How to deal with debt in the UK

Priority debts are those where non-payment has a consequence beyond money. Mortgage or rent arrears can lead to repossession or eviction. Council tax arrears lead to a liability order, then enforcement agents, and in England and Wales ultimately to committal proceedings. Magistrates' court fines can result in imprisonment. Gas and electricity arrears can lead to disconnection or a prepayment meter being installed. Income tax, VAT and National Insurance owed to HMRC carry enforcement powers other creditors do not have, including direct recovery from bank accounts and from earnings. Television licence non-payment is a criminal offence in the UK outside Scotland. Child maintenance arrears carry their own enforcement powers.

Non-priority debts are credit cards, overdrafts, personal loans, catalogue and store accounts, payday loans, buy-now-pay-later balances, most utility debts on closed accounts, and money borrowed from family. They can result in default notices, a damaged credit file and eventually a county court judgment, which can lead to an attachment of earnings or a charging order on a property. Serious, but slower and more negotiable.

That ordering is counterintuitive because the pressure runs the opposite way. Commercial creditors have well-staffed collections operations that call and text daily; councils send letters. The result is households paying credit cards while council tax arrears build, which is precisely backwards.

Build the picture before you do anything: a list of every debt, the balance, the interest rate, the minimum payment and whether it is priority or not, alongside a household budget of income and essential spending. Advisers use a common format, the Standard Financial Statement, and creditors are expected to accept it. It is the document that turns 'I cannot pay' into a proposal a creditor can agree to.

Check what you are entitled to before assuming the budget cannot improve. Unclaimed benefits are the single largest source of missing income in over-indebted households — Universal Credit, Pension Credit, Council Tax Reduction, Attendance Allowance and disability benefits go unclaimed at scale. A benefits check is a standard part of a debt advice appointment and frequently changes the answer entirely.

Check for debts that are unenforceable or already settled. Some consumer credit agreements are unenforceable where the paperwork does not comply with the Consumer Credit Act, and most debts become statute-barred after a limitation period during which no payment was made and no acknowledgement given — five years in Scotland, six in England, Wales and Northern Ireland for most simple contract debts. Acknowledging a statute-barred debt in writing or making a payment can restart the clock, which is why you should take advice before responding to a chaser about a very old debt.

Contact a free, FCA-regulated debt advice provider — StepChange, Citizens Advice or National Debtline are the main ones, and all offer telephone and online routes as well as face-to-face in some areas. There is no charge, no product being sold, and no commission.

Avoid firms that advertise heavily for debt solutions and charge a fee. Fees are deducted from the money you pay, which means creditors receive less and the plan lasts longer. Some are lead generators that sell your details on. The free sector provides the same statutory solutions, including Debt Relief Orders and Individual Voluntary Arrangements, without the fee.

Ask the adviser about Breathing Space. In England and Wales, the Debt Respite Scheme gives a moratorium of up to 60 days during which most creditors must stop applying interest, fees and charges, must stop enforcement action, and must stop contacting you about the debt. Enforcement agents cannot act, and most court action pauses.

Only a regulated debt adviser can start it, and there are conditions — you must not have had a standard Breathing Space in the previous twelve months, and you must be engaging with the advice process. It buys time to work out a solution; it does not write anything off, and payments that fall due during it still accrue.

There is a second, more protective version. A mental health crisis moratorium is available for people receiving mental health crisis treatment, applied for through an approved mental health professional. It lasts as long as the crisis treatment plus a further period, has no twelve-month restriction, and can be applied for by a nominated third party on the person's behalf. This is significantly stronger than the standard version and is under-used.

During the moratorium, work with the adviser on the actual solution: a negotiated repayment arrangement, a token payment arrangement where there is nothing spare, a formal insolvency route, or in some cases writing to creditors asking them to write off debt where income will never recover.

If you have nothing available after essential spending, say so. Creditors are expected under FCA rules to treat customers in financial difficulty fairly, and a nil or token offer supported by a Standard Financial Statement is a legitimate outcome, not a failure. Do not borrow to make a payment you cannot afford in order to look cooperative.

A Debt Management Plan is an informal arrangement to pay creditors a reduced monthly amount, arranged free by a charity or for a fee by a commercial firm. It is not binding on creditors — they can still refuse, add interest and take action — but in practice most accept a plan supported by a proper budget, and many freeze interest. It suits people whose income will recover and who can clear the debt in a reasonable period.

A Debt Relief Order, in England, Wales and Northern Ireland, writes off qualifying debts after a moratorium period for people with low income, minimal assets and debts below a set ceiling. It is applied for through an approved intermediary — the free advice charities do this — and the application fee was removed in England and Wales, though Northern Ireland's arrangements are separate. It suits people with no realistic prospect of paying: no property, a low-value vehicle at most, and little spare income.

An Individual Voluntary Arrangement is a formal, legally binding agreement supervised by an insolvency practitioner, typically running for several years, after which the remaining qualifying debt is written off. Once the required majority of creditors by value approves it, all are bound. It suits people with a regular income and assets — often a home — that they want to protect, and it is the main route for someone with equity who would lose the property in bankruptcy. It has real costs, taken from the payments, and failure part-way through leaves the debts outstanding.

