Stage 1 - Admit you are in debt: The first step toward any problem is to admit you have one, be it with smoking, bad diet or money-issues. Recognise that you have a problem with letting arrears pile-up and then you have taken the first step. You need to say to yourself 'I am in debt'.
Stage 2 - Do a Budget: This is where you will find out where your debts come from. The basic premise of the budget is to list your sources of income and compare them against your expenses. By doing this, you will be able to see where your money is leaking. Listing it in such a simple way can give you a viewpoint on your own financial situation that just wasn't there before.
The key thing here is that you are honest with yourself. This budget isn't there to impress anyone, it isn't there for others to make judgements on your money-matters, it is there to help you. And it can't do that if you aren't 100% straight down-the-line on it. If you spend £70 a week on clothes you might not like to admit it, but it is vital here that you do.
Stage 3 - Trim your expenses: Also known as trimming the fat, this is where you put the 'expense' column on your budget under scrutiny. Look at every single thing listed on there and ask yourself 'Do I really need that?' If the answer is 'no', then get rid of it. If the answer is 'maybe', then you need to be tougher on yourself and change it to a 'no'. If the answer is 'yes', then think of ways to use less of whatever it is, or find cheaper alternatives.
Stage 4 - Increase your income: Most of us work full time, so it can be difficult to bring in more money. You could look at working overtime where it is available, or even see if jobs are available with better salaries that you could apply for. If you work part-time, and your life permits, try and get more hours. No one likes to work, but putting in more time where you can now will make you a lot happier in the long-run.
Another option to take a look at are grants, taxes and other government entitlements. Things like job seeker's allowance, income support and tax credits could all help boost your income. The government website will help you find out exactly what you are entitled to.
Stage 5 - Order your debts in importance and contact your creditors: All your creditors will need to be satisfied, and you will need to pay all of them at least something, but a good idea at this stage is to order your debts in terms of importance. Now, the way to do this is to think to yourself 'Which debt would have the worst consequence if it wasn't paid?'. For example, for most people this would mean their mortgage, because the roof over their head is the most important thing besides their family.
With that done, you need to start getting in touch with your creditors. These will be credit card companies and people you have taken loans out with. The aim here is to acknowledge your debt to these people, as well as to let them know you are keen to repay it. But you are also going to negotiate with them; each individual company will want it's own debt paid first. That simply isn't possible, so you need to come to an arrangement on a regular repayment amount.
You are best doing this in writing, and here are some sample letters you can use for free.
Stage 6 - Get outside help: These stages will help almost anyone with any amount of debt. Now, I say help, I don't say solve. Sometimes the situation you are in might be a little above being saved by careful spending and increasing your income, as is sometimes the case depending on the size of your credit cards and loans.
The thing to do here is to get in touch with a reputable debt management company. A good one will talk to you, come up with a debt management plan and help you tackle your money situation. You may get a consolidation loan to lump all your arrears into one single monthly payment, making the whole thing easier to manage. Your local Citizen's Advice Bureau will help immensely with this; just ring them, make an appointment and tell them 'I am in debt, what can you do to help?'.