Debt Crisis - 4 Avoiding Sharks

A number of the charities will be the intermediary for a debt management plan, and this can take many different forms and, if you are happy with a proposal, is it the least costly and least strenuous way for you to meet your new obligations.

You might even agree plans with your creditors and then ask one of these charities to administer it, which usually means they accept a single payment from you each month and distribute it, according to the agreements, to your creditors.

I think almost all of them will tell you you will not get a debt written off. As general advice this is undoubtedly true. But it is an example of individuals not understanding your case. If it is good enough you will indeed get debts written off, or put on hold.

It did happen to me and so I can state it categorically, not as theory. But all creditors work to their own patterns and most of them will try to keep pressing at you, one way or another, to pay up. There are rules and regulations for them to comply with and these should be understood when you correct their behaviour. I cover this in my book.

Two other areas to apply extreme caution to are suggestions for consolidation of debt. By and large if you are having trouble servicing the current debts it is a bad idea to change horses in mid stream. You at least want to check the state of the new horse, the new terms, the fine print over penalties and the interest rate throughout the loan. And then compare it with what you already have. Within the formal credit industry you at least have some protections if the agreement breaches any rules.

But the area to avoid most of all is street corner loans, where the interest rates are astronomic and the lenders are unlikely to be part of the formal industry. I hope you dont even need to be told that.

And then there is family support. Often this help is offered with the very best will and intention. Over time this can change and cause upsets that make for great difficulties. Even if a family member or members does help you it is up to you to make clear what the agreement between you is and to make a formal document of some sort so you both, or all, know exactly what your obligations are and what the lender expects.

Dont leave it to chance and a handshake. It will probably take you years to sort out your debts, and both you and they need to be clear about how the loan is to be repaid, or left to be dealt with later. It is a grim thought, but remember too that the person who owns the debt later may not be the one you borrowed from. Something in writing is your best explanation of what was agreed.

If you manage to sidestep the shark threat you are probably set fair to solve the problem with your head held high and congratulations for your skill replacing the original How on earth did you get into such a mess?.