For some, talking about their debt problems can be difficult and embarrassing. Many of my clients tell me they feel they have failed and have let themselves and their family down because of their debts.

At some time debt may affect us all. Those who find themselves financially overstretched may have had a trigger point in their lives, such as redundancy, illness or separation from a loved one that started the cycle of debt. It often seems that whilst those in debt may have a talent somewhere, it may not be in money management.

Whatever the reason for the problem, you need to understand what help is available if you are financially strapped. My biggest problem with the debt management industry has been that sometimes the debtor/borrower is only told of one option, the one that earns the fee for the firm contacted for help. However I am pleased to say that this is becoming less prevalent due to improved regulation.

I have detailed below the six options available to you when debt problems arise. Not all will apply, it depends on your level of debt, your assets and how much spare money you have after paying essential bills.

1. Do Nothing

Stay as you are and ignore the creditors. This will guarantee your debt will increase and creditors will instigate Court proceedings to recover their money. This is often done through an attachment of earnings, where the Court orders a sum of money to be deducted from your pay every month until the debt is cleared.

There could also be a County Court judgement, known as a CCJ, with the lender making an application for a charging order on your property, if owned, to secure the debt. Finally of course there is the creditor making you bankrupt.

2. Informal Arrangement

Here you contact the creditors and explain your circumstances requesting that they freeze interest and charges and you offer reduced payments. If you get nowhere or feel too stressed doing this then you could consider option 3.

> More on our DIY guide

3. Debt Management Company (DMC)

Employ a DMC to do the negotiating with the creditors for you. The firm will act as a go-between for someone who owes money (the debtor) and the lenders (creditors) to whom the debtor owes money.

The DMC contacts the creditors on behalf of the debtor and draws up a contract between the debtor and his or her creditors. Once the contract is ready the debtor pays the DMC monthly payments and they in turn distribute payments to the creditors. There is a charge for this no matter what DMC you use.

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