their collection process on hold, it offers people in debt a chance to reassess their financial situation by either increasing their income or looking at debt solutions to help them get out of debt.

·         Agree to contact you at set times

This could work well with people who find it comfortable to talk about financial matters in their comfort zone.

People often get stressed if a creditor calls up demanding money while at work, especially if you are reluctant to let your employer know about your current situation.

Having them agree on a set time reduces the stress and anxiety so that they can calmly talk to their creditors about their current situation.

·         Agree on a communication method

People who suffer from mental health challenges may find it easier to ask their creditors to contact them via email rather than phone.  This gives them a chance to control their response more often in a more evident mindset.

·         Agree not to get debt collection agencies involved

Debt collection works on behalf of a company to collect debts for them; however, getting phone calls or letters in the post can sound daunting to someone already facing mental health issues.

If creditors can delay this process, it gives you time to sort your finances without the pressure of a debt collection agency pressuring you for money.

Do I need to provide evidence to my creditors regarding my mental health situation?

This is dependent on a case-by-case basis and also on the creditor’s guidelines.  Creditors could either:

·         Agree on a plan of action on the phone

This would be simply by contacting them and explaining your situation.  If you do not feel comfortable discussing it over the phone, you could write to them, explaining your mental health issues.

They may want a follow-up call to discuss it further, but at least they will have the details of the situation to hand before they call you, so you won’t need to repeat the situation to them again.

·         Ask for details of your mental health condition

Sometimes creditors may ask you for hard evidence regarding your mental health situation.  They could ask you for a current prescription or a letter from a qualified healthcare provider detailing your situation.

However, a creditor may also ask for more evidence regarding your mental health situation.  This would be by getting a health or social care professional to fill out a Debt and Mental Health Evidence Form (DMHEF).  Find more about this form in the next section.

What is a Debt and Mental Evidence Form (DMHEF), and why do I need to fill one in?

Often, creditors will accept things such as prescription medication for your mental health illness as evidence to consider your case for debt leniency.  However, sometimes that is not enough.  Instead, consider using the Debt and Mental Health Evidence Form (DMHEF).

The DMHEF is a generic form that asks a health or social care professional to provide evidence regarding your current mental health condition.  This can then be photocopied and sent to all your creditors.

Many lenders will be familiar with the form, and it is FCA regulated, so it is recognised as a reputable piece of evidence.

Creditors are not obliged to accept the form as there is no legal requirement.  This is all dependent on their policies and guidelines regarding mental health and debt.

It should not cost you to get your GP, healthcare and social care professional to complete the form but if they do try and charge you, it is essential to get advice regarding this.

Can I ask friends or family to speak to creditors on my behalf?

Sometimes it is not applicable for the person suffering from mental health issues to speak to their creditors.  This could be for several reasons.

The most common one will be if a person has dementia.  They might find it challenging to understand the situation, and quite often, a family will step in to deal with the matters.

Some creditors may allow you to do this over the phone. However, to protect you from fraud, a company could ask you to complete a consent form authorising access to a friend or family to deal with the matter on your behalf.

What do different types of debts say about consumers suffering from mental health problems?

All creditors have different guidelines and policies regarding mental health and debt; however, various authorities often regulate them, so they must follow their codes of conduct.

·         Personal Debt, Credit Cards and Loans Debt

The FCA (Financial Conduct Authority) generally regulates these types of debts.  In the Consumer Credit sourcebook, the guidance from the FCA states the lender must have policies in place for people who are in debt and have mental health difficulties.

·         Overdraft and Unsecured Loans Debt

Creditors usually follow The Standard of Lending Practice, which offers advice on what creditors should do if a person is in a vulnerable situation.  Also, the policy states that they should address the issue with empathy.  However, whether they use the advice is up to the creditors’ discretion.

·         Council Tax Debt

Each council differs, but generally, a council will have a vulnerability policy, so it is essential to contact your local council and find out what that is.

·         HRMC Debt

If you have income tax or tax credits debt, but you are suffering from mental health, then the HRMC will try its best to accommodate people with mental health issues.

What should I do about bailiffs if I suffer from mental health issues and am in debt?

