Prioritize your debts
Put your debts in order of importance, bearing in mind that the priority debts aren’t necessarily the biggest ones. They’re things like mortgage repayments, secured loans, rent, utility bills and taxes, where you could lose your home, be disconnected from a service or even go to prison if you don’t pay.
Next look at your unsecured debt. That’s typically things such as credit card and store card payments, bank loans, overdrafts, and money borrowed from family and friends. These debts are still important and may carry higher interest rates. So, they may have greater potential to grow. They aren't priority debts, but they shouldn't be ignored.
Work out a budget
Arrange an accurate weekly or monthly budget. This will show your income, household spending and debts. It may also show where you can save extra money which can go towards the repayment of your debts. Learn more about budgeting.
Some debt management companies may negotiate with your creditors on your behalf to reduce the payments you make overall. You make one payment to the company, which redistributes it among your various creditors. Debt management companies may charge a fee for this service. However, various national charities and debt advisory services might offer free debt management plans. Check to see if this is the case in your region.
Support your offer by explaining why you’re currently unable to keep up with full payments. Attach a copy of your budget and a list of your other debts. This helps the creditor see that you’re only spending on essential living costs, and that the offer you’ve made is fair given what you owe other creditors.
Your creditors don’t have to agree to your debt repayment plan. If you can’t afford to pay more than you’ve offered, continue paying what you’ve offered. If you can afford to pay more, you could agree to pay extra. This may help creditors see that you’re working towards paying off your debts. They may be more willing to agree to your repayment plan or stop adding extra charges.
Formal agreements are another way to resolve outstanding debts. There are various options, although not all of them may be suitable for your situation or available in your country. They include:
Also consider the following: