Name Kate Holton
Age 37
Occupation Medical secretary at a local NHS hospital
Relationship Lives with her three children and her partner Martyn
Goals To pay off her debts and to clear clutter

Kate's story

Kate's life is overshadowed by worry about her burgeoning debts. She owes £42,000. 'My ex-husband and I took out a £25,000 loan and I inherited half of this in the divorce. I then got into a horrible cycle of taking out loans to consolidate loans and credit cards to pay off credit cards - I ended up with four loans and six credit cards and constant worry. This wasn't for fancy holidays or cars, but just for day-to-day living.'

Kate eventually arranged an IVA (Individual Voluntary Arrangement) with her creditors, which allows people to pay off as much of their debt as they can afford in a set time-scale. Her payments were £300 a month over five years. 'But eight months later, I got pregnant and couldn't afford the payments with my maternity pay, which was about £400 a month.'

So she did what so many people do when debt overwhelms them and stuck her head in the sand. 'I haven't made a payment since July and I know they're going to come knocking any day now,' she says. 'That scares me. I have no idea what to do. I've gone back to work part-time, but I have hardly any money spare.'

Her financial chaos is echoed by the mess in her overly cluttered house. 'I can hardly move about. I'm my mother's daughter - she couldn't bear to throw things away and neither can I, so my house is filled with silly things like empty DVD cases (I can't throw them away in case I find the DVDs one day), three dining tables with chairs in various rooms, and old clothes from when I was thinner.'

And this doesn't include Martyn's clutter. 'He's an entertainer, so the hallway is jammed with speakers, musical instruments and clown shoes - and it's only a three-bed semi! My 12-year-old daughter Jennifer's so embarrassed she won't invite her friends round.'

Financial coach Bev Budsworth says

This amount of debt is incredibly stressful and Kate's reaction - ignoring it - is common. An IVA (for info, go to r3.org.uk) is an excellent solution for people in unmanageable debt, but in our phone session, I told Kate that she would benefit from making herself bankrupt. She (or her creditors) would present a petition to the court, which then issues a court order that freezes action by her creditors (IVA included). A trustee is then appointed to investigate whether she has assets that can be sold to pay her creditors - Kate doesn't have any, apart from an old car, which she could claim as a 'tool of trade' to exclude it from bankruptcy, as she drives it to work. She rents her house, and her personal belongings are exempt. She would be bankrupt for a year, and as she has little money left over from wages, it's unlikely her trustee would ask for income contributions.

The bankruptcy will stay on her credit records for six years and affect her ability to get credit and a reasonably priced mortgage. But bankruptcy is not as extreme as it sounds - it will allow her some breathing space so that she can focus on living within her means and getting the rest of her life back in order. Anyone with overwhelming debt can do this. Go to insolvency.gov.uk.

First steps to managing debt

· Take a look at your fixed monthly costs, then shop around to see if you can reduce them. For example, go to energywatch.org.uk to see if you can save money on your gas and electricity bills.

· Your creditors will not go away. Paying what you can afford is better than nothing at all. Can you make your own agreement with them?

· If you get a consolidation loan to make your debt more manageable, make sure you don't use your credit cards again. Cut them up.

Life coach Janie Romer says

Kate is in a vicious circle - the debt worries drain her energy, making it harder to reduce the clutter, and the clutter is making it hard to think. Clearing it out to make a harmonious space will help her gain a sense of control.

We started by using visualisation for one room - I asked Kate to imagine how she would like her dining room to look for a special occasion like a birthday. She had a vision of it free from junk, with candles and decorations. To ease her conscience, Kate should send as much as possible to a charity shop, or sell it at a car-boot sale to raise some cash. She's going to get Martyn to clear out the garage, so his stuff can go in there. The DVD cases are going into a box - if she finds the DVDs in the process of clearing out, she can reunite them. The rest go in the bin or to the charity shop. To save herself time, she has chosen five things she'd like to delegate to Martyn, such as emptying the dishwasher.

First steps to clearing clutter

· Try to identify what your emotional attachment to the clutter is, then try to imagine the emotional outcome of living without it. Realising that the world is not going to come to an end without it will help motivate you to clear it.

· When you're clearing out, have two boxes set out, marked 'irreplaceable' and 'waste of space'. You can then go through the irreplaceable box later and see if you can pare that down. Try to be ruthless, and ask yourself: Is this item more important to me than the space it consumes?

· Don't see the task as a mountain of potential loss. Motivation comes from having a vision of what you are trying to create instead, and anticipating a delicious sense of achievement! The process will bring pleasure and satisfaction. It can become addictive.

Interviews: Lisa Buckingham