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The 5 Stage Process of Dealing With Debt

People with debt problems often hide their situation because they are ashamed. But the reality is, that it is more common than we realise. In February 2022, the average adult in the UK owed £33.410 in total debt.

Mounting debts create a huge amount of stress and we all have coping mechanisms to deal with this. We have identified 5 stages many people might go through as debt begins to spiral out of control. Consider if these ring true for you, and if so, understanding where you are in the process could make it easier to intervene and take action to resolve your problems.

1. Denial

man giving a thumbs down

Debt is incredibly common and most people use credit in some form. Borrowing an affordable amount on a credit card and paying it off right away can benefit you. But when your debts get out of control, it’s important that you address the problem right away. Unfortunately, the first stage of dealing with debt is usually denial.

Even though the payments are out of control, people tell themselves that they are borrowing responsibly and they will easily be able to get back on track next month. Their spending habits don’t change, so they still make a lot of luxury purchases and don’t save money or pay their debt.

Emergency spending is also common in people that are in denial about debt because they fail to plan for the future. When all of your money goes into credit card payments and you don’t have any emergency savings, an unexpected payment pushes you further into debt.

A large proportion of people in debt denial will overspend and build up large credit card debts. Ultimately, this means that the situation gets worse every month and people in denial tend to avoid looking at their bank balance or credit card statements because they are afraid of the outcome.

2. Panic

Tired teen girl feeling dizzy, having panic attack and massaging her temple.

Denial can only last so long before you are forced to face your debt problems. Interest payments will increase on unpaid debts and the situation will snowball. Missed payments and unpaid bills start piling up and creditors will send letters and call you on the phone, demanding payment. Eventually, collection agents may start coming to the house too, so it is impossible to avoid the situation. This is when panic sets in. Once people realise that they are in a serious debt situation and they don’t know how to deal with it, they usually react in one of two ways; some people accept that they are out of their depth and seek help with their problems. However, some people try to manage the problem alone and move into stage 3.

3. Self-Determination

Successful businesswoman working hard on laptop computer in her office dressed up in white clothes.

Sometimes, people believe they can fix the problem themselves or are too proud to ask for help. Depending on the severity of the problem, some people can make positive changes to resolve their situation themselves and get back in control. But often, small changes to habits or using money-saving tricks only make a tiny dent in the large debts. Even getting a second job and making big cutbacks on spending can fail to solve the problem, especially if it has been ignored for so long. 

Although people can buy themselves a bit of time, serious debt problems cannot always be dealt with on your own. In many cases, it is too late for budgeting and you need to consider formal debt solutions. It is a good idea to have a realistic look at your situation and what you can practically achieve to help. For some people, it might be best to skip the self-determination stage and seek professional advice as soon as they recognise the problem, rather than delaying the inevitable.

4. Frustration

Frustrated woman with head and glasses in hands. Laptop open in front of her with paperwork on the desk.

Eventually, people get to a stage where they have tried everything and their debts are still increasing every month. At this point, the frustration begins and the debt problem starts impacting other areas of their life. Relationship problems are very common because people hide the scale of the debt. When they recognise that they cannot fix the problem and they need to admit how bad the situation is, this can lead to family tensions. People also try to shield friends and family from the situation, so they will isolate themselves.

Realising that they have tried everything and nothing has worked also creates a feeling of helplessness. This, coupled with the sheer stress of the situation, can lead to mental health issues like anxiety and depression.

If you do find yourself in this position, you can fill out a ‘debt and mental health evidence form’ and send it to your creditors. This gives them your consent to access information from your doctor about your mental health, so they are aware of the impact that debt is having on you. Many creditors will take this into account when contacting you about payments or negotiating a payment plan with you. 

5. Acceptance

Man stamping 'acceptance' in notepad.

Acceptance is the end of the debt cycle. After trying everything else and seeing the impact that it is having on their lives, people finally accept that they need help dealing with their debt issues. When people eventually reach acceptance, they seek the advice of a debt solution company like Swift Debt Help. 

If you have debts with multiple creditors and you are unable to pay, an Individual Voluntary Arrangement may be the right option. This allows you to write off a portion of the debt and consolidate all of your different debts into one manageable payment. It also stops creditors from chasing you, so you can take the pressure off and focus on repaying the debts.

Being trapped in a cycle of debt can feel hopeless and you might experience all of these stages, but help is out there. At Swift Debt Help, we can give you advice about different debt solutions and support you through the process. There are processes you can enrol in before you get to the debt recovery solutions stage, so you can protect your financial future,

If you are looking for a way to solve your debt issues, our excellent solution finder tool can help you find the right processes for you. Alternatively, get in touch directly and our expert team can give you all of the advice you need.

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Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

5 stages of debt, credit card debt, dealing with debt, Debt, Debt Help, Debt repayments, Debt support, Individual Voluntary Arrangement, IVA