Consumers are carrying record levels of personal debt, with millions of us owing more money than would be conceivable even just a generation ago. A long period of historically low interest rates combined with surging property prices have led to a distinct change in attitude towards borrowing money, with it almost becoming a way of life rather than a last resort for the majority of people.

While interest rates remain low and economic prospects rosy, most experts accept that the levels of debt we've burdened ourselves with are sustainable, if not advisable. However, recent changes in the economic outlook mean that the picture could be about to change. Lenders are becoming increasingly nervous about the effects of the 'credit crunch' and are beginning to hike up the interest rates they're charging on both secured and unsecured credit. Combine this with an expected fall in house prices, and it's easy to see that for many people debt could easily become a very real problem that needs an urgent solution.

For some people affected by this, the problems could be solved by a simple reordering of their finances such as debt consolidation or even just sticking to a more austere budget and lifestyle. For others less fortunate, their debt burden may propel them down the unhappy route of court proceedings, bailiffs, home loss and even ultimately bankruptcy.

For a lot of people though with problem debt, there is a middle ground strategy that could see your debts serviced and eventually cleared without the trauma of losing your home or being forced into insolvency, and that strategy is known as debt management.

The basic premise behind debt management is that your creditors would rather receive something than nothing. If they force you into bankruptcy, they may be at the back of a long queue of creditors and might be forced to write the debt off. Obviously, this would be a poor outcome from their point of view, and so most creditors are willing to discuss ways of preventing the situation getting to that extreme stage.

After drawing up a realistic budget and working out how much you can afford to put towards repaying your debt each month, you write letters to your creditors explaining the situation and offering to make a fixed repayment each month, even if this is smaller than the amount you're normally asked to pay. You can also ask that any interest charges or other fees are reduced, stopped, or even refunded, although your success on this point will vary.

In most cases, you'll find that your creditors are willing to come to some sort of arrangement, and if you stick to this then no further action will be taken against you.

The biggest problem with this kind of strategy is that it can be extremely stressful, and people already racked with debt worries will probably find the prospect of negotiating with their creditors rather daunting. This is where debt management agencies come in. For a small fee, they will take over the handling of all the negotiations and even repayments - you will pay the agency what you can afford, and they will distribute it among your creditors according to the arrangements they've made on your behalf. Not only do agencies remove a lot of the stress, they are also experienced in these negotiations and are far more likely to arrange a better deal than you are yourself.

If debt management sounds suitable for your current debt problems, then by all means contact a management agency or a charity who may take on the work for free, but one important thing must be borne in mind: your credit rating will be very severely damaged, with effects that can reach years into your future, and so entering a debt management program should not be taken lightly.

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