How much debt can you handle? The answer is different for everyone.  How you handle debt can affect you for a long time, so you should be aware of the advantages and pitfalls of debt.


Experts recommend no more than 15 – 20% of the monthly household income should be committed to credit card minimum payments excluding rent or mortgage, and no more than 40% of your monthly income should be paying of debts.


In order to determine amount of credit follow the following calculation.


Add up for 1 year divide by 12 to get monthly income.


Add all expenses calculate monthly cost (divide by 12), then subtract what you spend (expenses) from your (income) to determine how much you have left over.

Example £2,000 per month and you spend £1,500 you will have £500 left this could be to save or decide your borrowing power.


Employee Support Tony Davis 07813 596505 or office 01482 870577

If you are not sure how to resolve debt help is available.

  • Local Citizens Advice Bureau
  • Consumer Credit Counselling Service (CCCS) will provide a counsellor to act as a go between with creditors and arrange a workable pay plan. Tel 0800 138 1111.
  • National Debt Help line 0808 808 4000

Get help quickly, waiting will usually make your situation worse.

You have other options apart from contacting consumer services they are:


Using a neutral 3rd party to help you and the creditor open a line of communication and resolve your dispute.


You and the creditor may agree to argue a dispute charge before a neutral 3rd party (lawyer/judge).


Create a workable budget and negotiate with creditors to reduce your monthly payments and extend time to catch up on any missed payments.


  • Face up to the situation
  • Work it out
  • Ask the creditor for help
  • Set up a payment plan


Bankruptcy should be used only as a last resort. Make sure you understand the implications of being bankrupt.


A legal declaration of your inability to repay your debts, once you apply to the courts, all collection efforts against you stops. You are not allowed to take on any new debts, and the court will freeze your assets.  If your unsecured debts are less than £20,000 you will generally be discharged from bankruptcy after 2 years or 3 years.


Obtain forms from Combined Courts Hall, file the forms with the local court, this is at a cost. Instead of becoming bankrupt you might want to consider an administration order or an individual voluntary agreements.


If one or more of your creditors has obtained a court judgement against you, the county court may make an administration order.  Administration is a court- based procedure whereby you make regular payments to the court to pay towards what you owe creditors.  Your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly payments.  You do not have to pay a fee for an administration order but the court will take a small percentage from the money you pay toward costs.  If you do not pay regularly, the order could be cancelled and you may become subject to the same restrictions as someone who is bankrupt.  If your circumstances change and you cannot pay as ordered, you can apply to the court to change the order.  The court, which made the order, will tell you what to do.  Details of administration orders are available at your local county court.

DEBT PROBLEMS - Information Sheet

Uncontrolled debt is frightening often people keep these and other debts a secret because they are ashamed and fearful that friends/family or colleagues will judge them.   Often as a result of this secrecy these debts spiral further out of control due to increased interest charges, which leads to further anxiety pressure and stress, often known as the Ostrich effect, ‘if I don’t deal with it then it’ll go away.’

The information provided will help to alleviate the pressure and stress, allowing you to take responsibility for the debts you have incurred, and will help you to stay in your house, however if you fail to use the advice given you will continue to be pursued by your creditors and nothing will change.

Along with the above you will need to look at how you budget and spend the money you earn, as often people with debt adopt spending patterns which increase pressure and stress and often lead to further debt.

DEBT PROBLEMS - Information Sheet 1

1.        Steps to deal with debt

Establish how much money you have coming into your home weekly / monthly (whichever you prefer).

NB. This must be done honestly, a creditor who finds out you have been untruthful will never trust your figures and will constantly request verification of your Bank/Building Society accounts.

2. Work out your priority outgoing i.e.

  • Mortgage/rent
  • Council Tax
  • Water Rates
  • Gas
  • Electric
  • TV Licence
  • Maintenance
  • Court Fines
  • VAT/Income Tax/National Insurance
  • Hire Purchase


Once you have prioritised each of your creditors above, you will usually find that if contacted, they will have a department set up to help people to pay off their debts.

However before you make any approaches to your creditors above, you will usually find that if contacted, they will have a department set up to help people to pay off their debts.

However before you make any approaches to your creditors you must first fill out the income and expenditure form 2a) included.

3. Fill out your income and expenditure form.

Section 1: Income

Please note you have to be totally honest about how much money you have coming into your house.

Mortgage etc. each of these sections needs to be filled in accurately, you can not guess at these figures you must be totally clear and concise about these figures, as when they are added up these will be subtracted from your income so that you can then decide how much to offer your priority debts in No 3.

Section 2:  Priority Debt

In this section again you must be totally accurate with this information, remember this will be photocopied and sent to your creditors so that they can see you are being totally

Section 3:  Living Costs

As you can see there is a list of living costs starting with honest with them regarding your financial situation, (at this stage do not fill in the column ‘Payment Offer’ as there is a simple mathematical formula used to establish the amount you should offer for payment).

Section 4:  Non-Priority Debts

These creditors are normally loan companies / credit card Companies / or to your local loan companies / loan man.

Often these are the companies most difficult to deal with as They are sometimes quite insistent that the debt needs to be Cleared as quickly as possible, so you will feel pressured into making an agreement with them, often this agreement is unrealistic so don’t ring or contact these people until you are fully prepared.

Again preparation is they key to successful negotiation, you Need to fill in this column and be accurate don’t guess at the Level of your debt, ask each creditor to send you your total Debt in writing, once you have received this information Place it in the correct column. Again do not fill in the Column  ‘offer of payment’ as there is a mathematical     Formula used to establish the amount you should offer for payment.


First let us assume that following your income and expenditure statement you are left with £100 to clear both priority and non-priority debts.

First put 20% aside to make offers to your none priority creditors in this case you would put aside £20 as this is 20% of £100.00.

In this example you will then have £80 to offer your priority creditors.

So for example if you owe: –

1)     Rent arrears                    £600

2)     Gas arrears £300            Total debt £1700

3)     Council tax arrears £800


You follow this mathematical formula to work out how much to offer.

Amount available £80 x the debt £600 ÷ total debt

£1700 = offer.


In  this example you would offer  = £28.23  Rent

£80 x £300 = £24,000 ÷ total debt £1700 = £14.12 Gas

£80 x £800 = £64,000 ÷ total debt £1700 = £37.65 C.Tax


You then offer the rest of your non-priority creditors a token offer of say £5, with a promise the review once the priority debts are paid.   Once the priority debts are paid then we apply the same formula to non-priority debts.

National Numbers

Step Change

0800 138 1111


Job Centre


Free advice on debt based on what’s best for you – 0800 138 1111 www.stepchange.org/


0808 802 2000


Regional Numbers


Citizen advise bureau – 01482 224608

Council – 01482 300300


Citizen advise bureau – 01582 486632

Council – 01582 546000


Citizen advise bureau – 0844 826 9713

Council – 01942 244991