The process for getting out of debt will vary quite a bit from country to country. In the United States, borrowers can work out debt management plans or file bankruptcy. In the United Kingdom, borrowers also have more formalized debt management plans, and intermediary step called an IVA, and bankruptcy.

If your debt is between £3,000 and £15,000 you may want to consider Debt Management Plan (also known as DMP) – an agreement between you and your creditor to make monthly payment. It can be managed by yourself or by a third party (DMP `operator`) which can negotiate with your creditors on your behalf.  If you have surplus income (£200+ after essential living expenses) you will make one monthly payment, which then will be distributed between your creditors.  Most companies will charge for this service, but there are some organizations like National Debtline or Consumer Credit Counseling Service which will do it free of charge.

If you have a debt over £15, 000 you may want to consider Individual Voluntary Agreement.    This solution offers you an ability to pay off one portion of your debts and write off the debts you cannot afford to pay.  If you go for IVA your interest fees and debts will be frozen.

If you have a substantial amount of debt, an IVA may not be enough for you to get out of debt and you may find yourself bankruptcy. This should be avoided if at all possible, but may not be avoidable for everyone.

Options like Administration Orders, Informal Arrangements, Consolidating Debts are also available among others.  There are many ways of resolving debt problem and it is often confusing to choose between them. The best way is to use free and independent advice available to you through various organizations all over the UK.  Don`t neglect this opportunity and sort out your debt problems now.

If you have a large number of debts and aren’t really sure how to attack them, you can work through them systematically with a method known as “snowballing” or the “debt snow ball.”

This debt management method, widely promoted by radio host Dave Ramsey and Christian financial counselor Howard Dayton, involves listing one’s debts out from the smallest balance to the largest balance.  After having a list of your debts, make minimum payments on all of your payments (regardless of interest rate), and put any extra money that you have toward your smallest debt.

After paying off the first debt, take the payment you were making on the first debt and put it along with your second smallest debt along with any other money you can put in and work really hard to pay the second smallest debt off. Once that debt is repaid, work your way up on the list until you’re debt free.

Typically a debt snowball is used to get rid of consumer debt and paying off one’s house is usually a separate goal that happens after the debt snowball is complete.  If you have business debt, you may or may not want to include those in your debt snowball depending on how your business is setup and the type of debt that you have.

Some people are critical of the debt snowball because it is not mathematically correct. Critics suggest that borrowers should put all of their emphasis on the highest interest rate first to pay the least amount of interest. Dave Ramsey defends the debt snowball by saying that personal finance is more personal than it is finance. By getting rid of a few debts first, you will have some winds under your belt and will be making progress toward getting rid of your debt and will encourage you to continue in the process.

If you have the discipline, you are more than welcome to start paying on the loan with the highest interest rate, but if you’re not entirely sold on the idea of  a debt snowball, start with the smallest loan first.