We’ve all been in debt at some stage and everyone knows with the credit crunch it’s becoming more and more common for people to fall behind on their mortgage. I’ve put together some suggestions on how you can get organised and out of debt.

Firstly, make a list of all your debts:
The list should include:

• Names and addresses of the companies you owe money to
• Along with account or reference numbers
• Any credit and/or store card debt
• The total amount you owe to each with an overall total at the bottom

If you have a personal loan you should also have a copy of your loan agreement for reference, this will help you clarify the interest you maybe liable to pay and how much you borrowed. Once you have made your list you need to work out which debts need to be paid first.

I suggest you pay these high priority debts first:

• You pay your mortgage or rent arrears first this will keep a roof over your head
• Next up I think you should pay your utility bills such as electric, water and gas
• If you are behind on your council tax, I suggest you pay this next. If you don’t bailiffs can remove your personal belongings and you can even be sent to prison
• If you have fines such as parking or speeding tickets you should pay these next otherwise you could go to prison
• One other debt you can be sent to prison for is not paying maintenance to an ex-partner or child

After you have established the amount you owe, you have to work out your household income and outgoings. Your income relates to any money you receive. This includes benefits, wages, child maintenance and income from a tenant.

Don’t bury your head in the sand
The next thing you have to do is write down all of your outgoings, this is absolutely everything that you have to pay for and can include all of your bills, food, travel costs, clothing and contingency for any unexpected costs. It’s extremely important that you are both accurate and realistic with your outgoings. These figures will help you determine how much you have left to pay back your debts.

If you’ve received letters from companies you owe money to, call them or write them a letter explaining your situation and requesting more time to pay or a more manageable payment plan, this especially applies to your landlord or mortgage lender. If you need some advice on how to write a letter to creditors you can visit the citizen’s advice site where they can help. You should keep copies of any letters you have written to them and received from them.

Dealing with low priority debts
Low priority debts include:

• credit debts such as overdrafts, loans, hire purchase, credit card accounts and catalogues
• student loans
• money borrowed from friends or family

You can’t be sent to prison but you can be taken to court and your personal belongings taken away. So it’s important that you contact them and explain your circumstances this a) will help you agree an instalment plan and b) stop them from hounding you.

If you are unable to agree an instalment plan you can appoint a debt management company to do it for you. In any debt related situation there are always options it’s important that you don’t ignore them. I have included a number of links that will provide help and advice for debt.

www.turn2us.org.uk This organisation can provide funds for necessities to people with severe debt problems. For help and advice on debt you can contact your nearest citizens advice bureau.

Another option is to take an IVA (Individual Voluntary Arrangement). An IVA is is a legal arrangement you make with the people you owe money to, allowing you to pay affordable payments over a set period, usually 5 years. As it is paid over a set period of time a portion of the debt would be written off. The monthly payments are set accordingly, based on your disposable income and when the last payment is made the remainder of your debt is cleared.

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1. UK economy is weakening
2. Higher Lending Fees
3. How to save money during a recession
4. The guide to a better mortgage