Perhaps it doesn't look like it now but certain debts have a higher priority than others. Sit down and calmly assess which debts must or should be paid first, on the following criteria:

Urgency:
Which debt, if not paid soon, will cause you the most trouble? This could be debt collection, credit bureau reporting, legal proceedings etc. Obviously those that will cause you the most future trouble need to be addressed first.

Cost:
How much is the debt costing you? Obviously those debts which carry a higher interest charge are costing you the most and should be paid first. A rough guide to costs in descending order of magnitude would be:

• Loans from micro-lenders
• Hire-purchase agreements
• Credit cards
• Bank loans/vehicle loans
• Overdraft facilities
• Mortgage bonds

Do not accept this order as being correct in every case. You need to establish from your own records, which costs you the most.

If your credit rating warrants it your bank may allow you to consolidate all of your debt into one facility. More often than not, this facility carries a lower interest charge than the sum of interest payable on the individual facilities. The period of the loan may also be considerably longer than the sum of the individual facilities, thereby reducing the monthly payment burden. PLEASE NOTE!! The purpose of this action is to recover control of your finances. Once you have this facility in place it is important that you do not simply run up your other facilities again, thereby dropping yourself even further into debt.

If you are fortunate enough to have consolidated your debt or made other arrangements to pay off your debt, it is important that you learn from the experience. You must establish why it happened in the first place and make sure that that event cannot occur again. For example, you may have had an unexpected vehicle expense, a seized engine or a motor vehicle accident perhaps. You need to establish whether selling the car is a necessary step. If it was the credit card which sank you, close it! 

A daunting thought indeed! Surprisingly (or perhaps not) your creditors will often go to great lengths to come up with a solution or payment plan that you can afford. Why would they be prepared to renegotiate terms? Well, it certainly isn't because they are taking pity on you. It is more a case of self-preservation. They know that if they can come up with a payment plan you can afford they will be more likely to get some or all of their money back. The alternative to you paying off your debt on an agreed plan, is expensive legal action and the possibility of your bankruptcy, in which event they would receive nothing or very little of what they are owed.

No matter that you cannot afford to pay the entire instalment that you owe, try to pay something. This will indicate to your creditors the fact that you are committed and willing to pay off your debt and will make them more amenable to renegotiate terms with you.

The absolute last resort is to have yourself declared insolvent.

This will stay with you for a long time to come and will affect all of your future financial dealings. Before you entertain this step make sure that you have explored every other avenue open to you. We strongly advise you to consult a professional first, in order to fully understand the ramifications of this course of action.