When you reach the position where you can't afford your debt repayments, it's time to take action.

Instead of running from your situation you need to take positive steps to fix it. If you reach the stage where you cant keep up with the repayments, its VITAL that you contact your creditors as soon as possible and explain your situation.

It will help your situation greatly if you mange to contact your creditors before they contact you.

It will show them that you take your situation seriously and have taken responsibility for the state of your finances. It will reassure them that theyre more likely to receive their money.eventually!

Now this may be hard to believe, but your creditors wont want to take court action against you unless its absolutely necessary.

Would you like to know why? Well first, all court action is time consuming, costly and unpredictable. Its generally a last resort, when all other avenues have been exhausted.

Second, its a question of maths. Its just a simple commercial decision. If you were in the business of lending money and someone was having trouble repaying you, let me ask you a question. Would you rather receive all of it over a much longer period that originally agreed, or 20 cents in the dollar months later when the bankruptcy courts get it all sorted out?

Exactly! Theres no contest. Bankruptcy benefits nobody (well, apart from the lawyers and accountants, but thats another matter!)

And most lenders realise this!

If theyre offered a reduced payment schedule over a longer period, most will be glad to accept it. In most cases it will allow them to receive more of their money back than the alternative of bankruptcy. And that my friends, is your opportunity to find a solution to your debt problems!

Contact Your Creditors Early

As soon as you know you wont be able to keep up with your repayments, get in touch with your lender. Write to them explaining your situation, giving them the reasons for your financial difficulties. Creditors will often be open to negotiation, and dare I say it, quite helpful. As I say, they just want to ensure that they get as much of their money back as possible. It may be possible to work out a more suitable repayment schedule that will allow you to pay off your debts.

If you ignore your creditors, theyll have you in court quicker than you can say bankruptcy! Ignoring letters from creditors tends to make them ratty. Remember, they dont want to take legal action, unless your actions force them to! But if your general attitude says to them Im in this position because I spend recklessly and have a cavalier attitude towards my debts, they wont have any choice.

Once youve drawn up a personal budget and know how much you can afford to pay towards your debts each month, contact your creditors and make them an offer. Its best to keep your offer of reduced monthly payments as brief and precise as possible. But above all, make it honest and realistic.

This is good I would therefore like to offer $15 per month to repay this account.

This isnt Im hoping that things will get better over the next couple of months, so Ill increase my payments as much as I can at that time. Rubbish! The lenders would laugh in your face at that sort of offer!

And whatever happens, when it comes to making an offer of reduced payments, don't bluff your creditors.