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Thursday, April 2, 2015

How to deal with debt

Being in debt is no one’s idea of fun. Yet it happens to plenty of us, and is easy to fall into when you are struggling with money. Facing the problem head-on is key to getting out of debt, so read on to find out the best ways to approach debt and what your options are.

List your debts

The first step in dealing with debt is facing up the problem. So you need to sit down with a pen and paper and list all the debts you hold, and how much you owe.

Make a plan of action

How you deal with your debts will depend on your available income. And if you have very little spare money to play with, then you need to focus on priority debts first. These include:
  • Council Tax
  • Rent or Mortgage
  • Gas and Electricity
  • VAT or Income Tax Arrears
  • TV Licence
  • Child Support Payments
The consequences for not paying these debts are very serious, and include bailiffs or even prison. If these creditors have already begun court action you should be able to come to an agreement with them for repayment. However, if your problem is long term and you still cannot pay, then you will need to seek help from a specialist debt advice team who will advise you on how to proceed.


If you do have an income that includes enough money to cover your debts, then sort out a budget working out what you can afford to pay. You can then approach creditors with an income and expenditure form listing your income and expenses, with an offer of repayment. This can be for as little as £5 per month. If they agree, be sure you stick to it or you will end up with worse problems.

Options for debt

If you feel that your debts are unmanageable and you do not have the income to pay them off, then you do have options other than bankruptcy. These include:

Individual voluntary arrangements (IVA’s),

An IVA must be set up by a qualified person, called an insolvency practitioner. However, it allows you to repay your debts at a manageable rate if you have some spare income.

Debt relief order (DRO)

If you owe below £15,000 a year, do not own anything of any financial worth, and have £50 per month or less left over after essential expenses, then a DRO allows you to be free of your debts after one year. This is a cheaper option than bankruptcy.

Consolidation loan

If you can afford the repayments, then taking out a loan to repay all your priority debts off with one single payment could be an option for you.

Credit records and debt

Debts can have a significant impact on your ability to borrow in the future, and you should remember that your debts will always show up on your credit record. Use a credit reference agency or online credit report checker to be sure that any debts you pay off are recorded as paid.

About the author: Harry Price is a writer from the south coast.  He lives with his wife and 3 dogs and takes his writing inspiration from his surroundings.

Images: 1. Chris Potter/Flickr, CC BY 2.0;  2. Author owned and licensed