Dealing with your debts
Most debts can be sorted out if you know what to do. Plan a solution if you are in a complicated debt situation. This section outlines a step by step approach to managing your debt problems.
Contact all your creditors
Write to your creditors to let them know that you are dealing with your debt problems. Creditors prefer to deal with people who are making an effort to deal with their debt problems. Make a copy of your creditor's replies.
Contact emergency creditors
You must deal with some debts as soon as possible. These are known as 'emergency debts'. You may have an emergency debt if:
- your lender is going to repossess your home because you haven't paid your mortgage
- your landlord has asked you to leave because of rent arrears
- a creditor is threatening legal action
- you have to go to court because of a debt
- your phone or gas is about to be disconnected
Contact your creditors if you think you have an emergency debt. Explain that you are getting advice about clearing your debts. Ask your creditors to wait until you have sent them proposals for clearing your debts. Use the 
'Emergency debt checklist' when you are talking to your creditors.
Your creditor may ask you to make a payment immediately. Don't feel pressured into making large lump sum payments to your creditors. Follow up your telephone calls with letters. Letter templates may help you communicate effectively with your creditors.
Work out your priority debts
Divide your remaining debts in to priority and non-priority debts. Your priority debts may include:
- a mortgage
- a secured loan
- unpaid rent
- gas or electricity bills
- rates
- child support or maintenance
- television licence
Non-priority debts include:
- store cards
- credit cards
- an overdraft
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Work out your finances
It is important to know exactly how much money you have. It allows you to see:
- how much money you have to repay your debt
- what payments you can realistically afford
When working out your finances stick to either monthly or weekly figures. Include you and your partner's income and benefits. Don't include overtime or overestimate your income. You might make offers that you can't afford.
The budgeting tools in our Repossession and Mortgage Debt advice section may help you get to grips with your financies. Complete an income and expenditure form to see how much money you should have left at the end of the month and if you can make any savings.
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Maximise income
You may be able to increase the amount of money you get every week without getting a new job or increasing your working hours. You may be able to increase your income by:
- claiming extra benefits (housing benefit or tax credits)
- checking if your tax code is correct
- letting out a room to a lodger
Don't borrow more money to pay off your debts.
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Minimise spending
Be realistic about ways you can save money. You may be able to reduce the amount of money you spend by:
- using direct debits or standing orders to reduce bills
- using a budget plan for electricity
- reducing your spending on non-essential items
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Work out a realistic spending plan
You must pay off all your priority debts before you start paying your non-priority debts. Offer to repay your non-priority debts in proportion to what you owe. This is known as a repayment strategy.
Get advice if you are dealing with debt. An adviser can explain your options and help you contact your creditors.
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