If you are struggling with debt it is important to tackle with the problem immediately - the longer you leave it, the worse it becomes. Here is a plan of action to help you to cope… 

Make a list of everything you owe

The first job is to sort out exactly what you owe, and to whom you owe it (your creditors). You then need to put these debts in order of importance. The most important (’priority’) debts aren’t necessarily the biggest ones. Priority debts are ones where serious action can be taken against you if you don’t pay what you owe.

Priority debts

Priority debts are things such as mortgage repayments, rent, taxes and payments ordered by the courts: if you don’t sort these out, there’s a possibility you could lose your home or go to prison.

Non-priority debts

Non-priority debts include credit card payments, bank loans, catalogue repayments and money you’ve borrowed from family or friends. You can’t ignore these, but you don’t need to deal with them as a first priority.

Working out a personal budget

To find out what debt repayments you can afford, work out a weekly or monthly budget to see what you need to live on. It’s important to be realistic and honest with yourself.

Your budget will show how much money you can afford to commit to paying off your debts. Your budget may also show you where you can save money.

Talk to your creditors

Once you know what you can afford, you can talk to your creditors about your situation and what you’re going to do about it. Offer to pay each debt off in a way you can afford - it’s important not to offer to pay more than you can afford, and not to assume you’ll be able to pay more in the future.

It’s important to follow up a phone call with a letter confirming what you said and agreed.

You may have little or nothing left to offer your non-priority creditors. You should still talk to them, explaining the situation; you may be able to tell them that you will pay them back at some point in the future - but don’t make promises you can’t keep.

Where to get help and advice

Many organisations offer free, independent advice on debt problems, so you don’t need to use companies that charge.

Your local CAB is a good starting point for free advice. They provide free information and advice on legal, money and other problems: you can find your local CAB in the phone book or on their website.

Some local authorities offer a free debt counselling service. You can check with your local authority by following the link below. You’ll be asked to enter details of where you live and then taken to your local authority website where you can find out more.

If you’re being threatened with legal action, you can check the Community Legal Service website to see what your legal rights are. You may also be entitled to free and independent advice from your local Law Centre.

Source: DirectGov. Crown copyright.