Debt advice guide

When debt is getting on top of you where should you go for help?

We aim to find out in this guide.

When is it time to seek debt help?

There's no one tipping point for seeking debt advice: there's a service out there for everyone no matter how much, or how little, they owe and however much, or little, they know about money.

However, there are a number of red flags which might suggest that it's time to seek debt advice even if this isn't some you've considered before:

• Difficulty paying for the basics because of debt. Cutting back to pay a debt is good, going without food or struggling to meet the rent means something is up.
• Confusion about the demands lenders are making. Can't make the sums add up or confused about the rights a collection agency has to recover money? Ask an expert.
• Debt stress. Signs of extreme stress - such as panic attacks and sleeplessness - are more common among those with debt problems than they are in the general population. Debt advisers as well as doctors could help.

Where to seek help

Advice, much of it free, is available for any level of debt from a variety of sources including specialist debt charities, debt management companies (DMCs) and local authorities.

In and outside of the system

Debt advisers should always start just by talking through the debt problem.

After that point, many may be able to act on your behalf or set up arrangements when dealing with creditors.

However, a number of these debt management solutions place the debtor outside the mainstream of normal financial systems and repayments. Essentially, they draw under the debt and start again.

Drawing that line has potentially far-reaching consequences.

Good debt advice will always look to see whether debts can be repaid without having to resort to these methods. Sometimes options such as IVAs, bankruptcy and administration orders do represent the best way out of debt but they should never be entered into lightly.

Below are some of the organisations that can help when dealing with debt. We've also covered some tips on coping with debt here.

Who's offering what?

Face to face advice

Many people prefer to sit down with an adviser face to face to talk through a debt problem.

Here are some of those face to face services:

• Citizens Advice England and Wales
  3200 centres across the UK
• Citizens Advice Northern Ireland
  28 centres across Northern Ireland
• Citizens Advice Scotland
  81 centres across Scotland
• Christians Against Poverty
  160 centres across the UK
• Local authorities also have details of debt advice services available in the local area.

Help over the phone

Calling for advice is also a popular option, especially as a first step or for very specific debt problems.

Here are some highly rated phone advice services:

Help for specialist groups

Debt advice services can't be all things to all people so it's good to know that there's specialist help available too.

For example, Citizens Advice provide a specific microsite - Advice4me - which pools the information from its existing self-help website into a comprehensible online source which specifically targets the under-25 age group.

Gingerbread , a charity set up to support single parents, offers guides that provide guidance and advice on all aspects of personal finance from income support to managing monthly bills.

And Gamcare provides help for anyone suffering with debt because of a gambling problem through an online forum and a telephone helpline between 8am and midnight, seven days a week.

See our gambling and borrowing guide for more on Gamcare and similar services.

Additionally, there are rules in place to help protect vulnerable borrowers, such as people with mental health issues or capacity limitations, which include additional rules for those struggling with debt, see our guide on how lenders should protect vulnerable borrowers for more on this specifically.

Non-charity debt help

All the debt advice bodies that we've spoken about so far have been charities.

On top of these charities, however, there are a huge number of commercial debt management companies (DMCs) looking to help people deal with their debts.

DMCs: the difference

Simply, the difference is that DMCs are businesses that make money, usually in the form of fees, for helping people manage their debts.

That one difference spawns a number of other differences.

Like secured consolidation loans, DMCs normally take one monthly payment and negotiate and distribute it amongst creditors, although some, such as National Debtline, also offer free plans.

As we noted above, some debt management schemes can take people outside of the system and commit them to a very specific form of repayment and, often, these schemes earn the most fees.

David Rodger, Managing Director of Debt Advice Foundation, has gone into the key differences between debt charities and debt management companies here in more detail for us here.

Mixed reputation

In addition, a small proportion of the debt management industry has a poor reputation.

In late 2011, the Office of Fair Trading (OFT) told many DMCs to clean up their act.

The OFT found numerous failings in the sector from how the services were being advertised - in many cases, misleadingly, as if they were free - to the quality of the advice offered.

As we've said above, debt management companies were accused of favouring profit-making debt solutions, which they then take a cut of, over other, sometimes more effective methods.

The Financial Ombudsman Service (FOS) says it saw a 25% increase in the number of complaints about the sector in the last quarter of 2010, compared to the previous year's final quarter.