The starting point for anyone reading these pages is that debt can't be ignored! On these pages you will find details of support organisations and advice on what to do if you are not coping.

What follows is a structured approach for those who are trying to make their debts more managable:

If you are thinking of contacting your creditors personally and not using a debt management company to help sort out your debt issues then we can show you how to start along with some useful tips and ‘inside knowledge’.

Below is our 5 point guide to getting towards being debt free! It is aimed at those with a number of low to moderate sized unsecured debts.

1.       First work out how much you owe and to whom

Get together your recent credit and store card statements, any loan agreements and bank statements and draw up a list for each of the following:

  •  those in your name only
  •  those in your partner's name only (if applicable)
  •  those in joint names, i.e. your name and someone else’s (if applicable)


2.       Work out which loans are secured, like a mortgage

A secured loan would be a mortgage; another example would be where a lender has advanced you money but has secured this on your home. Some car loans are secured on the vehicle under a Hire Purchase agreement. This means the lender has your vehicle as security; if you don’t pay then you are at serious risk of having the vehicle taken back. These debts are known as ‘priority debts’.

Now work out other priority creditors such as utilities (gas, water, electric) and council tax.

Remember, if you don't pay secured creditors then you may lose the security (your house for example) and if you don't pay priority creditors such as your electricity or gas provider then you might lose the services they provide. Make a list separate to your unsecured creditors.

3.       Work out how much you can afford to pay back each month

To do this you will need to work out the total family income; this will include wages, pensions, benefits, family allowance and tax credits. Then make a list all your outgoings and include the payments to those to secured creditors but not those unsecured ones, like credit and store cards.

Once you have taken your outgoings away from your income you will be left with a figure that you can afford to pay each month- this is known in the trade as ‘disposable income’ (DI).

This DI will help you assess what options you have when it comes to dealing with your creditors.

Click on our budget wizard  to help you work this out for free. It has a unique built in debt predictor which will predict your debt (if it’s not looking good) explaining how much your will debt grow over one month, 12 months and five years.

Also see our updated Lender's expenditure guidelines

Now add up any assets you may have

An asset is your home, if you own it. Other assets would be savings, an item of value or your vehicle if it has no finance on it. To work out how much equity you have in your home take the amount of the mortgage outstanding from the value of the home.

For example, if your mortgage debt with your partner stands at £100,000 and your house is valued at around £140,000, then there is equity of £40,000. Once this is divided between you both, you would each have a share worth £20,000.

You are now ready to speak with your creditors

It is important that your creditors/lenders do not see you as a ‘won’t payer’ instead of a ‘can’t payer’. If you stop making the payments to your creditors/lenders and don't communicate with them, then they will regard you as someone who won't pay rather than can't pay. This leaves your creditors/lenders little option but to take court action against you to recover their losses.

Once you make contact with your creditors/lenders, they will ask for all the information we have listed above in points 1 - 4.

If after having done all this you feel you can't deal with it on your own then see our list of debt management companies that can help. The above page includes full contact details of the debt charities.

Our debt expert himself has a useful list of do's and dont's when dealing with creditors which is worth checking out too.

If after contacting your creditors/lenders you think they are being unreasonable or you simply cannot afford the amount they are demanding to be paid then seek professional advice from one of the debt management companies in the link above.

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