Dealing with debt

Free advice on managing debt is available from the following sources:

The Citizens Advice Bureau is the largest provider of free impartial debt advice in the UK. The Consumer Credit Counselling Service is a charity funded by the financial services industry which specialises in working with clients to devise individual debt management plans. The National debtline is a telephone based information and advice service. The Insolvency Service provides free advice to commercial entities and to individuals.

Please note that some debt management companies have acquired poor reputations because they charge fees for negotiating with creditors to reduce monthly payments by rescheduling the debt over a longer period. Some include payment protection insurance in a contract with a client and charge interest on this as well as on outstanding debts.

Type of debt and what could eventually happen :

All debts are important, but some are more pressing than others. The ultimate consequences of not dealing with a particular debt - in other words the worst that can happen - depends on what the debt is for. Some debts carry severe penalties and you should deal with these debts first. These are your priority debts. The list below shows what may eventually happen if priority debts are not dealt with.

* Distraint is the seizure of some of your goods by bailiffs.

Dealing with your creditors

Don't Delay!

The worst thing you can do when you owe money is to ignore the problem, hoping it will go away. The earlier you contact your creditors, the more flexible they're likely to be in coming to an agreement with you.

Decide which debts are priority debts and which are not. The list above explains what may happen if you fail to pay priority debts. Write to your creditors, or phone, and indicate that you want to work out an arrangement which will reduce the debts.

If you make any arrangements over the phone, ask the name of the person you speak to. Write down what was said and then follow up with a letter to confirm the arrangement. Remember to quote your account reference and to keep a copy of all letters you send.

Don't make promises you can't keep

Don't be bullied into agreeing to repayment arrangements which you cannot keep. Arrange a rate of repayment that you can afford to keep up, based on the figures in your personal financial statement. Otherwise, sooner or later, you are likely to default or miss payments elsewhere and find yourself back in trouble. The aim is not just to solve the immediate problem but to get things organised so that you can afford to pay your creditors and meet your other expenditure for the foreseeable future.

Make regular payments

Many firms are computerised and these systems are programmed to send reminders and warnings automatically if payments are missed. It is better to make regular payments, however small, rather than make large occasional payments.

The law is on your side

Although the law gives creditors the power to take action to recover the money you owe them, it also makes them go through fixed procedures before the final action can legally be taken. So the law also gives you protection. For example, you cannot legally be evicted from your home without the creditor having been to court and obtained the necessary authority.

Don't be unduly intimidated

Harassing people in debt is illegal. If you are harassed by creditors seek advice immediately. You can make a complaint to your local Trading Standards office or the police. If the person is your landlord, contact your local Council's tenancy relations officer.