How to Get Out of Debt in the UK

Debt can feel overwhelming, but it is a problem with solutions. Whatever your circumstances, there are practical steps you can take today to start getting out of debt — and a range of UK-specific formal options available if you need more structured help. This guide walks you through the process from first principles through to formal insolvency solutions.

Step 1: Face the Full Picture

The single hardest step is also the most important: knowing exactly what you owe. Gather every statement, letter and email. List every debt with:

• Who you owe (the creditor or collection agency)
• How much you owe (the current balance)
• The minimum monthly payment
• The interest rate or APR
• Whether it is a priority or non-priority debt

This is uncomfortable, but a clear list is the foundation of every decision that follows. Guessing at the total almost always makes the problem feel worse than it is — and stops you acting.

Step 2: Separate Priority and Non-Priority Debts

Not all debts are equal. UK law and creditors treat some debts far more seriously than others, and the consequences of non-payment differ dramatically.

Priority debts

Priority debts are ones where non-payment can lead to serious consequences — losing your home, losing essential services, or even imprisonment (in rare cases of deliberate council tax refusal).

• Council tax arrears — local authorities can apply for a liability order, send bailiffs, and in extreme cases apply for committal to prison.
• Rent arrears — can lead to eviction.
• Mortgage arrears — your home is at risk of repossession.
• Gas and electricity arrears — supply can be disconnected (though suppliers must follow strict rules first).
• Court fines — non-payment can lead to enforcement and, ultimately, imprisonment.
• Income Tax and National Insurance debts — HMRC has strong enforcement powers.
• TV licence arrears — can result in a fine and, in rare cases, imprisonment.

Non-priority debts

These are still legally owed, but the consequences of non-payment are less immediate:

• Credit cards
• Personal loans
• Overdrafts
• Store cards
• Catalogue debts
• Payday loans
• Buy-now-pay-later agreements

Always deal with priority debts first. If you cannot pay everything, paying the priority debts and negotiating token payments on the rest is the correct approach.

Step 3: Build a Realistic Budget

You cannot plan repayments without knowing what you can actually afford. Use a simple income and expenditure sheet:

1. Total monthly income — salary after tax, benefits, pensions, any other regular income.
2. Essential monthly spending — rent/mortgage, council tax, utilities, food, transport, basic household costs.
3. What’s left — income minus essential spending is your disposable income for debt repayment.

If your disposable income is negative, you are in a deficit situation. This is common, and it points towards formal solutions rather than informal repayment plans.

Be honest and realistic. Understating food or transport costs to make the numbers “work” will just lead to a plan you cannot stick to. The Standard Financial Statement used by UK debt advisers uses agreed guideline amounts for household spending — these are a good reference point.

Step 4: Maximise Income and Reduce Costs

Before borrowing more or entering a formal solution, check whether you can improve your situation at the margins:

• Check benefit entitlement — millions of pounds of means-tested support goes unclaimed each year. Use a benefits calculator (entitledto.co.uk or turn2us.org.uk).
• Review subscriptions — cancel anything non-essential.
• Switch utilities and insurance — comparison sites can find cheaper tariffs.
• Negotiate bills — many providers will offer better deals to customers who ask.
• Consider a second income — even a few hours a week can help.

These steps alone rarely solve serious debt, but they free up money for the repayments that will.

Step 5: Deal with Creditors Early

A common and damaging mistake is silence. Creditors cannot help if they do not hear from you, and ignoring letters usually makes the situation worse — debts pass to collection agencies, default notices are issued, and County Court Judgments (CCJs) become more likely.

Contact each creditor, explain your situation, and offer what you can realistically afford. Many will agree to:

• Reduced payments — accepting a lower monthly amount temporarily.
• Frozen interest and charges — particularly if you can demonstrate financial hardship.
• Payment holidays — a short break from payments.

Put every agreement in writing and keep copies. If a creditor refuses to cooperate, do not panic — a free debt adviser can negotiate on your behalf.

Step 6: Consider Formal Debt Solutions

If informal arrangements are not enough, the UK has a range of formal solutions governed by the Insolvency Act 1986 and regulated by the Financial Conduct Authority (FCA). The right one depends on your level of debt, your income, and whether you own a home.

Debt Management Plan (DMP)

A DMP is an informal agreement to repay debts at a reduced rate over a longer period. It is not legally binding, but most creditors will freeze interest if the plan is set up through a reputable provider. There is no minimum or maximum debt level. A DMP suits people with some disposable income who can repay their debts in full, just over a longer timescale.

Individual Voluntary Arrangement (IVA)

An IVA is a legally binding agreement with your creditors, supervised by a licensed Insolvency Practitioner. It typically lasts five or six years. You make affordable monthly payments, and at the end of the term, remaining unsecured debt is written off. Depending on your circumstances, you may be able to write off a portion of your unsecured debt. IVAs are suitable for debts generally above £6,000 with a regular income. They affect your credit file for six years and may require you to release equity from a home.

Debt Relief Order (DRO)

A DRO is a formal solution for people with low debt (under £30,000), low disposable income (under £75 per month), and few assets (under £2,000, plus a vehicle worth up to £2,000). It lasts 12 months, during which creditors cannot take action. If your situation does not improve, the debts are written off at the end. A DRO costs £90 to apply and is designed for those who cannot afford other options.

Bankruptcy

Bankruptcy is a serious step that writes off most debts but has significant consequences. Assets including your home may be sold, and it stays on your credit file for six years. It can be the right option when debts are large, income is low, and there is no realistic prospect of repayment. Bankruptcy can be petitioned by you or by a creditor owed £5,000 or more.

Debt Arrangement Scheme (Scotland only)

If you live in Scotland, the Debt Arrangement Scheme (DAS) is a statutory scheme that freezes interest and charges while you repay debts in full at an affordable rate.

Step 7: Get Free, Impartial Advice

You do not have to navigate this alone, and you should not pay for initial advice. Several organisations provide free, confidential, impartial debt advice:

• StepChange Debt Charity (stepchange.org) — the UK’s largest debt advice charity, offering free advice and DMP setup.
• Citizens Advice (citizensadvice.org.uk) — face-to-face and phone advice on debt and benefits.
• National Debtline (nationaldebtline.org) — free telephone and online advice.
• Christians Against Poverty (capuk.org) — free debt coaching in local communities.

A free adviser will review your full situation and recommend the best option. They will not push you towards a particular product because they have no financial incentive to do so.

Common Mistakes to Avoid

• Borrowing to pay off borrowing — consolidation loans can help, but only if you address the underlying spending. Many people who consolidate end up with the old debts plus new ones.
• Paying for advice — reputable initial advice is free. Be cautious of any firm charging upfront fees for “debt help.”
• Ignoring priority debts — credit card companies are persistent, but council tax arrears and rent have far more serious consequences. Prioritise correctly.
• Waiting too long — debts grow through interest and charges. The earlier you act, the more options you have.
• Hiding from your partner — joint debts affect both of you. Honesty is essential.

What to Do Right Now

If you have read this far, you have already taken the hardest step. Here is what to do next:

1. Make your list of debts.
2. Identify the priority debts.
3. Do a simple income and expenditure budget.
4. Contact a free advice service for guidance.
5. Use our assessment tool to see which solutions you may qualify for.

Ready to check your options? Get your free assessment

This information is for guidance only. For free, impartial debt advice, contact StepChange (stepchange.org) or Citizens Advice (citizensadvice.org.uk). We are not a debt advice charity and may receive commission from solution providers.