A guide on clearing debt
Some debt is necessary and unavoidable, but if it's keeping you up at night, it might be time to take action by looking at strategies for clearing debt and where to go for support.
By Steve Smethurst
Dealing with debt
Some of the most popular ways to get out of debt are to cut back on non-essential monthly costs, lower spending on food and drinks, sell belongings and even pick up an extra job.
However, it’s important to recognise that certain types of debt can prove more problematic than others. These include your mortgage/rent, council tax and child-maintenance debts. These should be prioritised, as the consequences of not paying them are greater.
Other strategies for clearing debt include paying off high-interest loans first, consolidating your debts and trying to clear those that might harm your credit rating. However, the best advice is to seek expert advice early.
MoneyHelper is a government-founded, independent service helping you make the most of your money. For information on dealing with debt, and to find free debt advice services, visit https://www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt.
If budgeting, consolidation and prioritisation won’t be enough to solve your debt issues, there are other options. Perhaps the best known is bankruptcy. This is a form of insolvency in which your debts are written off. However, any income or assets you have may be taken to pay off some of your debt.
It’s important to seek advice as bankruptcy may not be the best solution. Alternatives include debt management plans through which you would make a single monthly payment through a debt-management company based on what you can afford; and an individual voluntary arrangement, a form of insolvency under which you would make agreed payments to your debts, usually over several years, and at the end any unsecured debts are written off. Another option if you're on a low income with very few assets is a debt relief order, which will freeze your debts for a year then write them off completely if your circumstances haven’t changed.
The Government's Debt Respite Scheme, Breathing Space, could also be right for you. After years of campaigning from debt charities, it was introduced in May 2021 to give people in problem debt the right to legal protections from their creditors while they deal with their debts.
There are two types of ‘breathing space’ — standard and mental health crisis. With the former, if you pass the eligibility checks, your creditors won't be able to add interest or fees to your debts, or take enforcement action for 60 days.
You'll still need to make your regular payments if you can afford to, but it does stop action being taken against you if you're unable to pay.
A mental health crisis breathing space is only available to someone who is receiving mental health crisis treatment. It lasts as long as the person's mental health crisis treatment, plus 30 days. A Breathing Space can only be applied for by an approved debt-advice provider. They're administered by the Insolvency Service who'll then let the creditors know when the scheme starts. There's more information about this on the Government website.
Don’t wait to get help
The earlier you take action the sooner you’ll be able to sleep soundly at night. It’s also worth discussing your money worries with your creditors as many will be willing to come to temporary arrangements to help you out. As part of this, you'll need to work out your monthly budget to prove to creditors that you're paying what you can afford to pay. This is something our debt calculator can help you with. Add details about your debt — how much you have left to pay, the interest rate, how much you're paying each month — and our calculator will work out how many months it'll take you to pay it off in full. Finally, remember that debt advice should always be free, confidential and impartial.