What if the worst does come to the worst?

Everybody knows about the credit crunch and how it is affecting our lives. But have you ever really stopped and asked yourself ‘What if.?’ ‘What if they take my house?’ ‘My Car?’ ‘Cut off my water?’ Don’t panic. Here are a few answers to your nagging questions.

If I can’t afford mortgage, how much time do I have before I lose my home?

Mortgage lenders are probably buckling the most under the pressure of the credit crunch. Some lenders seem to hassle borrowers for their money almost immediately after missing one payment.

A lot depends on your relationship with the mortgage company. Some mortgage companies may allow you to take a payment holiday, especially if you have equity in the property. What you should remember is that no matter what, you will not lose your home before going to court first.

If you cannot afford your next mortgage payment then it is essential that you get in touch with the mortgage lender before the due date so you can explain the situation.

Will my water get cut if I cannot afford to pay

No, because that is illegal. What they can do is send a bailiff to your home or send you to court. If you predict you may have a payment problem, let your supplier know. You may have the option of paying your bill in weekly or fortnightly chunks instead.

Will my gas and electricity be cut off if I cannot pay my bills?

Yes it could, and power suppliers do not need to take you to court to do so. But it depends on your attitude as well. Disconnection usually takes place about 28 days after the final bill demand, including a hand delivered notice of intent to cut you off. But generally, this will only happen if you have remained uncooperative and refused to allow a prepayment meter to be installed or defaulted on an agreed payment arrangement. If you are on a ‘social tariff’, the provider will follow more lenient rules as well.

Cutting electricity is usually only a last resort, with many companies offering a ‘pay back’ plan with nearly all their customers. They would rather you pay small amounts on a regular basis than receive no money at all. If you feel as though you cannot afford to make your next utility bill payment, contact the supplier as soon as possible.

Will I go to jail if I don’t pay council tax?

Yes, being an uncooperative taxpayer is unacceptable. If you feel you may struggle to pay, let your council know and they will usually find a way to help you by setting up a different timetable for payments, offering a discount for a ‘second adult rebate’, or checking to see if you qualify for council tax benefit. All you have to do is call and request to pay less for a temporary period. Only once a council has exhausted all other avenues – including bailiffs and a charging order on your home – will they resort to jail.

Can my bank reject me if I am heavily overdrawn and receive regular fines?

Yes, banks are free to choose their own customers according to their specifications. If they feel you have become too much of a burden, you will be forced to look elsewhere. You are usually given a 30 day notice period. What you should remember is to keep your bank in the loop with everything you are struggling with. Keep your bank up to date and you may be able to work out a deal that will benefit you both.

How soon will the firm take my credit card off me after missing a payment?

Nothing is set in stone here, and is most likely based on your existing card history. If you are an average customer who only misses one payment, there is no need to worry. If, however, you have a bad track record, you will face a much quicker exit.

Should I pawn jewellery to make ends meet?

Pawnbrokers do not have the best reputations. They should be seen as a last desperate attempt for cash. Try the credit union first, where new flexible rules allow easier credit. You should only expect half the value of your goods, as well as paying at least 8% interest a month, with a minimum six month contract.

Do I have to renew my TV license?

Let’s look at this practically. The amount you pay for renewing your license is significantly cheaper than the amount you will have to cough up should you get caught out and fined. If you are over 75 or live with someone who is, put the license on their name and it will be free. You could also pay weekly instalments for 6 months. Pay monthly by direct debit, but do not pay quarterly by direct debit as the premium is about £1.25 per quarter.