Finding your way out of a debt crisis

Debt levels in the UK are at crisis point. With in excess of 60 million credit cards in circulation in the UK alone it is no wonder that in the last 10 years we've seen debt levels soaring and bankruptcies at their highest levels since records began in 1960.

This means that more and more people are lying to their spouses and loved ones, turning to alcohol or even gambling to solve their problems. Many I see are suffering from depression and contemplating committing suicide, so what can be done to ease the burden and start to regain control of our finances? Debt wizard Mike Thomas offers some easy and practical advice.

1. Make a list of how much you owe, establishing what is secured, such as mortgage or loan secured against the house, what is hire purchase, normally for a vehicle and what is unsecured, usually credit cards, personal loans and store cards, not forgetting the bank overdraft or any purchases that you have with interest free credit such as furniture.

2. Now draw up six columns on a sheet of paper, in column one detail the name of the lender and amount outstanding, column two whether it is secured, unsecured or HP, column three the amount repayable each month, column four date the loan agreement ends, this will be the date of the last payment and can be very useful when budgeting, column five the interest rate applicable to that particular loan and column six put the name of the borrower, i.e., your name, partner's or joint where applicable. This is because if you were to seek professional help then the information is all there, on paper.

Now complete an income and expenditure / budget planner, this is another sheet whereby you detail everything you are spending every month but it does not include your unsecured creditors only your secured ones. You need to consider, mortgage/rent, utility bills, insurances, housekeeping etc: these forms can be downloaded free at

Next step is to detail your income, this is your regular salary without overtime, also include any other allowances, such as family tax credits or family allowance and partner's income if applicable.

Now the interesting bit, subtract your outgoings from your income and see what surplus income you have, this is the figure you are left with to pay those unsecured creditors as described above. For example if payments to your unsecured creditors total £770 per month and your budget form details you only have £370 per month then you have a problem, you are £400 short every month, that's £4,800 per year. You are in trouble.

What to do if in trouble

If your debts are £20,000 and upwards then there are alternatives such as in Individual Voluntary Arrangements, IVA's. For other debts you could also consider a Debt Management Company, DMC, but beware; DMC's can be expensive as most charge a fee of around 17% of your monthly payment towards your plan. More details on IVA's and DMC's can be found at

Action plan

Can you obtain a better deal somewhere else on the interest rate or move your credit card debt to another company that is offering a nought or lower rate; would your current card provider offer you a better deal? As with any debt it is more beneficial to clear the highest interest rate first as that form of credit is costing you more money. It might be that you need to take further action such as the following;

1. Stop using the credit cards, store cards, if need be lock them away.

2. Check the status of your bank overdraft, are you being charged for an unauthorised overdraft, this can be from as much as £35 to over £100 per month.

3. Go through the income & expenditure form, note areas where you can make savings, you may well need to be hard with yourself.

4. Consider contacting the lender to see if they will help re juggle the payments for a certain period.

5. If you are so overwhelmed and cannot cope then contact one of the agencies on my website who help FREE OF CHARGE, remember you have already done most of the hard work by completing the forms. If you want an assessment from myself then complete the budget forms on my website and email them in the strictest of confidence to

6. Finally, the best tip of them all, if you don't need it, can't afford it, then don't buy it!

In the preparation of this article, every effort has been made to offer the most current, correct and clearly expressed information possible and it is intended to afford general guidelines on matters of interest. Accordingly, the information in this article is not intended to serve as legal advice. Therefore, no responsibility can be accepted by, for any loss occasioned by a person acting or refraining from, acting on the basis of this article. Users are encouraged to consult with professional advisors for advice concerning specific matters before making any decision.

Mike Thomas January 2008
 Copyright 2007 limited

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