Herald guide: Get out of debt in 2009

PUBLISHED: 12:51 06 January 2009 | UPDATED: 22:49 15 June 2010

AS Britain's economic woes look set to continue, you may have needed more than liver salts to cure your New Year hangover.

AS Britain's economic woes look set to continue, you may have needed more than liver salts to cure your New Year hangover.Hundreds, if not thousands, of people across East Devon and West Dorset woke up on New Year's Day to the stark realisation that their debts are getting out of control.That's why your Herald is today urging those in debt not to ignore bills they can't pay and to take a proactive approach to tackling financial worries.We've contacted the UK's leading debt advice agencies to help you start 2009 on the right financial footing.The Citizens' Advice Bureau (CAB), which provides free, impartial advice to individuals and small businesses, says: "If you are in debt, don't panic. But it is important to do something, because the problem won't go away."Don't ignore calls or letter from the people you owe money to (your creditors). Contact them to explain why you are having problems. Most will be more helpful if you approach them first."Make a list of all the people you owe money to - then work out which are priority debts."A priority debt is one that could have serious consequences if unpaid," says CAB. "Not paying your rent or mortgage would leave you homeless, or not paying your gas or electricity bill could leave you being cut off and taken to court. Non-priority debts are ones which have less serious consequences if you don't pay them. They include things like overdrafts, loans, hire purchase, credit card accounts and catalogue debts. However, your creditors may take you to court."Once you have decided which are priority debts, work out how much you can realistically afford to pay back. To do this, you will have to make a list of all the income and expenses for your household.CAB says people should check their incomes and see if there are any benefits or tax credits they are entitled to but not yet claiming."Look carefully at your spending and see if there is anything you are able to cut down on," CAB advises. "For example, you could shop around for a cheaper gas or electricity provider, or look at cheaper mortgage or insurance providers."When you have worked out how much you have left over after paying your expenses, contact each of your priority creditors. Show them your budget and try to make an arrangement to pay back what you owe."If you can't afford to pay anything to your priority creditors and your situation isn't likely to get better, get advice straight away."How you deal with your non-priority debts will depend on whether you have any money left over.Be careful about taking out further loans to pay off existing debts.National Debtline offers a comprehensive advice service - covering everything from how to make pro-rata offers of payment, free debt management plans, information about bankruptcy and individual voluntary arrangements and even administration orders.It also offers sample letters for people to use when writing to creditors.A number of Herald readers have contacted us to say they are being hounded by credit card companies, some receiving up to 10 phone calls a day - even at work. Is this happening to you? Call us on (01392) 888488.

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