How to deal with your debts

• Make a complete list of your debts. Remember to divide them into separate headings - priority and non-priority debts (see Types of debt). You will have to make offers to pay off your priority debts before you tackle your non-priority debts.
• Work out your income and expenditure. Be honest and make sure that the amounts are realistic. Your resulting budget will show you if you have any money left over to divide up between your creditors. You may even be able to identify where you can make some savings. If you encounter problems, an advice agency can give you confidential advice on what to do.
• Do not ignore creditors' letters or phone calls. Contact your creditors as early as possible and explain to them why you are in debt. If you phone, you should follow up the call with a letter, confirming what you said on the phone. Send all the creditors a copy of your budget and the list of your debts. If you do not feel confident to deal with your creditors, contact a free advice agency.
• If you have only a small amount of money available for your creditors after your essential spending, you may have to offer all of this to your priority creditors. You could have very little, or nothing, to offer to non-priority creditors and you should explain this to them.
• Do not borrow more money to repay your debts. Think about the ways in which you might earn extra money or increase your income instead. If your income is low, you may be able to claim benefits

If a creditor is pressurising you for payment, it may be because they are not aware of your financial circumstances. If you tell them creditor about your difficulties, they may agree to accept reduced payments from you. In some rare circumstances, a creditor may give you a short payment holiday.

Although creditors are allowed to send reminders to you if you are in debt, they are not allowed to harass you. If you think you are being harassed, or if a creditor is not listening to you, take advice from your local Citizen's Advice Bureau or other advice agency. If you do not feel able to approach your creditors yourself, a Citizens Advice Bureau or another free advice agency may be able to help you.

Often, you will have more than one priority debt, or will have a mixture of priority and non-priority debts. It is important to make a list of all your debts and let each of your creditors have a copy of the list. When trying to work out what you can afford to pay, the creditors will need to know your full financial details.

You will also have to let the creditors have details of your family's income and expenditure. How you deal with your debts will differ, depending on whether you have any income to spare after you have paid your mortgage or rent and met the costs of essentials like food, clothing and transport. You should also look at whether you have any assets that are worth selling, and whether your situation is likely to get better or not.

If you have only a couple of non-priority debts, you could consider transferring the debts to another account which charges a lower rate of interest. However, paying a lower rate of interest can mean that you pay off the debt over a longer period of time.

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