If you're struggling with debt, the most important thing to know is this: there is always a way forward. Free, confidential debt help is available no matter how much you owe or how long you've been in difficulty. This guide explains what to do, in the right order.
Step 1: Don't Panic — Get the Full Picture
Before you can tackle debt, you need to know exactly what you're dealing with. List every debt you have:
- Who you owe money to (creditor)
- How much you owe
- The interest rate
- Whether you're up to date or in arrears
Once you have the full picture, it feels more manageable — and you can start dealing with debts in the right order.
Step 2: Priority Debts First
Not all debts are equal. Priority debts have serious consequences if ignored — you can lose your home, have your energy cut off, or face prison. Deal with these before anything else, even if the balance is smaller.
| Priority debt | Consequence of non-payment |
|---|---|
| Mortgage or rent arrears | Repossession or eviction |
| Council Tax arrears | Bailiffs, prison (rare but possible) |
| Gas and electric arrears | Disconnection |
| Court fines | Prison, bailiffs |
| Child maintenance | Bailiffs, deductions from earnings |
| TV Licence | Fine up to £1,000 |
| Income Tax/NI | HMRC enforcement action |
Step 3: Non-Priority Debts
These are serious but the consequences of non-payment are less severe — typically letters, credit score damage, and eventually a County Court Judgment (CCJ). They include:
- Credit cards and store cards
- Personal loans
- Overdrafts
- Payday loans
- Catalogue and buy-now-pay-later debt
- Water arrears
For non-priority debts, pay the minimum on all, then throw any spare money at the highest-interest one first (the avalanche method) — or the smallest balance first for a psychological win (the snowball method).
Debt Solutions Explained
Debt Management Plan (DMP)
An informal arrangement where you make one reduced monthly payment to a debt management company, who distributes it to your creditors. Free via StepChange or PayPlan. Creditors often freeze interest. Takes longer to pay off debt but keeps you in control.
Individual Voluntary Arrangement (IVA)
A formal, legally binding agreement to pay back a portion of your debt over typically 5–6 years. The remainder is written off. You need debts of roughly £10,000+ and must use an Insolvency Practitioner. Always use a reputable firm — beware of companies charging large fees for a free service.
Debt Relief Order (DRO)
For people with debts under £30,000, little or no assets, and low income. Pauses debt for 12 months, then writes it off. Costs £90. Apply through an authorised debt adviser.
Bankruptcy
A last resort that writes off most debts. Costs £680 to apply. Serious consequences including losing assets (like your home). Usually lasts 12 months. Best discussed with a free debt adviser first.
What NOT to Do
- Don't take out more debt to pay off debt — especially payday loans, which can spiral quickly
- Don't ignore letters — unopened letters don't make debts go away; they escalate them
- Don't pay a "claims management company" to help with PPI or debt — genuine services are free
- Don't borrow from friends or family without a clear plan — it damages relationships if things go wrong
Breathing Space Scheme
The government's Debt Respite Scheme (Breathing Space) gives you 60 days free from creditor contact and enforcement action while you get debt advice. Mental health crisis patients get longer protection. Ask a debt adviser to apply on your behalf.
Free Debt Help
UK's largest debt charity. Free advice, DMPs, IVA referrals, online or phone.
Free advice and self-help tools. 0808 808 4000.
Free DMPs and IVAs. Funded by creditors, not clients.
Local offices across England and Wales. Drop-in or phone.
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