Money and debt advice

Priority	Non-priority
Rent or mortgage	Unsecured loans
Secured loans	Credit cards
Council Tax	Store cards
Court fines	Overdrafts
Income tax or VAT arrears	Catalogues
TV licence	Hire purchase
Child Support Agency payments	Benefit overpayments (unless there has been a conviction for fraud)
Gas and electricity

If you are in debt, it is important to contact the people you owe money to (creditors) at the earliest opportunity. This may seem daunting but if your creditors are not aware of your financial situation they may assume you do not want to make payments and start taking action against you.

Where do you start

Contact your priority creditors to discuss your situation.
Make a list of all your essential expenditure and a note of when payment is due.
List all of your income, including all benefits.
Check you have claimed all the benefits you are entitled to. Complete a benefits check online.
Contact your local Citizens Advice for help.
Look at ways to increase your income, for example, getting an additional part time job or taking in a lodger. Ensure you check how this affects your benefits.
Work out if you can reduce your non-essential expenditure.

There are a number of good websites offering tips on money saving, including:

Next steps

Once you have worked out how much you can afford to pay your creditors, you will need to get in touch with your priority creditors and try to make payment arrangements. If there is money left over, you can make offers to non-priority creditors.

You should ensure that the offers are affordable and that you are not persuaded to offer more than you can manage to pay. Some creditors may agree to freeze interest on loans. You should ask them to consider this.

Debt management plan

There are organisations that can negotiate debt repayments on your behalf. Once a plan is in place, you would make one payment to them and they will distribute the funds to your creditors. Some of these organisations charge a fee for their services. The links below can direct you to agencies that can do this for free.

What if I do not have enough money to make payments?

If you have no available income, a large amount of debt or lots of creditors, it can be difficult to negotiate repayments. If you are on a low income and your situation is unlikely to improve, you may need to look at alternatives. It is important to seek immediate advice on your options.

Bankruptcy

Bankruptcy is a court order which can free you from large levels of debt and enable you to make a fresh start, subject to some restrictions. It ensures your assets are shared out fairly among your creditors. If you are declared bankrupt you have a duty to provide information to the official receiver and the trustee. Your finances will be investigated and you may still have to make some payments to your creditors. You should be aware that you will be unlikely to obtain credit for some time after bankruptcy. It is important to check tenancy and employment contacts before proceeding with bankruptcy as there can be an impact.

Debt Relief Order (DRO)

DROs are a cheaper alternative to bankruptcy. You may be eligible if you owe less than £30,000, are on a low income and do not have assets/savings exceeding £2,000. A DRO must be applied for through a competent authority.

Individual Voluntary Arrangements (IVAs)

An IVA is a formal form of insolvency and can be considered as an alternative to bankruptcy. An IVA is arranged by an Insolvency Practitioner and requires the agreement of 75% of your creditors (based on the amount of debt owing). The Insolvency Practitioner will charge a fee for their service. You will make one monthly payments and/or pay a lump sum to be distributed between the creditors. IVAs last for a fixed period (usually five years). When the IVA ends, any outstanding debt is usually discharged. If you default on your IVA payments, your creditors could take the decision to make an application to the court to make you bankrupt.