Depression. Anxiety. Stress. These are all words we are hearing more of 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 starts to affect your life and the way 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 quite often the two feed on each other making the situation worse.
What can be done to help people who are in debt and have mental health problems? What can a person suffering from mental health and debt do to help themselves? Read our guide as we explore everything you need to know about the challenges facing mental health and debt.
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What does debt and mental health mean?
Mental health can cover a range of 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 all affect the way 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 mean a reduction in your pay or income. As a result, this could mean that you might not be able to keep up with your current bills, leaving you to get into debt.
- Dementia
If you or your loved one has dementia, then it might make it impossible to make decisions about the money. You might assign someone to help you make decisions regarding money.
- Stress
If you are stressed then 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.
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Should I speak to my creditors when experiencing mental health issues?
You shouldn’t have to suffer in silence when it comes to mental health. A majority of creditors will be willing to understand your mental health challenges and how it is 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 who have 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:
People who are 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.
This could particularly work well with people who find it comfortable to talk about financial matters in their comfort zone.
People often get stressed if a creditor rings up demanding money whilst they are 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.
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 and often in a clearer mindset.
Debt collection work on the behalf of a company to collect debts for them, however, the prospect of getting phone calls or letters in the post can sound daunting to someone who is already facing mental health issues.
If creditors can delay this process, then it gives you time to sort your finances without the pressure of a debt collection agency pressurising 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 detailing your situation from a qualified healthcare provider.
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, you might consider using the Debt and Mental Health Evidence Form (DMHEF).
The DMHEF is a generic form that is used to ask 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 to do so. 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 important 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 who is suffering from mental health issues to speak to their creditors. This could be for several reasons.
The most common one would be if a person is suffering from dementia. They might find it difficult 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 who are suffering from mental health problems?
All creditors have different guidelines and policies when it comes to mental health and debt, however, they are often regulated by different authorities so they must follow their codes of conduct.
- Personal Debt, Credit Cards and Loans Debt
These types of debts are generally regulated by the FCA (Financial Conduct Authority). 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, this is up to the creditors’ discretion whether they use the advice.
- Council Tax Debt
Each council differs but generally, a council will have a vulnerability policy, so it is important 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 am suffering from mental health issues and I 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 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 are facing mental health challenges, however, issues only arise when you get yourself into debt. Creditors can add for example 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 then it might be beneficial for you 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 fell into arrears
This might have been because of a mental health illness which means you had to take time off work and this 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 then 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.
If I have mental health issues, what can I do to help my debt situation?
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:
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 ‘Breathing Space’, however, there is also a scheme run especially for people who need Breathing Space but are suffering 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.
Find out more about Breathing Space and Mental Health Breathing Space Scheme in our guide.
You could contact your creditors to discuss your mental health situation further. It might be difficult to do but remember you are not alone when it comes to dealing with debt and mental health.
Most reputable lenders will have a ‘debt and mental health’ policy in place. Read the information before you contact them so that you can 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 will need to 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.
Sometimes it is not possible for you to 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 also their risks, so it is important to find out more about them before you decide to commit to one of them.
You can find out more about these solutions by contacting us.
