However hopeless the situation may seem, there is always room for negotiation.
"Once the simplicity of negotiating with creditors is pointed out, some people positively thrive on getting to grips with their problems," says John McQueen, founder of The Bankruptcy Association. "One member of the Bankruptcy Association promptly came to sensible arrangements with all his 68 creditors - a remarkable achievement."
Debt counselling agencies take a systematic approach. The councel drawing up a business budget, listing average monthly receipts against costs.
Work out how much you pay monthly on essential living expenses, and take your total outgoings from your total income to calculate how much is left over each month to pay creditors.
Don't be an ostrich, advise the debt counselling agencies: negotiate instead. "Try to make an arrangement to pay," counsels Business Debtline. "Use your business and household budget to support your offer, and start paying what you can afford, no matter how little, whether they agree to your offer or not."
Priority debts, which can lead to a prison sentence or bankruptcy, must be paid first. "It is amazing how many people pay off less important debts first," notes McQueen. "This is usually due to the methods employed by non-priority creditors. For example, they will use telephone calls or threatening letters to pressure a debtor into making payment. It is important to note that an unsecured creditor, such as a credit card company, cannot harm a debtor in the short term in the way that a gas or electricity company can by cutting off fuel supplies. Debts such as unsecured credit cards, store cards and so on, should be paid last."
It makes sense to transfer borrowings to lower interest rate loans: store cards can charge APRs of over 30%. "But it is important not to borrow to get yourself out of trouble," warns CCCS spokeswoman Amy Brown. "Credit cards are unsecured, so while you could get a County Court Judgement against you to prevent you borrowing for six years, you can't lose your home. We are concerned that people are tempted to consolidate all their debts into one payment which is secured on the home, so they are swapping a low risk debt for a very high risk debt."
For further advice, contact:
Business Debtline: 0800 197 6026
The Bankruptcy Association: 01524 64305
The Consumer Credit Counselling Service helpline: 0800 138 1111