When financial disaster strikes few people are financially prepared. Be it losing your job or being forced to file for bankruptcy or a debt arrangement it can take months or years to claw your way back to financial stability.

Key to getting back on your feet is to ask for help. Simon Trevethick, head of communications at debt charity organisation StepChange says most of their clients wait a year before contacting them. “We would advise people to get help as soon as they see the warning signs or are struck by an unexpected disaster such as a job loss. Our instinct is to go it alone, but it is usually just papering over the cracks and ends up making things worse. Covid and the cost of living crisis has pushed more people over the edge and there are currently some 3 million people living with problem debt in the UK.”

Bayla Perrin chief executive of Paperweight charity which helps people with paperwork says key is: “Being open and honest with whoever is helping. Holding back key information can prejudice the outcome of any negotiated outcome or backfire in regards applications for temporary or permanent grants and benefits to which you may be entitled And do not go silent on those you have engaged to help you, they need to keep you informed and to enquire information from you."

If you are struggling, contact your local Citizens Advice (citizensadvice.org.uk) or organisations such as Paperweight (paperweight.org.uk), National Debtline (nationaldebtline.org) or StepChange (stepchange.org) which offer free advice to people in debt. Avoid paying debt management companies if you can, as these will only increase the overall burden with their fees.

You’ll need to write an honest list of your income and expenditure so you can see if there are any areas that can be trimmed back, what you can afford to repay each moth and the extent of the shortfall. The debt agencies will be able to help with this and offer online tools. Then you need to prioritise your bills - making sure you pay the critical ones, such as your mortgage or rent. If you can, contact the people you owe money to as soon as possible to alert them to your financial situation and see what arrangement you can come to. While you work out your financial situation and a plan to reset your finances, you can apply through these organisations, for ‘Breathing Space’ (or a Debt Moratorium Period in Scotland). This government backed scheme gives a 60 day break from debts attracting fees, interest or court action.

There are a number of longer term debt solutions, and it depends on your personal situation, how much and the type of debt, as well as your ability to repay, as to which one is most suitable. Your credit rating may be affected for up to 6 years after, which will make getting new debt difficult. Alternatively look at debt consolidation loans, remortgaging or equity release which won’t affect your credit rating if you keep up the repayments.

The main debt relief schemes include:

* Debt Relief Order, which allows you to pay back what you can afford each month and writes off all unpaid debt after 12 months if your situation has not improved.

* Arranging a repayment plan yourself with creditors based on what you can afford each month.

* Debt Management Plan, allows you to repay what you can afford to creditors via a single monthly payment to your debt advisor which distributes the payment on your behalf.

* Individual Voluntary Arrangements allow you to agree an amount to be paid to your creditors which is then repaid either as a lump sum or over 60 or 72 months. After this the debt is written off.

* Bankruptcy typically allows you to write off all your debts if you do not have any means of paying them back.

Case study:

David Davensac was comfortably managing his £50,000 of unsecured debt until he was made redundant from his job as head of training at the beginning of the pandemic lockdown in 2020.

“I know it was a lot of debt on credit cards and loans, but I overpaid each month and was paying them off before the interest free period ended so it wasn’t a problem. As it was early days I didn’t qualify for furlough, but thought I would get another job quickly. I spoke to my lenders immediately who gave me some leeway. But after two months of no job offers I contacted StepChange via my local Citizens Advice as it was beginning to affect my mental health,” says David, 55 who is now medically retired.

StepChange helped him set up a Covid Repayment Plan, for the next 12 months while he found work. Unfortunately when the year ended he was still out of work. He then moved onto a Debt Relief Order paying £240 a month to StepChange which then redistributed the money to his creditors. This ended in December 2022 and he is now debt free.

David says: “My message to others is swallow you pride and ask for help from the experts. They helped me take advantage of all of the benefits I was entitled to and spoke to the lenders on my behalf. I was getting overwhelmed with all the forms I had to fill in.”