Expert View: Work out a realistic plan of action with your creditors

Debtors need to acknowledge that they have a problem. Dealing with debt issues does not automatically mean you face bankruptcy, but ignoring them might.

Ask for help from sources such as Money Advice Scotland or the Citizens Advice Bureau - the sooner advice is sought, the better the long-term chances of improving your financial situation.

You should then make a list of all your debts and write down your income, expenditure and how much is owed. Then prioritise your debts by identifying your essential financial commitments (eg. mortgage, rent, council tax) and cut down on luxuries and non-essential spending. Realise any assets you have and identify outstanding debts with the highest interest rates and start with them if you are not considering a statutory solution.

Try to warn your creditors of any potential financial difficulties. Be transparent and provide full details about the financial situation that you face. It is important to keep the lines of communication open so you can discuss how they can help. This is a stressful situation to be in, so don't allow yourself to be pressurised and make sure you talk to a regulated professional rather than a provider whose main concern is their fee.

Depending on the outcome of the advice you get, you could decide how much money can realistically go towards paying off debts, so you can make an offer to the bank and other creditors towards clearing them. Make it a realistic offer and ensure that you can make these payments without default. It is important to remember that indebtedness does not necessarily lead to bankruptcy if you act soon enough.

• Iain Fraser is spokesman for R3, the insolvency practitioner trade body.