Dealing with debt

When you're facing financial difficulties it can be hard to work out what to pay off first. Here are some suggestions to help you deal with your debt.

Dealing with debt

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Developed with the Money Advice Service, this podcast explains how to deal with debt. You can also read the information below for further support.


Working out your debts

Draw up a list of exactly how much you owe and you who owe it to. Staple any reminder letters, loan agreements or statements together and keep them safe.

Urgent court papers or letters will need to be acted upon quickly. If you don't then your creditors won't know you're having financial difficulties and will assume you don't plan to pay.

This could result in a court order giving bailiffs permission to take your goods. In some scenarios unpaid debts can result in a prison sentence. However, in reality this is unlikely to affect you as long as you keep the relevant people informed of your current situation. This way they can work with you to find a solution to paying back debts over a longer period of time.

Priority debts

It is a good idea to work out a budget and see how much money you may be able to put aside to help pay off your debts (arrears).

There will be some debts that are more urgent than others. These are known as priority debts and should be paid off first.

This is because the consequences of not paying them can be more serious than other forms of debts, including losing your home or having your gas or electricity cut off.

Some debts, such as Council Tax or Child Maintenance may be taken out of your benefits or wages via the Department for Work and Pensions (DWP).

Priority debts include:

  • mortgage
  • rent
  • Council Tax
  • gas and electricity
  • court fines for traffic offences
  • Child Maintenance
  • Income Tax or VAT.

Non-priority debts

These are still important, but you can't be sent to prison for not paying these debts. Another example is that you can't have your water cut off because of not paying your water bills.

If you don't make any offers to pay off your debts, your creditors can still take you to court. This can then result in a visit from the bailiffs, who will sell your goods to pay for your debts.

You may also have to return any goods you have failed to keep up on any hire purchase payments.

Non-priority debts include:

    • credit card debts (including overdrafts, loans, hire purchase, credit card and catalogues)
    • benefit overpayments
    • overdrafts
    • local authority parking fines
    • water and sewage charges
    • other loans (including student loans)
    • money borrowed from friends and family.

Contacting your creditors

You may receive some frightening letters and bills threatening legal action. It's worth bearing in mind that legally, creditors are not allowed to harass you. There is a range of behaviour that counts as harassment. For example, they cannot contact you several times a day or at unreasonable hours, threaten you physically or verbally, or imply that legal action can be taken when it can't.

They also can't pressure you to pay off large amounts in one go or tell someone in your family, or even a neighbour, about your debts.

Prioritising repayments

When it comes to paying off debts, you need to decide why some debts are more important than others. For example, if you need a car to get to and from hospital appointments, it's important that you sort out any repayments as a priority.

Ask your creditors to explain what type of agreement you have, the balance owing, terms or repayment and interest or penalties, your debts and any insurance policy attached to the agreement.

If you do have to go to court try not to miss your hearing if you are able to go. Take your financial statement, or copies of letters that are relevant, with you.

If you can't make a hearing because you have planned treatment or are not well enough to attend, you need to let the court know as soon as possible. This way you can be excused from attending and another date can be set.


      • ask them if they can freeze any interest on your debts
      • ask them if they will agree to you paying a smaller amount over a set period of time
      • get any agreements in writing and keep a copy of any letters or emails you've received or sent
      • try offering your creditors a full and final settlement where you pay a lump-sum instead of the full balance you owe on the debt. In return, the creditor agrees to write off the rest of the debt.


      • give away your account details and reference details to anyone other than the creditors
      • agree to pay an amount that isn't realistic and that you can't afford
      • hand your property keys back to the lender
      • send any payment before it's agreed (especially in terms of a full and final settlement)
      • borrow more money, known as debt consolidation loans – they may help you in the short-term, but could end up getting you into more serious debt.

For more information and advice you can contact your local authority or get advice from the following organisations.

Contact your local Citizens Advice Bureau or phone CLIC Sargent on 0300 330 0803 and we’ll put you in touch with someone who can help.

You can also call National Debtline on 0808 808 4000 and Step Change (was the Consumer Credit Counselling Service) on 0800 138 1111.

Updated August 2016, next review due 2017.