Being in serious debt is a horrible experience which can totally dominate your life, so it is important to take steps to change your situation as soon as possible.
The important first step is to seek help, as the problem will definitely not go away without you actively addressing it yourself.
You do not have to know all the answers in order to change your situation, but it certainly helps to have an understanding of the main processes for dealing with debt, so that you know where to go for help and what to expect.
That is what this article is concerned with.
When your debts are such that you can not keep up with the repayment terms you have agreed with your creditors, you need to engage with the people you owe money to in order to come to a new arrangement for settling the debt.
If you are genuinely unable to repay what you owe, it is possible to negotiate with creditors to settle the debt for considerably less than the full amount.
Creditors will accept less than you owe if they believe that the amount offered is the most they are likely to get.
They are unlikely to settle if it is clear that you could actually afford to pay them the full amount.
Debt settlement negotiation is well established process in the US, which involves using a skilled negotiator to persuade your creditors to write off a substantial part of your debt.
This frequently means that you end up repaying less than half of what you really owe.
In the UK there is no debt settlement industry as such because debt companies can offer a scheme set up by the government, called an IVA.
This is a formal arrangement which has a similar end result to debt settlement.
You make payments towards your debts for a fixed period then the rest of your debts are written off.
Assuming your debts are serious enough for debt settlement (or an IVA) to be the appropriate solution, the main choice you have to make is whether to use a debt settlement company to help you, or to undertake the negotiation yourself.
It is perfectly possible to negotiate with creditors yourself, but you will need to have a good understanding of the processes involved if you are to achieve the same kind of results as a professional.
Most of us do not have this kind of knowledge and understanding already, but there are many sources of guidance and help that can take you through the whole process.
The advantage of such guides is that they cost a lot less then you would need to pay to a debt settlement company, so you maximise the savings that you manage to negotiate.
You will need to take care over which guides you use as there are many available online that will not really give you the kind of detailed help and assistance that is necessary to achieve the best results.
If you are not comfortable with the idea of undertaking the negotiation on your own, there are quite a few very good debt settlement companies that will do this for you.
They will want to be paid for the service they provide, but the good ones will only take a proportion of the amount they manage to get written off for you.
This is important as it means that you cannot end up worse off than you were before, and it reflects the fact that such companies are confident about the results they will achieve.
The advantage of using a well established company, apart from the obvious one that they do all the work, is that they have more leverage with your creditors because they will be negotiating with them on behalf of many other people who also owe them money.
This means they can negotiate collectively and achieve a much bigger write off.
Some of them will also offer guidance and advice with managing your finances and budgeting, to help you prevent getting into debt in future.
They way it works with a debt settlement company is that you put money aside each month in a separate account, instead of paying any of your creditors.
The company work on the negotiations and when an agreement is reached they use the money that has been saved up to make the payment.
If you do decide to look into using a debt settlement company, it is advisable to apply to a few different ones so that you can assess which is offering you the best deal.
Some deals, however, are too good to be true, and are likely to come from disreputable companies that could fail to deliver results and leave you worse off.
You can avoid such organisations by using only companies that are recommended and known to have a record of success and high ethical standards.