Credit Card Agreements Unenforceable

If you should find yourself in serious credit card debt you may feel as though you are the only person in this situation. You may think that no-one else appears to be having your problems. But you are most definitely not alone! Over 2 million others are in exactly the same situation and usually through no fault of their own. People get into debt for all sorts of reasons, including marriage break-ups, job loss or illness.

Once you get into the situation where you owe more than you can afford to pay back on your credit cards it can seem impossible to find a way out, but there are ways to get your head above and take back control of your life. There are various sources of debt assistance open to you, and the best route to take will depend on your particular circumstances.

Do NOT borrow more money to pay off credit cards debts unless you have seriously considered the alternatives available and decided that is the best course of action. With some assistance and advice you can assess your situation for yourself and perhaps put a plan in place that will not involve increasing your costs above what you already owe. Make sure any debt advice you get is unbiased and comes from someone who is not trying to sell you a service.

Never consider Debt Management Plans Individual Voluntary Arrangements, Consolidation Loans or (all of which will cost you money) Bankruptcy is the last resort. Go through the following steps yourself, which will help you get to grips with exactly the position you are in and what you may be able to do about it.

Step one - Write to your Lenders

You can't expect sympathy or understanding from the people you owe money to if they don't know you are having difficulties. Write to all your creditors. Explain why you are having problems and get them to confirm the details of exactly what you owe them. Template letters are available online for guidance from the many consumer forums on line.

Step Two - Prioritize your Debt

This is VERY important. When you receive replies from your creditors, you must place them into one of two categories, Priority Creditors, or Secondary Creditors. The priority you give to them is about the consequences of not paying them. It is nothing to do with how snotty their letters are or how loud they shout, it is about what will happen to you if you don't pay them first. These will include mortgages, secured loans and anything where not paying could result in the loss of your home, essential services or goods.

Step Three - Create a Budget Statement

In order to work out what you can afford to pay your creditors, you need to create a Financial Statement. This will not only tell you what you have left to pay people, but it will help to show your creditors, why you are not in a position to pay them at the usual rate. It is very important that you do NOT include your Secondary Creditors in this calculation, only your Priority ones. You must list all your income and all your expenditure for each month, which will show you what you have left to make repayments with.

Step Four - Make Offers of payment to Your Creditors

Now that you know how much you have left after making payments to your priority creditors, you need to work out what you are going to offer to your secondary creditors. The only way to be fair and consistent about this is to divide up your surplus income in proportion to the debts you owe. For example, imagine that your total debt is £10,000 and you owe Creditor A £5,000. This is 50% of your total debt, so Creditor A should be offered 50% of your available income each month. Write to each of your creditors and explain how much you can offer them. Ask them to accept this and waive any penalty charges. Follow this step by step plan and you should be well on the way to managing your debt without looking at more costly methods.