When most of us get into debt we don’t foresee a future in which we are too sick or incapacitated to make repayments. However, unfortunately, this sometimes does happen and that can create a very frightening situation from which it feels like there is no way out. If you’ve become long term ill, sick or disabled then don’t panic. There are ways to start dealing with your debts so that you don’t get overwhelmed.
Start by assessing your debts
The first positive step to take if you find yourself in this situation is to assess your financial options. Make a note of all the debt that you currently have, the interest rates that apply and the term still left to run on each one. How much do your monthly debt repayments come to and how much of your monthly outgoings do they make up? Don’t forget to take into account where any offer periods are about to come to an end, for example, the expiration of a 0% rate on a credit card.
Are you entitled to any sick pay?
You need to establish what kind of income you’re likely to have if you’ve become long term ill, sick or disabled and for many people, this starts by looking at sick pay. Most of us are entitled to some form of statutory sick pay (other than self-employed workers who generally don’t receive it). You need to be earning over a specific weekly minimum in order to receive statutory sick pay – if you do then you’re entitled to support for up to 28 weeks. If you have two (or more) jobs then you can claim statutory sick pay from each of your employers. It’s important to remember that this is treated as income so you’ll have to pay both income tax and National Insurance on whatever you receive.
Aside from statutory sick pay, you may also have an entitlement to company sick pay. This is usually more generous than statutory sick pay so it’s worth checking your contract to see what you might benefit from.
Benefits for long term sick, ill or disabled
If you don’t meet the requirements for statutory sick pay (or you’ve been receiving it for more than 28 weeks) then you may be entitled to benefits. If that’s the case you’ll receive a form SSP1, which will then enable you to claim Employment and Support Allowance. You might also be eligible for a number of other benefits depending on your individual circumstances and the reasons for your illness, sickness or disability. Citizens Advice is a great resource if you’re looking to identify the benefits that you might be entitled to in a situation such as this.
Managing your income
If your situation is changing there may be other ways in which you can still maintain the same – or a similar – level of income. For example, there may be options to work flexibly or to switch to a freelance role that would mean you wouldn’t have to work in an office. If your income is going to drop substantially it’s worth looking into whether you might be entitled to a rebate of some of the income tax that you’ve paid for the year. Some charities also offer grants and loans that are available to people in very specific situations to help deal with financial issues where long-term illness or sickness is making life tough.
What does your insurance policy say?
If you have taken out insurance then this is exactly the right moment to evaluate what support those policies could provide for you now. For example, if you have life insurance in place this may pay out if you’ve already had a diagnosis of a terminal illness. Critical illness cover could entitle you to regular payments or income protection insurance may provide you with cash if you’re no longer able to work.
Look for other ways to save money
If you can reduce payments on other outgoings then you may be able to continue to cover debt repayments.
Switch your energy supplier to reduce your monthly bills
Apply for a discount on your council tax bill to take into account your changed circumstances
Research local schemes that provide free travel and look into whether you may be eligible for free parking with a Blue Badge
See if you’re eligible for free prescriptions – for example, in England cancer patients are exempt from paying for prescriptions
If you’re really struggling with your debts then ask for help – charities such as Step Change can offer free advice that will enable you to identify your options.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley