What if I get into debt?

There's no easy way out - you know that already. But the sooner you face the problem, the easier it will be to solve it. So act now.

• Tell your creditors (the people and companies you owe money to) as soon as you have problems. Don't ignore letters or demands. The earlier they know about any problem, the more sympathetic creditors are likely to be.
• Follow the action plan below. It'll help you to see where you stand and give you the information you need to talk to your creditors.

ACTION PLAN

Step 1:

How much do you owe?

List all your financial commitments and when they are due. Some debts can cause more trouble than others can. These are priority debts. You must deal with these first.

Priorities

• Any rent you owe as you could lose your home. Do not simply hand in the keys to your landlord and walk away as you will still have to pay the rent that you owe.
• Council tax arrears as you could land up in court,or bailiffs could come and take your possessions away.
• Utility bills like electricity and gas, as you could be cut off.
• Court fines as there could be serious penalties if these are not paid.

Step 2:

What is your income?

Find out how much money you have coming in. Work this out on a weekly or monthly basis. Include your pay, any benefits and money from other sources.

Are you receiving all the income you are entitled to? Check with your local Social Security office, Citizens Advice Bureau, or look in the Benefits chapter to see whether there are any benefits or tax credits you could claim (tax credits are relevant for young people who are responsible for a child, or have a disability).

Step 3:

What do you spend?

Work out your essentials like rent, fuel and food, again on a weekly or monthly basis. Don't forget occasional payments like haircuts, and include things like cigarettes. And remember any payments you make on hire purchase or credit arrangements.

Step 4:

Still more going out than in?

If you spend more than your income, can you make savings anywhere? Divide up your essential outgoings from other extra expenses like clothes and repairs. Try to cut down on things like alcohol, cigarettes and eating out. You'll have to make sacrifices. Can you get an extra part time job for a while? Is there anything you can sell to bring in extra money to pay your debts? But do not sell anything on which you still owe money.

Step 5:

Talk to those that you owe money to (your creditors)

• Explain to them how much you can afford. Don't make an offer to them that you can't afford. A small but regular payment is better than no payment at all, or one that you can't keep up.
• Deal with priority debts first. Concentrate on keeping a roof over your head. You can then decide how much you can give any other creditors you have.
• If the first person you speak to in the creditor's office is unhelpful, be persistent and go higher up. Make payments to the creditor anyway, even if they say the offer is too low. The company may be a member of a trade association. Look on any headed notepaper received from the company. You can complain to the association if you have not been treated sympathetically.

Don't give up.

• Keep copies of all letters you send each company and their replies. Make notes of any phone calls with the dates and the name of the person to whom you spoke.
• You must try to stick to any agreement made about reduced payments. If you have made any arrangements by phone, it is important that you follow this up with a letter stating clearly what has been agreed.

Borrowing again to get out of debt?

You may be tempted by newspaper and TV ads, or mailshots offering loans to pay off your existing debts. Some of these loan companies offer advice on debt problems. But you have to pay for the advice and they encourage you to take out another loan as the solution to your problems. These loans can be very expensive and you might end up worse off than before, so get independent advice first. Being offered further credit is no guarantee that you can afford the repayments.

Think very carefully before taking on further loans.

Harassment from creditors

Creditors are entitled to keep reminding you from time to time if you do not pay, as long as they don't resort to improper methods. It is illegal for anyone who has lent you money to keep demanding payment, for example, by phoning you late at night, or too frequently at home or work. Neither should they park a van marked - debt collectors' outside your home, nor contact your employer. You can't be prosecuted in the criminal court because you haven't paid your debts. Some lenders, however, might try to make you think you can. If you are being harassed tell the local trading standards department or the police.

Getting advice

If you can't tackle your debt problems yourself, you can get free advice from a Citizens Advice Bureau. If you can't find an advice agency, your local trading standards department may be able to put you in touch with one.

If they want to take you to court

Hopefully, by talking to your creditors and following the steps mentioned above, you will avoid being taken to court. Most creditors don't want to take court action. It's used as a last resort. Don't ignore the court papers. Fill in the forms which you receive with the summons as soon as possible. Send them back to the court or the creditor, as instructed. Again, your Citizens Advice Bureau can help you with this.

You'll be treated fairly by the court. You can only be sent to prison for non-payment of certain debts, such as tax and maintenance payments, and then only if you have the money to pay but choose not to.

Always seek help after receiving a summons

Citizens Advice Bureau and law centres can help you fill in the forms and explain the steps involved.