When debts close in, the financial Samaritans are only a call away

With more and more people living beyond their means, the phones never stop ringing at Britain's leading insolvency advice charity

"So you're telling me that you owe £1,300 on two credit cards?" asks Chris, a helpline adviser.

"No," comes the reply from the caller, a man in his late seventies. "It's £13,000 we owe."

Exchanges like this are routine at the Leeds branch of the Consumer Credit Counselling Service (CCCS), where staff have to deal every day with the human cost of Britain's soaring personal debt levels.

The charity is on the frontline in its work with the thousands of people in this country in serious financial difficulties. Its free national telephone service (see below) is the first point of contact for those struggling with debt. It also runs eight visitor centres, where debtors can come for an appointment with one of its advisers.

Sadly, the caller owing £13,000 is typical of many of the people the CCCS deals with. It soon emerges that the man has "big problems with debts" on the two credit cards he mentions, both of which belong to his wife.

During the course of the 20-minute call, Chris, the CCCS's adviser, takes the time to reassure him that his problems are not insurmountable. First, she works methodically through each secured or "priority" debt to get a clear idea of their size and importance. These outgoings include rent, council tax, utility and phone bills. "We have to keep a roof over your head," Chris tells him.

She then moves on to unsecured or "non-priority" debts. This type of debt includes credit card balances, personal loans and hire purchase payments.

"Don't use the credit cards any more," she says to the caller, speaking gently but firmly. "Cut them up now and we'll help you sort this out."

After that, she makes him an appointment for a more detailed discussion with a counsellor the following week. Finally, she advises him to contact his credit provider with his new CCCS client reference number. "This should ease the situation until then."

A reference number from the CCCS is usually a sign that the creditors can soon expect to start seeing some of their money back. And when they learn that a customer with bad debts is taking action to remedy the situation, banks and other lenders will usually be more sympathetic.

Chris, who is in her late fifties, has worked for the charity for six years. Experience has given her the ability to reassure people during what is often a terribly stressful time. And the importance of her work cannot be overemphasised.

"These calls can be very emotional, and some callers can be on the verge of suicide," she says.

But, although those getting in touch with the CCCS may have problems in many areas of their lives, staff are not trained to offer any advice other than that of a financial nature.

"We're not here to give emotional counselling," says the charity's chief executive, Gordon Bell. "It's about help with budgeting and better money management. Our role is to provide independent, impartial and realistic debt advice."

Since CCCS is a charity, the callers - or clients - pay nothing for its services. The organisation earns money to pay its running costs through the fees it collects from banks, building societies and other lenders.

CCCS advisers work to set up a debt management plan tailored for the client. Under this, he or she makes one monthly payment to the CCCS; it, in turn, distributes the money among the client's creditors. For example, an average £200 monthly repayment might be divvied up as follows: £55 to store cards, £100 to credit cards, £13 to personal loans and £32 to in-store credit deals. Each of the creditors then pays 11.75 per cent of what they've received to the CCCS to cover its expenses.

Lenders are happy to pay the charity in this way, Mr Bell says. "The creditors trust us and incorporate us into their operations - and no lender can chase debts owed to them for less than the amount they pay to the CCCS."

Some £99m was paid to creditors by the charity last year.

The debtors receive monthly statements showing how their money has been paid back. Not only are they not charged for this service, but the terms the CCCS can negotiate with creditors on their behalf will usually be far better than those they would obtain if they approached the lenders directly.

"The advantage of these plans is that clients have only one piece of paper dealing with all their debts," Mr Bell says, "and they get to see their balance going in the right direction. In many cases, lenders agree to stop debt collection activity and late payment fees once an individual comes under CCCS management."

Of those who seek help from a CCCS counsellor, 45 per cent are given their own debt management plan. More than 50,000 Britons are now on one of these plans, a figure that has risen by 69 per cent since 2003. Most pay back what they owe within seven to 10 years.

