Debt can, of course, be caused by irresponsibility on your own part or changes in your circumstances-llness, accident, unemployment, etc. -which are beyond your control. In any case, you may face anxiety and depression caused by the debt - not to mention pursuit of the debt by your creditors, or debt collection agencies acting on their behalf - or by the circumstances surrounding the debt. It is important, therefore, that you adopt a positive approach to debt and actually do something about it rather than burying your head in the sand and hoping that it will go away of its own accord.

Debt Solutions

One instantaneous solution to debt of any level, may be the acquisition of a sum of money - from a win on the National Lottery or some other form of gambling, or, say, from an inheritance - unexpectedly. This is only likely to apply in a tiny minority of cases, however, and is hardly a reliable or practical solution to debt; indeed, if you are already in debt, gambling can exacerbate an already difficult situation and cannot be seriously recommended. There are, however, a number of different debt solutions - informal and formal legally binding solutions - which are practical and may be applicable to you, depending on the nature and total extent of your debt.

If your credit rating is still reasonably good, you may be able to consolidate your finances by taking out an unsecured, or secured, loan; a secured loan requires collateral, usually in the form of your home. A consolidation may allow you to settle outstanding loan or credit card commitments and replace them with a single monthly repayment - for a lower amount, but over a longer repayment period - thereby reducing your monthly outgoings and avoiding the high interest rates charged by some credit card companies. Do bear in mind, however, that your home may be at risk if you cannot keep up the monthly repayments on any loan secured against it.

If debt consolidation is not a possibility, you may need to consider an informal DMP ("Debt Management Plan") or a formal IVA ("Individual Voluntary Agreement"). Both are agreements with your creditor(s), whereby your repay a percentage of your debt by monthly repayment, typically over a period of 5 years. The principal difference between them, however, is that an IVA is legally binding, whereas a DMP is not, meaning that creditors can request repayment in full at any time, despite the agreement.

If all else fails, bankruptcy may be the only remaining solution but should only be considered as a last resort. Bankruptcy involves placing your assets, and possibly a proportion of your income, in the hands of the Official Receiver so that your debt can be repaid in a sensible, structured manner. Your bank and credit card accounts will be closed, and restrictions will be placed on what you can, and cannot do, financially or otherwise, in future. In extreme circumstances, however, bankruptcy can allow you to become debt-free and start to rebuild your credit history in a relatively short period; first-time bankrupts are usually discharged after 12 months although restrictions may remain in place for a much longer period.