IF YOU are up to the credit limit on your cards, wondering whether you can afford your mortgage repayments and wary of opening letters from creditors, you are not alone.

The number of people facing difficulties with debts is rising, with many so desperate that they are willing to seek a new start through bankruptcy. But despite the relaxation of bankruptcy rules, this should still be the last resort.

Here are ten things you need to know to sort out your debt problems.

1 Acknowledge that you have a problem

Add up your borrowings and assets to get a clear picture of your financial state. The Consumer Credit Counselling Service (www.cccs.co.uk) has an online quiz designed to show how bad your problems are.

2 Stop being afraid of debt collectors

Do not be intimidated by a nasty voice on the telephone demanding payment. Debt collection agents are under investigation by the Office of Fair Trading (OFT) after officials uncovered evidence of heavy-handed tactics. If you have a complaint against a debt collection company, call the OFT on 08457 224499.

3 Never just pay the bank that shouts loudest

Prioritise debts. Make your mortgage and debts secured on your property a priority — you risk losing your home if you default on these loans.

4 Seek free, informed advice Obtain professional help from someone who is not trying to relieve you of even more money. You can consult debt advisers from organisations such as Citizens Advice and adviceUK. Debtors can call the National Debtline helpline on 0808 8084000.

5 Beware of commercial debt companies offering help

Debt advisers have attacked debt management and loan consolidation companies for exploiting customers with expensive fees and charges. Not all these companies are sharks but they are in the business of making money. At best, the solutions offered are appropriate for a tiny minority of borrowers.

6 Do not rule out going to the wall

You may not believe that the stigma of bankruptcy has gone, but it has become easier to go bust. The period over which a bankrupt can discharge debts was cut last year from three years to one.

Going bankrupt can mean losing your house and any vehicles you own, so it should not be taken lightly. It may also affect your chances of employment. There are severe penalties for those who have run up debts in a profligate manner and see bankruptcy as a mere formality.

7 Beware of firms offering an alternative to bankruptcy

There has been a 70 per cent year-on-year rise in the number of people signing up to individual voluntary arrangements (IVAs). However, an IVA, a legally binding agreement in which an insolvency practitioner formulates a five-year repayment plan with a debtor’s creditors, suits only a small minority of debtors. The schemes typically levy fees of £7,000.

8 Discipline is crucial

Some high street banks are encouraging customers who are suffering repayment difficulties to enter into agreements that consolidate all their borrowings into one loan. This can be a solution, but only if you stop spending.

9 Take a close look at free ways to escape debt

Free debt management plans can be set up by Payplan (0800 0854298) and the Consumer Credit Counselling Service. They will organise monthly payments on your behalf and help you to negotiate with banks and credit card firms.

10 Stop using shopping as a form of therapy

If your idea of stress relief is a spending spree with your flexible friend, find another hobby.