The other most common solutions to personal debt are individual voluntary arrangements (IVAs) and bankruptcy. While the latter is the best-known course of action, the former is becoming more popular. An IVA is a formal arrangement similar to a debt management plan (with a set proportion of your income going each month to pay your debts), but is set up through a court.

Clients calling the CCCS helpline have found their way to it by various routes: just under half are referred by one of their lenders, while a fifth are acting on a personal recommendation. Seven per cent find the charity on the internet.

Many people are spurred into action only after receiving a court summons or a letter threatening them with bailiffs.

"The earlier people come to us, the more options we have," Mr Bell says. "Lenders will deal with customers struggling with debt problems far more sympathetically than debt collectors."

Later, I listen to another difficult call from a debtor in trouble. This time, Emilie is counselling a housebound lady in her late sixties who has run up more than £5,000 in bills from mail order catalogues. No longer able to work, she lives in housing association accommodation and relies heavily on benefits. She has contacted the CCCS (on the recommendation of her daughter) after receiving a threatening letter from a creditor.

Part of Emilie's job is to assess whether the caller has enough income left over each month to make a repayment offer to her creditors. With the help of computer software, she draws up a realistic budget and works out an appropriate monthly sum to help pay off the woman's debts.

Emilie recommends that the caller take out a debt management plan and bin her catalogues. The main stipulation made by CCCS is that those who use its services don't take on any more debt.

"We are not a soft option," Mr Bell says. "We're willing to commit time and help to those who are willing to commit. It's about you and your debts. We are just the conduit to help you manage them."

Some clients who have been through the CCCS scheme return to the charity as staff. "We do not require any qualifications for someone to become a debt counsellor as we train them in debt knowledge," Mr Bell says. "But they do need to have empathy."

Contact: the CCCS helpline is on 0800 138 1111, or go to www.cccs.co.uk

ONE-TO-ONE APPROACH GETS YOU BACK IN THE BLACK

When an individual first calls the CCCS, a helpline adviser will assess their situation.

The adviser can then send out self-help literature - allowing the caller to make their own arrangements to repay debts - or offer them an in-depth counselling appointment.

About a third of those contacting the CCCS will end up in one of these sessions, usually a week or so after the first contact. An appointment will last up to an hour; before it takes place, the client will receive an advice pack to help them prepare the necessary paperwork.

Counselling can be face-to-face or over the phone. The counsellor will offer financial advice and provide an action plan, selecting the most appropriate solution for the individual's particular circumstances. This could be a debt management plan, individual voluntary arrangement or bankruptcy (see main story).

"It's about setting up plans that are sustainable," says Gordon Bell, chief executive of the CCCS. "But in 5 per cent of cases, we find callers haven't got a debt problem at all - and can, in fact, afford to meet their debts."

For most, simply picking up the phone to talk about debt for the first time is the biggest step.

MR AVERAGE IS MARRIED, IN HIS MID-THIRTIES - AND OWES £30,000

Household debt in Britain stood at £1.16 trillion at the end of 2005. The largest part of this is mortgage (or secured) debt, which has just broken through the £1,000bn mark.

However, it is the growth in unsecured debt - fuelled by an increase in borrowing on credit cards - that is causing concern. This now stands at £58bn.

The 2005 "statistical yearbook" issued by the Consumer Credit Counselling Service shows that those who consult the charity come from all walks of life, from those on benefits to professionals in highly paid jobs. However, the charity's average client last year was in their mid-30s, married with children and owing £30,763, up 5 per cent from £29,340 in 2004.

Younger clients (18-24) owe an average of £15,079, while clients aged over 60 owe £33,568 on average.

But those aged between 40 and 59 have the highest levels of debt - owing an average £34,456.

Worryingly, the proportion of clients owing more than £100,000 to creditors has increased to 2.7 per cent, up from 1.4 per cent in 2004. The CCCS has also seen a 6.5 per cent rise in the number owing 20 times their monthly net income.

But the picture is not totally gloomy: more of those in debt are facing their problems and seeking help.