Having debt problems is not a nice situation to be in but taking positive action to deal with it can make things easier and importantly provide a little peace of mind.

It’s easy to run away from debt problems or bury your head in the sand, but the problem is not likely to go away and will probably only get worse if you do not choose to deal with it.

First thing to do is sit down and calmly look at your situation. Look at who and where you owe money and write it down. The money owed will be to your ‘creditors’. Next thing is to group your debts in order of importance between ‘priority debts’ and ‘non priority debts’. Your priority debts will be the most important as they will be the ones that could result in action being taken against you if you fail to pay.  Priority debts are things such as mortgage repayments, rent, taxes and payments ordered by the courts: if you don't sort these out, there's a possibility you could lose your home or go to prison. Non-priority debts include credit card payments, bank loans, catalogue repayments and money you've borrowed from family or friends. You can't ignore these, but you don't need to deal with them as a first priority.

OK so you have highlighted exactly what you owe and prioritised, now you need to look at your incoming and outgoing expenditure this will form your ‘personal budget’. Your incoming will be any money that your have coming in and your outgoing will be the amount of money you need to live on.  Your budget will show how much money you can afford to commit to paying off your debts. It may also show you where you can save money. Make sure that you are totally honest and realistic when working out your personal budget.  If you need help with working out your personal budget you can get advice and help from the National Debtline or use the FSA’s online ‘Moneymadeclear’ budget calculator.

Once you know what you can afford, you can talk to your creditors about your situation and what you're going to do about it. Offer to pay each debt off in a way you can afford - it's important not to offer to pay more than you can afford, and not to assume you'll be able to pay more in the future. It's important to follow up a phone call with a letter confirming what you said and agreed.

You may have little or nothing left to offer your non-priority creditors. You should still talk to them, explaining the situation; you may be able to tell them that you will pay them back at some point in the future - but don't make promises you can't keep.

There are many organisations that offer free, independent advice on debt problems, so you don't need to use companies that charge. Organisations that give advice are the Citizens Advice Bureau, National Debtline and the Consumer Credit Counselling Service. You can also try your local authority who might offer a free debt counselling service.

If you're being threatened with legal action, you can check the Community Legal Advice website to see what your legal rights are. You may also be entitled to free and independent advice from your local Law Centre.