By Steve Quinn Money Advice Association debt adviser

Inevitably, some of us will get into difficulties, typically due to a change in circumstances such as a relationship breakdown, unemployment or illness.

Contact your creditors, tell them you are having difficulties and let them know

Credit becomes debt when you can't meet the contractual payments without further borrowing.

Realising this can be a shock, some people panic or try to ignore the problem - this is not a good idea as they can end up in the courts or worse.

First steps

Admitting there is a problem and that you need help is an important first step.

STEVE'S FIVE RULES

Don't ignore the problem Define income and expenditure Deal with priority creditors first Do not pay for debt advice Courts can help, not hinder

Read a Q&A about dealing with debt

Before embarking on your debt action plan contact your creditors, tell them you are having difficulties and let them know why.

Confirm how much you owe and that you will be back in touch once you have worked out what you can afford to pay.

Let things drift and you are likely to default and be blacklisted for future credit.

Consolidation risk

Many people's first instinct is to take on more debt. The credit industry calls this a consolidation loan.

Make sure you deal with your priority creditors first - those which could lead to you losing your home, liberty or fuel supply

Think carefully before doing this. Can you really afford the new repayments?

It may make things worse rather than better.

Most consolidation loan firms will seek to secure such loans on your home, which could put it at risk.

Financial statement

Before making any move to tackle your debt, you need to get an accurate picture of your income and outgoings.

Compile a weekly or monthly personal financial statement.

And if your outgoings exceed your income:

• Check you are getting all the benefits you are entitled to - all reputable money advice agencies will do this (you should not have to pay for this advice)

• Review expenditure - see if you can cut down, but avoid doing this to basics like food, gas and electricity - and remember you need enough to live on, not just to survive on

Send your creditors a copy of your financial statement, making it clear what you can afford to pay them.

Sort your priorities

Make sure you deal with your priority creditors first - those which could lead to you losing your home, liberty or fuel supply.

Do not ignore bills or court letters

Once you have dealt with your priority creditors, write to all your other creditors.

Distribute any available money fairly - make the offers relative to the size of the debt.

Be realistic. Remember you may have to maintain these payments for some time.

Smaller but regular payments are preferable to unrealistic offers, which you cannot sustain.

Nothing to offer?

Whilst you should aim to make offers of payment, this may not always be possible.

If no money is available but positive change is expected, such as a new job, ask if you can freeze your account for three or six months.

If the money you have available is small, offer token payments to each of your creditors, even �1 or �2 a month can sometimes be acceptable.

Creditors recognise some people will never be able to repay their debt and make provision for 'bad debt'. Some debts are written off, although creditors are reluctant to do so.

Court action

Debt can end in court action.

Remember court is not there to punish debtors - it is an arbiter, a referee.

Even if you have a County Court Judgment made against you and your debts are under �5,000, you can request an administration order.

Under such an order the court will work out what you can afford to pay and then administer your debts for you.

Unfortunately, you may find yourself dealing with debt collection agencies but they have no more power than creditors.

Remember they will almost always need to take court action before being able to carry out any of their threats.

Above all else when dealing with debt, stay in control. Even if circumstances deteriorate, review your financial statements and if necessary amend offers to creditors.