Top 10 Tips

1. Don't ignore it

   Sounds simple, but it's all too common for people to try and avoid the situation by ignoring calls and not opening post. Experience shows that this can only make matters worse.

2. Work out your income and expenditure.

   it's a good idea to write down exactly what you're spending each month and what you're spending it on. This will show what money you have left each month and is useful for working out what you can afford to pay towards your debts.

3. Cut costs

   Once you've identified what you're spending each month you may be able to reduce your bills by cutting out unnecessary costs or switching providers, such as gas, electricity or telephone. There are many sources of information available to help you compare costs.

4. Prioritise your debts

   Don't be tempted to automatically make payments to creditors (or people acting for them such as a debt collection agency) that are making the most noise! Work out which are your priority debts , these are ones where serious action can be taken against you if you don't pay what you owe, for example, you could lose your home or be sent to prison.

5. Find out about benefits or assistance you may be entitled to.

   Check out the Government's Benefit Adviser to see if you are eligible for any assistance.

6. Get help

   Getting help from someone can be the first step to facing up to your difficulties, but it's often something that people put off. This can make matters worse if you've already fallen behind with payments. Contact us today and we'll take the time to review and understand your situation and identify real solutions that are personal to you to help ease the burden of mounting debts.

7. Get it in writing!

   Ensure that any agreements you enter into, whether these are with creditors, debt collection agencies, or a debt management company acting on your behalf, are in writing. That way you can be sure of what has been agreed and this will help avoid any nasty surprises. Always make notes of any telephone conversations you have with your creditors.

8. Avoid getting further into debt.

   Many people borrow more to repay existing debts which can increase their outgoings even further. Some even find that they don't use the money in the way planned, so that debts don't actually get repaid. If you're already struggling to pay your current level of debts then obtaining another loan is unlikely to help and you may find you are unable to get a loan because your credit record has been damaged because of your payment difficulties.

   Don't be tempted to borrow from loan sharks. These are illegal lenders and the interest rate is usually extremely high. You may also find that they harass and threaten you if you can't repay the loan.

9. Talk to your creditors

   Lots of people are scared to talk to their creditors, but being honest with them about your financial situation could prevent legal action and help you come to an agreement about how the debt is to be repaid.

10. Think carefully before cancelling your insurance policies

    Lots of people cancel their insurance policies when they're struggling with debt. In fact, recent research from the Association of British Insurers reveals that nearly 1 in 4 people cancel or don't renew their contents insurance to save money. Yet, nearly half of the people questioned said that burglary was one of their biggest fears! If you have a mortgage it's usually a condition of the loan that you have buildings insurance in place, so it's quite worrying that nearly 1 in 5 people have cancelled this type of cover.

    By reviewing your insurance arrangements you may be able to find a cheaper premium or arrange more appropriate cover. For further information visit the Money Made Clear website from the Financial Services Authority. Remember, insurance is usually one thing you can't buy when you actually need it!

Priority Debts

Priority debts are the ones where serious action can be taken against you if you don't pay what you owe. It's important that you do all you can to meet these.

Mortgages or other debts that are secured against property (such as secured loans) if you are unable to meet repayments on your mortgage or secured debts, your home may be at risk and it can result in your home being repossessed. Your lender can sell the property and if the price is less than the amount you owe, you will still be liable for the remaining debt.

Rent your landlord can evict you if you owe money on your rent. He can also take you to court to try and get the money you owe.

Hire Purchase If you can't meet the repayments on a car lease, it could be taken back. If you need the car for work then this could be seen as a priority debt.

Income Tax, National Insurance, and VAT non-payment can result in court action and in some cases, imprisonment.

Court fines, Council tax and Maintenance if you don't make these payments then you could face court action, including bailiffs, and can also risk imprisonment.

Gas and electricity your supply can be disconnected if you are unable to pay.

TV licence you can be fined or imprisoned if you don't have a TV licence when you're required to.

Getting a Bank Account

If you're struggling or will struggle to get an ordinary current account, there are special accounts called "basic bank accounts" which may be suitable for you. However, if you are an undischarged bankrupt or have a record of fraud, then you may not be eligible for one.

These are now offered by most of the main banks, although you may want to choose a bank that you don't already owe money to.

With a basic bank account you'll be able to get your salary or benefits paid in, and arrange for bills to be paid out of the account as well as withdrawing money with a cashcard. You won't get an overdraft or a cheque book.

A basic bank account can be useful for rebuilding your finances particularly where you keep to the terms and conditions and don't have any unpaid direct debits or standing orders.

Debt Collectors

Many lenders appoint Debt Collection Agencies to try and recover the debt on their behalf. What you may not be aware of is that most lenders have their own internal debt collection team, but they use a name different to the lender so that you think the debt has been passed on to another company. You can usually tell if this is the case because if it's just a trading name that the lender uses, it should say so at the bottom of any letter they send to you.

Other lenders have debt collection agencies which have been set up to collect debt on behalf of the lender, but the actual company is owned by the lender. By operating in this manner you see a letter from a company, other than your lender, and it has the potential to scare or shock you into action.

It's important to know that debt collectors are not appointed by the court and they don't have the powers that a bailiff would have. For example, they can't come into your home and take away your possessions. If they are looking to visit your home, they should generally give you notice. Even so you do not have to agree to a visit or let them in.

All debt collectors have to be licensed by the Office of Fair Trading and adhere to its guidance.

Responding to Threats

The approach taken by creditors, or those acting on their behalf, varies widely.

Some are committed to treating their customers fairly and being sympathetic when you fall behind with your payments.

However, there are those that try to use "scare" tactics, such as issuing a statutory demand, phoning you repeatedly, or putting pressure on you to make large payments that you can't afford.

If you are receiving telephone calls tell the lender or debt collector that you prefer to deal with them in writing. Where you do receive letters, don't ignore them. You should keep copies of any responses you send.

If your creditor is taking action against you in the County Court, you will receive a claim form from the Court which will show how much the creditor says you owe them. The form gives you chance to explain your situation. There will also be an admission form which asks for details of your income and outgoings and you have the chance to make an offer of payment.

You have 16 days from the date the papers are sent (not from the date you received them) to send the forms back to the court. Alternatively, you can send an acknowledgement of service or a defence form.

Take a look at our Legal Stuff page for further information about legal action that is being taken or threatened.

If the debt is more than 6 years old and you've not been contacted about it in the last 6 years, it could be statute barred and the lender or debt collection agency cannot continue to pursue you.

You may be contacted about debts that you do no actually owe! This can happen if somebody has fraudulently used your details to obtain credit. In this case, you can contact the lender and tell them that you dispute the debt and why. OFT guidance states that lenders and debt collectors must investigate debts that are disputed and cannot continue to take action to collect the money until it has been investigated.

If you do owe the debt and you can pay it, then you should do so. However, if you are experiencing financial difficulties, then it's important to take steps to reach an agreement with your lender about what you can afford to pay and when.

If the pressure of threats and debt collectors is getting too much then contact us to see how we can help.

Insolvency Service Guide to Debt

If you have debt problems there are various options for helping you make arrangements involving your creditors.

The Insolvency Service Guide to Debt is a guide that explains these options, how they work and some of the pros and cons of each. The guide can help you with personal or business debts, or both.

About this guide:

• summarises the key features of each of the main ways of dealing with debt;
• sets out how each of them works; and explains the pros and cons of each.

To download the guide as a printable PDF Click here