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Creditors, debts and mortgages
When applying for any finance it is important to know who your existing creditors are and how much you owe in order to ensure the new finance and existing finance remains affordable.
This is also the case when applying for a mortgage with bad credit and debts, however when bad debt is involved this is not always as straightforward as it seems. It may well be the case that the debts have 
been passed to debt collection agencies, if there are a number of debts it is often very easy to lose track of who is chasing which debt and how much the balance is to that debt as letters come through and phone calls from the collection agencies increase.
When someone applies for a bad credit mortgage the lender will go to great lengths to ensure the new mortgage is affordable, they will want to match up the creditors listed on the persons credit file with the associated debt collection agencies and if the potential borrower can not do this it will inevitably hold up the application process.
From experience there are a few ways to best match up the loans to the collection agencies. One way is for the person applying for the mortgage to get hold of their credit report prior to applying for a mortgage and listing each creditor in turn, then matching these up with the debt collection agencies manually - this can be time consuming but will ensure the potential borrower understands exactly what is owed to who.
Another way is to let a third party company do the hard work for you, debt management companies can do this. Rather than applying for your credit report they will run through in income and expenditure exercise with the borrower and reach a figure called a disposable income - this is effectively what the borrower can afford to manage the unsecured debts. The debt management company will then contact each creditor (by the borrower forwarding all correspondence to them) and arrange new monthly payments to service the debts. In the process of doing this they will make notes of the original creditor and the new debt collection agencies and forward a monthly statement to the borrower detailing the company the money is owed to, the total amount owed and the monthly payment being made to each individual debt. A lender will very often accept this statement as proof of new payment arrangements and work from this statement to figure out which creditor on the borrowers credit file relates to which debt collection agencies.
There is also a government funded charity called the Consumer Credit Counseling Service which will do a similar job as a debt management company without asking for a fee, although it may be the case that a debt management company will be more thorough and act more quickly than a charity.
These are really the only two ways to satisfy a lenders underwriting criteria for payments of bad debt. The lender will also require an explanation of how the arrears came about, whether it be due to reduced income, the borrower over committing themselves or a one of event not likely to happen again - as long as the explanation is truthful and plausible the lender should be fine regardless of the explanation as long as they deem the new mortgage affordable.
