Debt Help & Options

Start by understanding your complete financial position rather than dealing with whichever creditor is making the most noise. List your income, essential household expenditure, debts, arrears and any court or enforcement action that has already started.

Some debts are considered more urgent because the consequences of non-payment can be more serious. Once the overall position is understood, an appropriately authorised debt adviser can assess which available routes may be suitable for your circumstances.

Depending on the circumstances, routes can include informal arrangements with creditors, Debt Management Plans, Full & Final Settlements, Individual Voluntary Arrangements, Debt Relief Orders and bankruptcy. Breathing Space can also provide temporary statutory protection while debt advice is obtained and a plan is considered.

These routes work differently. Some are informal, some are formal insolvency procedures and Breathing Space is temporary protection rather than a debt solution itself.

A Debt Management Plan is generally an informal repayment arrangement for eligible non-priority debts. An IVA is a formal insolvency arrangement involving an insolvency practitioner and an approved proposal to creditors.

A DRO is a formal debt relief procedure for people who meet specific statutory eligibility criteria, while bankruptcy is a formal insolvency process in which debts, income and assets can all become relevant. These are materially different procedures rather than different versions of the same plan.

A DMP is not a formal insolvency procedure and does not automatically bind creditors. A creditor can therefore decide whether to accept or cooperate with a proposed arrangement.

This is one of the important differences between an informal DMP and formal procedures that operate within a statutory framework. Creditor behaviour and the wider financial position should be considered when regulated debt advice is obtained.

In England and Wales, the Debt Respite Scheme — commonly called Breathing Space — can provide eligible people with temporary legal protection from certain creditor action while they receive debt advice.

A standard Breathing Space can last for up to 60 days. During the protection, most enforcement action and creditor contact relating to included debts is paused, and most interest and charges on those debts are frozen. It is not a payment holiday or a long-term debt solution.

It can. Missed payments, defaults, court judgments and formal insolvency procedures can affect information held on your credit file. The way a particular arrangement or settlement is recorded depends on what has happened and the type of debt route involved.

It is therefore useful to consider the credit-file consequences as part of the wider picture rather than looking only at the monthly payment or amount of debt.

Depending on the debt and circumstances, a creditor may pursue a civil court claim to recover money they say is owed. Court proceedings are a different stage from ordinary collection activity and can involve formal documents and response deadlines.

If you receive a claim form or other court document, identify exactly what it is and the date by which a response is required rather than treating it as another routine collection letter.

Ignoring correspondence does not normally make the underlying debt disappear. Depending on the debt and creditor, unresolved arrears may progress through collection activity, formal notices and potentially court proceedings.

Not every debt follows the same path, but identifying what a letter is, who sent it and whether it contains a deadline can help establish the stage the matter has reached.

Formal enforcement can result in an enforcement agent attending an address in some circumstances, but a debt collector and an enforcement agent are not the same thing and do not automatically have the same powers.

The legal position depends on the type of debt, the enforcement authority being used and the stage the matter has reached. If you receive an enforcement notice, check the document carefully and obtain appropriate help where needed.

A creditor may agree to accept a negotiated payment in settlement of a debt, but they are not required to accept an offer and there is no standard percentage that every creditor must accept.

Where a Full & Final Settlement is agreed, the terms should be clearly confirmed in writing before payment, including what will happen to any remaining balance and how the account will be recorded.

There is no single debt route that is appropriate for everyone. DMPs, IVAs, DROs and bankruptcy differ in legal status, eligibility, creditor treatment, assets, payments, consequences and professional involvement.

Choosing between them requires an assessment of your individual financial circumstances. Where that assessment amounts to regulated debt advice, it should be provided by an appropriately authorised debt adviser.

Regulated debt advice should be provided by an appropriately authorised debt advice organisation or professional. Free debt advice services are available in the UK, and MoneyHelper provides a debt advice locator for finding free and confidential support.

Stop Your Debt UK can help with permitted administration, documents and case coordination. Where regulated debt advice or another specialist service is required, the relevant work is handled by an appropriately authorised professional.