Bankruptcy is applied for online through the Insolvency Service in England and Wales, with an application fee, and normally ends restrictions after a year, though payments from income can continue longer. Assets including a home can be sold to pay creditors. It is not a disaster for everyone — for a tenant with no assets and substantial debt it can be the cleanest route — but it affects some occupations and professional registrations, so check the consequences for your job before applying.

An administration order is a less-used route through the county court in England and Wales for people with a county court judgment and total debts below a limit, consolidating payments through the court.

Scotland has its own statutory landscape administered by the Accountant in Bankruptcy. The Debt Arrangement Scheme is a statutory Debt Payment Programme that freezes interest, fees and charges and protects against enforcement while you pay debts in full over an agreed period — closer in effect to a protected debt management plan than to insolvency. Scotland also has its own Minimal Asset Process and full sequestration, the Scottish equivalent of bankruptcy, under the Bankruptcy (Scotland) Act 2016, and a statutory moratorium against diligence. Do not read English guidance across to Scotland; the schemes, the thresholds and the terminology all differ.

Northern Ireland has Debt Relief Orders, IVAs and bankruptcy but is not covered by the England and Wales Breathing Space scheme. nidirect and the Northern Ireland courts are the reference point there.

Every formal solution has a credit file consequence lasting years, and most are recorded on a public register. That is a real cost, but it should be weighed against the cost of an unsustainable plan that never ends. Advisers will set out both.

Enforcement agents — bailiffs — in England and Wales operate under a defined statutory procedure. They must give notice before a first visit, cannot force entry to a home for most civil debts on a first visit, cannot enter through anything other than a door in normal circumstances, and cannot take goods belonging to someone else or basic household necessities and tools of a trade up to a value limit.

You do not have to let them in, and once they have been let in the position changes materially. Deal with them at the door or by phone. If you are vulnerable — elderly, disabled, seriously ill, pregnant, recently bereaved, or with young children — say so and put it in writing, because enforcement agents are required to take vulnerability into account and to withdraw in some circumstances.

Scotland does not use bailiffs in the same way. Enforcement is called diligence and is carried out by sheriff officers under a different procedure, including arrestment of earnings and bank accounts and attachment of goods, with its own protections. Northern Ireland uses the Enforcement of Judgments Office, a court body rather than private firms.

If a creditor takes you to the county court, respond to the claim form rather than ignoring it. Ignoring it produces a default judgment for the full amount plus costs, whereas responding lets you admit what you owe and propose instalments the court can order. Judgments can also be set aside where you never received the papers.

A charging order turns an unsecured debt into one secured against your property after a judgment, and an order for sale is a further and less common step. This is the mechanism by which credit card debt can eventually reach a home, and it is a reason not to let judgments go undefended.

Do not ignore correspondence from HMRC or the council. Both have powers other creditors do not, both will negotiate a time-to-pay arrangement when asked, and both escalate quickly when ignored. HMRC's time-to-pay service exists precisely for this and is arranged by telephone or online.

Finally, be wary of anything that promises to make debts disappear for a fee, of transferring assets to relatives, and of taking further credit to service existing credit. All three make an insolvency route harder later, and the last one is the mechanism by which a manageable problem becomes an unmanageable one.

Keep the essentials running first: housing costs, energy, water, food and travel to work. A repayment plan that leaves a household unable to heat the home fails within weeks and damages your credibility with creditors when it does.

If a benefit is being reduced by deductions for arrears and overpayments, you can ask the DWP to lower the rate of recovery. This is a real discretion and it is exercised. Similarly, energy suppliers must offer help to customers in difficulty, including repayment plans matched to your ability to pay, and there are supplier hardship funds and industry schemes that write off arrears in some cases.

Council tax is the debt most worth engaging with early. Councils can spread payments over twelve months instead of ten simply on request, and Council Tax Reduction schemes, single person discounts, disregards for students and people with severe mental impairment, and hardship funds all exist. Many households in arrears are entitled to a reduction they have never applied for.

If you rent, engage with the landlord and check whether Discretionary Housing Payments are available from the council to cover a shortfall. If you have a mortgage, contact the lender early — lenders are required to treat borrowers in difficulty fairly and options include a term extension, interest-only for a period, or a payment deferral, all of which are far better than the arrears building unaddressed.

Guard against the two decisions that cause the most lasting damage. The first is securing unsecured debt against your home through a consolidation loan or second charge — it reduces the monthly payment and converts debt that could never take your house into debt that can. The second is using a pension to clear debts, which is possible from the minimum pension age but permanently removes retirement income, can create a tax charge, and in bankruptcy an untouched pension is generally protected while the cash you withdrew is not.

Watch for scams. Debt advice cold calls, offers to write off debt for an upfront fee and companies imitating the free charities are common. The free services never charge, never cold call and are listed on the FCA register, which you can check before giving anyone your details.