Money: Badly in debt? Help is at hand

THESE days, plastic can seem a girl's (and boy's) best friend. Need a new kitchen? Put it on the card. Holiday in the Caribbean? Just slap it on your flexible friend. But what happens when that dream purchase becomes a debt nightmare?

In fact, contrary to popular belief, debt is very rarely the result of a credit-card shopping frenzy, or the domain of HP-happy consumers gone mad. Serious debt, which claims 750,000 new cases each year, "is almost invariably a result of some unforeseen circumstance such as loss of job, relationship breakdown, accident or injury", says Moira Haynes of the Citizens Advice Bureau (CAB). "The resulting drop in income then generates a heavier reliance on credit. What was manageable suddenly becomes unmanageable."

Rather than relying on winning the Lottery or boarding the next boat to Rio as a way out of your problems, debt counselling can be a worthwhile option. Available services fall broadly into two categories: those offering free advice and those which charge for it.

The largest single provider of free debt advice in the UK is the CAB. Funded mainly by the state, its hundreds of centres offer impartial and independent advice in confidence.

"Our advisers encourage people to take control of their financial situation," says Ms Haynes. "First, we review their total income and outgoings. Then we help the person decide which debts take priority. This is not determined by paying up to whoever shouts loudest, but according to the consequences of non-payment. In other words, mortgage and rent payments are priority because a roof over your head is essential. Payment of utilities like gas and electricity are also at the top of the list to prevent homes being disconnected.

"We advise those in debt not to ignore the problem - it won't go away. We suggest people keep creditors informed of their situation and see if they can make regular but modest offers of repayment."

Citizens Advice Bureaux can also negotiate with creditors on behalf of clients, writing letters requesting suspension of court action or the freezing of interest on debt repayments. Representation at court hearings can also be arranged.

Accounting for a sizeable corner of the non-fee-paying market are a further 1,000 debt- counselling agencies. They come under the umbrella of the FIAC (Federation of Independent Advice Centres), a regulatory body that monitors members and ensures certain standards and codes of conduct are upheld. Often holding charity status and supported by both the voluntary sector and private businesses, these agencies purport, like CAB, to offer impartial, independent and confidential advice on debt management.

National Debtline is an example. "We provide telephone advice on how people can best manage their debts based on a self-help philosophy. We also send out fact sheets on bankruptcy and dealing with bailiffs," says adviser Sophie Brookes.

There are organisations, however, who charge for their financial words of wisdom. These fee-paying debt-counselling agencies are generally frowned on by the FIAC. "It's very easy to obtain a debt-counselling licence," says Nick Pearson, the FIAC's National Money Advice co-ordinator. "Then many of these companies simply buy up mailing lists of people with recent county court judgments against them and offer to sort out their debt problems for a fee of pounds 300. There may also be ongoing charges of, say, pounds 50 a month to pay."

Ironically, people who agree to pay often end up in the situation of being in worse debt than before as the agencies' fees mount up. "At the FIAC, we pick up the casualties," says Mr Pearson. "Some of these companies are unscrupulous. They rarely advertise in the mainstream press or directories. They operate for a short while then close down, change their names and pop up somewhere else."

On a happier note, recent trends indicate that, despite a steady increase in credit-card ownership, fewer of us are falling victim to heavy debt - something illustrated by the continuing drop in house repossessions. According to the Council of Mortgage Lenders, 1997 saw a total of 32,770 repossessions, down by 24 per cent on the previous year and less than half the total figure for 1991.

q Contacts: the FIAC, 0171 489 1800; National Debtline, 0121 359 8501. For your local CAB, look in the Yellow Pages.