When you’re in debt, dealing with creditors threatening to bankrupt you or send the bailiffs round can be frightening. A lot of people turn to debt management companies just to ‘make the hassling men go away’. But why pay money to do something that you can do for free? Here’s the easy guide to getting them off your back!

• How to deal with your creditors step by step
• Where to get debt advice

How to deal with your creditors step by step

Step 1: Prioritise

Some debts are more important than others. The bills you MUST pay each month are:

• mortgage or rent
• Council Tax
• utilities (gas, electricity)

Pay these first, even if you have to make different payment arrangements with the companies. You can pay other debts over the long-term.

The credit card companies will hassle you and send you nasty, threatening letters but they have relatively little power. They bank on the fact that most people don’t know this and will cave in to pressure.

However, if you don’t pay your Council Tax, the council could make you bankrupt. Firstly, though, do find out if you could get Council Tax benefit. If you are on a very low income, whether you work or not, you might be eligible. There are details on how to find out if you could get Council Tax benefit on the Directgov website.

So…

1. If you can afford it, make sure that your mortgage/rent, Council Tax, electricity and gas bills are paid.
2. If you are struggling with these, see if you can get them reduced – i.e. get Council tax benefit, speak to your mortgage company to restructure your debt so that you pay less each month, switch your gas and electricity to a cheaper version or, if you can’t do that, speak to your providers and see if they can help in any way.
3. If you have money left over, that can go into paying your other debts.

Step 2: Communicate

Don’t ignore creditors. It may be horrible, even terrifying, but the least painful and cheapest way to deal with them is to keep communicating. Think about it – if you lent money to someone and suddenly they stopped paying you back, didn’t return your phonecalls, ignored texts, emails and letters and generally went completely silent, wouldn’t you worry? You would probably be even more persistent in trying to get hold of them.

That’s what it’s like for the banks and credit card companies. If you don’t pay and you don’t communicate, they worry.

So contact your creditors before they contact you. Write to them or phone them explaining your situation and showing what you are doing to pay off your various debts. Be polite and respectful and keep them abreast of your situation and everything you are doing to pay the money back. If you phone, make sure you follow it up with an email or letter detailing the points you covered in your phone conversation.

Learn their language. As in so many areas of business, if you know how the other side are thinking, and the words that press their buttons, you will get on much better. If you want help with this, contact one of the free debt advice agencies (see below) and ask them to help. They know exactly how to speak to creditors and they will either help you do it or do it for you.

As long as you show that you’re honestly trying to sort things out as best you can, many creditors will accept an offer of much smaller payments and may even suspend the interest charges. In other words, you can do your own personal arrangement with your credit card companies and banks. It’s the sort of thing that debt advice companies say they will do for you for a fee, but actually you can do it yourself or get one of the charities below to help you with it.

Subscribe to our free debt action plan emails for more advice and sample letters to creditors.

Step 3: Beat your creditor’s tactics.

Credit card companies, banks and loan companies can do very little to harm you. What they’re good at is making your life miserable by threatening you and pursuing you. As many consumers believe lenders, government agencies and landlords have the power to throw you and your family on the street, this often works for them. Actually, they usually don’t – at least not at first.

Don’t be intimidated by demands for payments that you can’t afford, or threats to send the bailiffs round. Creditors can do nothing without a court order, and that includes coming into your home to take away your possessions. They know this but they count on your ignorance and hope to intimidate you.

It’s particularly important to know the rules when it comes to Bailiffs. As you can see from our article on what to do if the bailiffs knock on your door, they can’t force their way in. Just be careful not to open the door to them or have any other entrance open that they could use.

Step 4: Know your rights

The Office of Fair Trading decrees that debtors must be treated fairly, free from harassment. If creditors become really nasty, you should report them to the OFT for breaking those rules. If private debt collectors arrive on your door step without an ‘execution warrant’ issued by a County Court, deny them entry and report the firm and the creditor to the police: they are breaking the law. That’ll shut them up for a bit.

Get advice

Use charities that offer free advice and will help you organise a debt management plan. Any of the steps above can be done with the help and support of one of these free organisations. Don’t pay for help – the paid ‘advisers’ are often not as good as the free ones anyway.

• Citizens Advice Bureau (CAB), provide free, confidential and independent advice from thousands of  locations in the UK
• Consumer Credit Counselling Service (CCCS) a charity offering online debt remedy  service and free debt advice
• Creditaction.org.uk a national money education charity
• Christians Against Poverty a national, free advice service run through local churches
• Nationaldebtline.co.uk – the website has some useful sample letters for writing to creditors and a free phone number
• Payplan.com - free debt management company that make repayment arrangements and debt consolidation
• Adviceuk.org.uk - the largest support network for free, independent advice centres in the UK
• Legal Service Commission - offers free legal information

These organisations can do everything from helping you create a budget to negotiating with your creditors and dealing with legal issues. Even if you have to wait for help (they are all in high demand) it’s still worth it.

Here at Moneymagpie.com we also offer lots of free advice to help you organise your finances and start making a dent in those debts. Learn how to detox your finances and read our guide to beating your credit card balance. You can also sign up to our free debt action plan e-mail service.

Make sure you are also signed up to our free weekly newsletter which always has handy articles to help you save and make money every day.

Useful links:

• Citizens Advice Bureau
• Office of Fair Trading
• Consumer Credit Counselling Service
• Christians Against Poverty
• Nationaldebtline.co.uk
• Payplan.com
• Moneymagpie debt action plan emails