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Basic steps to help you deal with a debt

The basic steps to help you deal with a debt problem are shown below. However, you should get independent advice to help you find the best way to deal with your debt problem. You can get free and independent advice from organisations like Citizens Advice and the National Debtline.

• Debt - where to get free help and advice

Step one - make a list of everything you owe

You should sort out exactly what you owe and who you owe it to. The people you owe money to are known as your creditors. If you owe money, you are known as a debtor.

Step two - put your debts in order of importance

The most important debts are known as ‘priority debts’ and they aren't always the biggest ones. Priority debts are ones where serious action can be taken against you if you don't pay what you owe. For example, you could lose your home, be disconnected from a service or even go to prison.

Priority debts usually include things like:

• mortgage repayments
• secured loans
• rent
• Council Tax
• utility bills
• taxes
• court fines

You need to sort out payments on your priority debts first.

Non-priority debts include things like:

• credit card and store card payments
• bank loans
• overdrafts
• home-collected credit - like a Provident loan where the agent collects payments weekly
• catalogue repayments
• money you've borrowed from family or friends

You can't ignore these, but you don't need to deal with them as a first priority.

You can get help sorting out your priority and non-priority debts for free from organisations like Citizens Advice and the National Debtline.

• Which debts to pay off first

Step three - work out a personal budget

Work out a weekly or monthly budget to see what your income and expenses are, it can also show you where you can save money. A budget will help you decide what you can reasonably afford to repay your creditors, so it’s important to be realistic.

You can get free and independent help working out your personal budget from organisations like Citizens Advice and the National Debtline. There are also self-help packs and online tools you can use to help you.

• Personal budgets – how they can help you

• Use the Money Advice Service budget planner Opens new window

Step four - get advice on the different ways to deal with your debts

There are lots of options for dealing with debts. For example, arrangements you can make with your creditors or more formal ones that debt specialists can organise for you. There are sometimes extra costs involved and conditions you have to agree to.

It’s important you get independent advice to help you find the best way to deal with your debts. Free and independent advice is available face to face or over the telephone from organisations like Citizens Advice and the National Debtline.

• Debt repayment options - a guide

• Debt - where to get free help and advice

Step five - talk to your creditors

Once you know what you can afford to repay, talk to your creditors about your situation and what you're going to do about it. A debt adviser can do this for you, and some will do this for free.

Be realistic about what you can afford to repay and don’t assume you’ll be able to pay back more in the future. It's important to follow up a phone call with a letter confirming what has been agreed.

• Download 'Dealing with people you owe money to' (PDF, 400K) Opens new window

• Help with PDF files

Using mediation to help you deal with your debts

If you can’t come to an agreement with your creditors, or need help talking to them, you can get help from a mediation service.

In mediation, someone from a mediation service helps two sides work out an agreement. Use the link ‘Mediation in debt disputes’ for information on how mediation works and how to contact a mediation service.

• Mediation in debt disputes

More useful links

• On a low income

• Crisis Loans

• Find out about tax debts

• Debts and arrears

Useful contacts

• Money, tax and benefits contacts