COMMENT
The Warning Signs Of Unmanageable Debt

A thought that frequently crosses my mind when someone new surfaces on our Dealing with Debt discussion board in a panic is 'Thank Heavens they've recognised they've got a problem'.

For some, the debts are manageable and with a bit of cutting back here and some credit card shuffling there, money can be freed up to tackle the debts properly instead of the borrower limping from minimum payment to minimum payment each month. For others, it's too late and the only solution is quite clearly bankruptcy (there seem to be quite a few of those these days).

And then there are those in between who, in my view, actually have the hardest task of all ahead of them. They're the ones who have to write to all their creditors, providing them with details of income and expenditure showing very clearly how much they can afford to pay each month and asking them if they will please freeze the interest and accept reduced payments.

In an ideal world, creditors would willingly agree to the proposed course of action but not all of them do. Some ignore the fact that you owe money to other people and instead make impossible demands on the amount of cash you have going spare each month. In some cases, the debts have already been passed on to debt collectors who also aren't always as understanding as they could be and the words 'court' and 'bailiff' start cropping up with alarming frequency.

That's when the debtor needs to go to one of the free debt advice agencies such as the Consumer Credit Counselling Service, Citizens Advice or PayPlan who tend to have more luck with the tougher creditors. But you get put on a debt management plan and have to account for your money each month which, while it's a relief to have someone sort out your finances for you, can be a bit of a pain.

If you want to avoid all of the above, it's important to recognise when you're heading for the deep do-do and, to my mind, any of the following are the red flags to watch out for:

• When you're spending more than 20% of your monthly income on meeting non-mortgage debts.
• When you can only ever afford to make the minimum payments on your credit cards.
• When you're beginning to rob Peter to pay Paul.
• When your total non-mortgage debt amounts to more than your annual income.
• When after meeting all your monthly expenses you have nothing left over to save.

If any of those red flags apply to you then it's time to scoot along to our Get Out Of Debt centre to find out what to do about it. And don't forget our Dealing with Debt discussion board.