Bailiffs should follow Taking Control of Goods: National Standards, which states that creditors who find their debtors in a vulnerable situation should treat every case with sensitivity and discretion.

There shouldn’t be a generic policy for all cases, but a qualified advisor should look at each circumstance and come to a decision based on this.

Can I write off my debt if I am facing mental health challenges?

Writing off your debt is usually a last resort.  The reason why this would be an option:

  •       Your debt situation is unlikely to improve over time
  •       There are no assets or money to pay the debt

If you want a creditor to consider writing off your debt, get advice from a qualified debt advisor, as there are guidelines a creditor should follow when considering writing off unsecured debt.

Will my mental health situation affect my credit rating?

Your credit rating won’t be affected if you face mental health challenges; however, issues only arise when you get into debt.  Creditors can add late payments, CCJs, and default notices to your credit file, which affects your future lending options.

When it comes to mental health, sometimes your condition may make it difficult for you to manage your money.  You might not be able to control how much you are spending, or you may take out credit you can’t afford.

If this is the case, it might be beneficial to add a ‘notice of correction’ to your credit reference file.

What is a notice of correction, and how can it affect my credit file?

People with mental health problems can add a 200-word statement called a Notice of Correction to their credit file.

This can either provide details to lenders on:

·         The reasons why they miss payments and fall into arrears

This might have been because of a mental health illness, meaning you had to take time off work, which is why you fell into debt.

·         Why they should be cautious when lending to you

I know that statement might sound odd as it is working against you, but if you are worried you might be tempted to take out unnecessary credit, this can work in your favour.  A ‘notice of correction’ will be read by a person, so if they feel you are making an unnecessary credit application, then it gives them time to reconsider.

What can I do to help my debt situation if I have mental health issues?

The fact that you have accepted you have a debt problem is the biggest hurdle to overcome.  After this, there are things you can do to help yourself:

1.   Check if you qualify for Mental Health Breathing Space

The government introduced a scheme in 2021 called Breathing Space to offer people who were in debt time to get debt advice without being chased by creditors.

The standard Breathing Space Scheme currently offers people in debt 60 days of’ Breathing Space’; however, there is also a scheme run primarily for people who need Breathing Space but suffer from mental health.

The Mental Health Breathing Space Scheme consists of everything Breathing Space offers; however, there are a few differences:

  •       The Mental Health Crisis Breathing Scheme will last for the full duration of your mental health treatment, plus an additional 30 days.
  •       The Mental Health Crisis Breathing Scheme does not require you to receive advice or find a debt solution to get you out of debt.
  •       You can have someone talk to the debt advisor on your behalf
  •       The number of times you apply and register for the Mental Health Crisis Breathing Scheme is unlimited.
  •       You can apply for the Mental Health Crisis Breathing Scheme if you have been on the Standard Breathing Scheme in the last 12 months.
  •       The Mental Health Crisis Breathing Scheme gives you the same rights as a Standard Breathing Space Scheme.  For more details, visit our sections on this.

In our guide, find out more about Breathing Space and Mental Health Breathing Space Scheme.

1.   Check if you should contact your creditors about my mental health situation?

You could contact your creditors to discuss your mental health situation further.  It might be challenging, but remember you are not alone in dealing with debt and mental health.

Most reputable lenders will have a ‘debt and mental health policy.  Please read the information before contacting them to show them how serious you are at getting out of debt.  Some may need evidence from your mental health practitioner confirming you are undergoing mental health treatment.

You will need to obtain a debt and mental health evidence form, which must be completed by your doctor or mental health professional.  This could determine how your creditors should collect your debt from you in the future and what methods of communication they will use to talk to you.

1.   Look at alternative debt solutions to get you out of debt

Sometimes you can’t manage your debt without making the situation worse.  People often turn to debt solutions to help them consolidate their debts.

Depending on the type of debt, you could pool all your debt into a payment which suits you by considering debt solutions such as Debt Consolidation, IVAs and Debt Management Plans.

All these solutions have their benefits and risks, so it is important to find out more about them before you commit to one of them.

You can find out more about these solutions by contacting us.

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