If you're struggling to pay for the basics or your debts are bigger than your income, the worst thing you can do is bury your head in the sand.
There are many ways of dealing with debt and it's important that you face up to the problem, so here's how and where to get help, and some tips on tackling and managing your debt issues.
Don't dismiss debt
Take an honest look at your incomings and outgoings to make a budget and see exactly where you might be able to reduce spending. Keep this information handy, including a full breakdown of what needs paying and when. When you do speak to creditors or debt support services, they will need to know the details of what you can afford, so be prepared. It will also give you a clearer idea of how serious your debt problem is - if the basic outgoings are greater than your after-tax income, you may need help via some form of debt management plan.
Wherever possible, cut your debt outgoings by switching to better deals. You may be able to find a credit card with a lower rate, or a personal loan might provide the best option. Unfortunately, these options are only going to help if you have a half decent credit score, and if you have debt building up, that is typically not the case. Whatever you do, don't be tempted to borrow more unless you get a better deal. Payday and short-term loans might help you out of a small and immediate hole, but the debt from these firms can quickly spiral out of control.
Instead, speak to your creditors. From utility firms to mortgage lenders, creditors want you to pay off what you owe, and for that reason, they would much rather help you to set up an affordable plan to pay off arrears than to take you to court, so don't ignore their calls and letters. Armed with your budget and breakdown of outgoings, you will be able to come up with a solution that suits both debtor and creditor, and knowing that you have an affordable plan in place can help to ease the pressure and provide some breathing space. And if you think you may miss a payment, call your lenders early - don't wait until you've missed a payment or defaulted.
There are a whole host of companies offering individual voluntary arrangements (IVAs) and debt management plans, but the safest bet is to go to a non-profit organisation or someone offering free advice, a company that doesn't have an ulterior motive for helping you out.
The Citizens Advice bureau, StepChange, Payplan and the National Debtline can all help when it comes to dealing with debt, and offer impartial advice on which solution might best suit your needs and situation. They may also be able to help by dealing directly with debt collection agencies and prevent further harassment.
You may also be able to get help from the government. Local councils can often help with real emergencies such as buying food or getting healthcare, and those on certain income-based benefits may be able to apply for a budgeting loan or advance via the Jobcentre, providing help with household essentials.
For those in serious difficulties, a debt solution such as an IVA or debt management plan may be suitable, but it is essential to think carefully before going ahead, which is why free and impartial advice is so important. An IVA, for instance, is a scheme whereby you may be able to freeze the interest on your debts, make one affordable monthly payment, and in some cases, some debt may be written off. But it is a long-term arrangement that has long-term effects on your credit report and ability to borrow in the future, so talk to a debt advice line or charity before entering into an IVA. A debt management plan is similar, but in most cases you will eventually repay the entire debt.
For those who are not homeowners and have debts of less than £15,000, a debt relief order maybe a suitable option, and you will need to go through an approved intermediary such as StepChange or Citizens Advice.
You're not alone
Serious debt can leave you feeling alone and isolated, but remember, others are in the same boat. The likes of Money Saving Expert and the Consumer Action Group have online forums where you can speak to others struggling with debt, and receive or give advice on dealing with both the causes and the solutions to debt problems.
Are you recovering from a debt crisis? How did you manage the problem? Leave your comments below...