The first and most vital step in dealing with debt problems is to talk to the companies that you owe money to, also known as you creditors.
However, a combination of worry and fear can make this part the hardest of all, which only exacerbates the problem the longer it goes on. Talking to your creditors means they are kept informed of the problems you face and reasons for the payment delays, without them knowing this, they often simply assume it is a deliberate attempt to avoid paying and resort to legal proceedings straight away.
Where do we start?
Before contacting creditors it is important to fully understand your own situation, list out all of the money owed and any money you still have, and see if any of the higher priority debts can be paid.
The high priority debts are those that, if remain unpaid, have serious consequences for your life. Examples of this would be rent or mortgage arrears, because the consequence is obviously losing your home. Taking your list of debts and putting them in an order of priority helps to form a plan to tackle the issues, by allowing you to deal with each debt from top to lowest priority in order.
Aside from the mortgage and rent mentioned, other debts that could be considered priority are government debts, such as income tax and VAT, child maintenance or council tax. These could have bailiffs visiting your home or even land you in prison for non-payment so again, the consequences for not dealing with them push these debts up the ladder of importance.
Energy bills would be the next rung of the ladder, having fuel supplies disconnected is not a good situation, so they warrant dealing with urgently.
Unsecured debt, court fines and store cards are the lower priority types of problems to be dealt with, although that is not to suggest such debts are not serious.
Once you have your debts in priority order and understand what is owed on each and how much, if anything, you can repay, then you can begin to contact the creditors in order to see if there is an amicable solution. If your problems are temporary, such as a redundancy cutting your income but with new employment on the horizon, explain that. Always try to be honest and offer your view on the debt situation with each creditor.
It is important to let the creditor see you are working to deal with the debt and working to a solution that they are happy with, because doing this can avoid any legal proceedings against you if the creditor can see a solution without them.
The aim in all of this is to try and agree a deal, either a new repayment plan you can afford (it is important to only take on new payments you can actually maintain, not doing so will make the legal route far more likely) or other ways to deal with the debt. Being honest and open about your situation, and most importantly talking to the creditors, can achieve that.