New year – same pandemic
One month into a new year and Covid-19 continues to affect our daily lives and livelihoods. Hopefully, there is some light at the end of this very long tunnel with the vaccine programme rollout.
Since March last year, many households have been left struggling financially due to reduced income because of furlough or redundancy, shielding, or having to take on extra caring responsibilities.
Essential household bills haven't stopped during Covid. People still need to pay priority bills such as mortgages, rent, Council Tax, energy and TV Licences. If they ignore these bills, the consequences can be serious, including losing homes, fuel being disconnected, bailiffs at the door or fines and imprisonment.
A recent Citizens Advice report found that, at the end of 2020, 14% of households had fallen behind with essential bills since the pandemic's start. For homes with children under 18, the figure increased to 26%. Of households where people were furloughed it rose to 24%. Even if you haven't been affected directly, you might have partners, children or other family members who have. Some households may have initially used savings to make up lost income but these are likely to have run out after nearly a year.
Last year, the government introduced measures to help mitigate some of the pandemic's financial consequences. They included payment holidays for mortgages and some consumer credit debts, a hold on court-action for possession and eviction, and suspension of fuel disconnections.
Don't ignore the problem
Being in arrears with essential bills can be stressful. If you are struggling, it's important to act now. The longer you leave outstanding payments, the more complicated life can become later down the line.
Don't just cancel Direct Debits or stop making payments. Try to pay as much as possible to prevent the arrears from increasing.
Creditors are more likely to take further recovery action if you ignore them. They won’t know your circumstances or whether you 'can't pay' or 'won't pay'.
Contact your lender, landlord, council or fuel provider now to discuss your situation. They should be understanding and sympathetic, especially if the arrears are directly due to Covid. They might offer payment breaks or accept reduced payments until your situation improves.
- Mortgages: if you haven't yet taken a payment holiday due to Covid you have until 31 March 2021 to ask for up to six months' mortgage payment holiday. Remember, you will continue to accrue interest and payments may increase after your payment holiday ends.
- Rent: it’s vital to contact your landlord promptly if you’re in rent arrears. Discuss your situation and try to make a payment agreement. In the long term, if you don't pay your rent, you could be evicted.
- Council Tax: councils will usually seek to collect current arrears for the year in full by the end of March, so they might ask for higher payments. For those who can’t afford to pay more, once a summons has been issued and a Liability Order obtained, the council can accept payments that are spread over an extended period. If you can't reach an agreement, the council can apply for an Attachment of Earnings Order to deduct money directly from your salary or instruct Enforcement Agents (bailiffs) to collect the debt.
If your income has been reduced, you may be entitled to help through the Council Tax Support scheme. Or you could apply for a reduction under Section 13A of the Local Government and Finance Act 1992 on the grounds of hardship.
- Energy: Ofgem has ruled that from 15 December 2020, energy providers must put customers who are in debt on realistic and sustainable repayment plans. There are also protections for customers on prepayment meters to prevent self-disconnection.
Some energy providers have schemes to reduce energy costs for vulnerable customers or Trust Funds to help customers who are struggling to pay their bills.
It's important to look carefully at your budget to make sure you are prioritising your essential payments. You might need to make difficult decisions and consider reducing non-essential expenditure to help you free up money to pay for essentials. If you have consumer debts, these are non-priority so they should not be paid over and above essential bills. Use our budget calculator or speak to JaneBot – our money chatbot.
Has your household income dropped? It's worth checking whether you could get any additional help. Find out by using the Benefits Calculator on Entitled To.
If you are already receiving benefits, inform the DWP or local council if your income changes.
Apply for help
Our Money Advice and Guidance team provide free, confidential and impartial advice on debts and the options available for dealing with them. Where there is a need, the Charity can also consider applications for financial assistance with priority arrears such as a mortgage, rent, Council Tax and fuel, if appropriate. Get in touch and apply now.