Paul and Amanda Davis have worked hard all their lives to bring up their three children, but they do admit to having succumbed to the buy-now-pay-later culture, and now find themselves with £50,000 of unsecured debt.

Paul, 39, and Amanda, 46, live in a three-bedroom house in Hartlepool. Their eldest child is at university, while the others, aged 15 and 16, are still at home.

To fund various Christmas and holiday breaks over the past four years, the Davises have taken out six credit cards, one store card and two personal loans. During that time Amanda was forced to take two years off work on unpaid sick leave. The couple subsidised the loss of income with more credit cards. With minimum debt repayments taken into account, their monthly outgoings now exceed income by about £1,100.

Paul says: “It is a sorry state of affairs and we feel terrible that we have got into this situation. We are just about managing to keep our heads above water at the moment, but we are in desperate need of some help.”

For their Money MoT, the couple compiled a detailed list of income and outgoings. Paul, a construction manager, brings home £2,700 a month, while Amanda weighs in with £520 a month from her part-time job as a credit risk manager. She cannot work full-time for health reasons. The couple also receive £144 a month in child benefit.

Their house has a £78,000 mortgage on Abbey's standard variable rate, currently 7.09 per cent, which gives monthly mortgage repayments of £811. Household bills are about £270 a month and grocery shopping comes to £629.

But it is the loan and credit card debt that is making the largest dent in their monthly budget. The average interest rate on the cards is 17 per cent and the balance across the six cards totals £40,400. The minimum payments alone cost £954 a month, while the two personal loans and car finance costs them an additional £790 a month.

The Davises say that raising three teenage children has proved expensive over the years and they have struggled to adjust their lifestyle to their new financial situation.

“We still spend about £400 a month on going out and pocket money for the children,” admits Amanda. “Explaining to the kids that we now can't afford things like Sky TV and mobile phone contracts has been hard - they don't really appreciate how much it all costs. We bought our eldest a £400 laptop when he started university. We knew that we could not afford it, but he needed it.”

The Davises were also keen for their children to learn to drive. “Unfortunately, it took our eldest son five attempts to pass, so the cost of lessons really mounted up,” Amanda says. “However, we had committed to paying for it. Our other son turns 17 next year and will be expecting the same.”

Although the Davises are not yet in arrears, they know that they cannot afford even minimum repayments on their cards for much longer. With monthly income of £3,364 and total outgoings of £4,580, they need to take control of the situation now to avoid spiralling farther into debt.

The Davises: what the experts say

Debt solutions 1: John Fairhurst, Payplan

“Paul and Amanda must look at ways of increasing income and cutting costs. We calculate that the family is entitled to basic tax credits of £45.50 a month, so they should claim for that immediately.

“The biggest opportunity to reduce outgoings is to cut back on discretionary costs, such as entertainment and dining out. It may also be possible to reduce mortgage costs by extending the payment term, though this will prove more expensive in the longer term. Another opportunity to economise on outgoings may be to trade in their car for a cheaper model, but this may be difficult if the car was bought using a conditional sale agreement.

“These measures may be enough to bring the household budget into balance and allow Paul to continue making contractual payments to the couple's creditors.

“If, despite making economies, Paul is unable to balance his budget, then we would suggest that he considers a debt management plan (DMP) from a free provider, such as Payplan or the Consumer Credit Counselling Service.

“In a DMP, Payplan would agree a budget that is acceptable to both Paul and his creditors. We would allow for reasonable living costs and then split the remaining money between his creditors. This would allow Paul to stabilise his finances and repay his debts at an affordable - albeit reduced - rate. Creditors will usually accept reduced repayments made under a DMP, often waiving, or at least reducing, interest charges. This solution also has the advantage that if circumstances change, the repayment can be adjusted to take this into account.”

Action plan

Claim tax credits and minimise all expenditure.

Consider a free debt management plan if outgoings still exceed income.

Debt solutions 2: Alison Winstanley, Citizens Advice Bureau, Bolton

“The Davises are really struggling with their personal loan and credit card debt. To avoid the risk of county court action they need to make some payment to creditors. However, it need not be at the level that they are currently paying.

“Paul and Amanda may be able to negotiate reduced payments with their creditors, using a financial statement - a detailed budget. However, creditors may refuse to accept lower repayments if they consider expenditure to be excessive. For example, spending £520 a month on entertainment and children's pocket money would be unacceptable.

“Once the Davises have revised their budget and eliminated any unnecessary spending, they can approach the creditors to make an offer of payment calculated pro rata - so the creditor with the largest debt receives the largest offer, based on their available income. This debt repayment plan (DRP) can be calculated by an adviser at your local Citizens Advice Bureau.

“Unlike DMPs - where the money is given to the DMP provider, who divides it between creditors and sometimes takes a fee - Citizens Advice does not handle payments, nor take a fee. But our advisers can help you to negotiate repayments with creditors.

“Visit www.adviceguide.co.uk, or check the phone book for details of your nearest Citizens Advice Bureau.”

Action plan

Consider a debt repayment plan.

Debt solutions 3: Beccy Boden-Wilks, National Debtline

“A lot of Amanda and Paul's expenditure is going on repaying their debt, which is accruing at high rates of interest. It may be possible to look at loans and credit card balance transfers with a lower interest rate.

“They should visit comparison websites, such as moneyfacts.com or moneysupermarket.com, to check out the best deals. It is vitally important when refinancing to ensure that you start living within a budget. If you continue to use credit to make up the shortfall in your income, you will only increase the size of your debt.

“For help to clear their debts the Davises should first try a DMP or DRP. If these prove unsuccessful, they may wish to consider an individual voluntary arrangement (IVA). This must be arranged by an insolvency practitioner and the fees can be expensive - about £3,000 or more.

“An IVA is a formal agreement to repay a percentage of the debt over three to five years. This can be a good option because you will not have to pay back the full amount and will be debt-free in five years. But it is important to check the details of your IVA proposal because the equity in your house may be included.”

Action plan

Transfer credit card debts to 0 per cent balance transfer deals.

If DRPs do not work, consider taking out an IVA - but be sure to seek advice first.

Paul's response

“We sat down and reworked our budget on the back of the advice and then contacted National Debtline. It advises that a debt management plan is probably our best option and will help us to set it up free.

“It also said that our first objective must be to protect our income by opening a basic account with a bank with which we have no unsecured debt. Once this is set up, we should have our salaries paid into the account and also transfer our priority direct debits to this bank.

“Next, we must suspend non-priority direct debits by sending holding-notice letters. These advise creditors that we are seeking professional help, offer a token payment and request that they withhold action for 28 days and do not apply charges or interest within this period. Then we await their reply.”

Would you like a financial makeover? Write to Money, The Times, Times House, 1 Pennington Street, London E98 1TB, marking your envelope Money MoT, or e-mail moneymot@thetimes.co.uk. Please include current finances, short and long-term goals and a daytime phone number. You must be prepared to disclose your income and be photographed.