What to do if you are struggling with debt problems

What to do if you are struggling with debt problems

Since the economy took a turn for the worse more and more people have been finding themselves struggling with debt problems as lenders cut borrower’s access to credit to minimise their risk.

Most people will associate debt with loans and credit cards but more and more people are falling into debt through unpaid bills and mortgage and rent arrears as they struggle to make ends meet.

But what can you do if you find yourself struggling at the end of each month?

Prioritise debts

If you are struggling with debt then there is a good chance that you will owe money to a variety of lenders, be that your mortgage provider, landlord, bank or even your gas and electricity suppliers.

So the first thing you have to do in this situation is sort out which debts are a priority and should be paid first. As it is unlikely that you are going to be turfed out of your home or have to sit in total darkness as a result of not paying your credit card bill this should be considered a lower priority than your rent or utilities.

So it is vital that you pay these debts first then worry about other debts such as unsecured loans, credit card bills and overdrafts.

Make a budget sheet

You then need to make a list of all your debts, including things like mortgage and credit card payments, and other monthly outgoings, for example shopping, telephone bills and car insurance.

Then make a list of all your incomings each month through wages, benefits etc. and then subtract your total debts from your total income and this should give you a figure that will be your disposable income at the end of each month.
If you have no money left at the end of each month or your disposable income is actually negative then it may be time to seek professional advice.

Get help

If you are having problems with debt then the worst thing that you can do is simply ignore it and hope it will go away. It won’t go away and it will only get worse as your debt increases as fines and penalties are added on to it and it will eventually be passed on to bailiffs or even the County Court.
If you are unsure what to do then it may well be worth seeking prefessional financial advice. If you go down this route then you will probably be given one of four options:

  • Debt Consolidation
    • If you are a homeowner then you may be able to take out a debt consolidation loan that you can secure against your home. This can make your debts easier to manage as there will only be one monthly repayment and it may also give you a more favourable rate of interest.
  • Debt Management Plan
    • your financial representative will get in touch with your creditors and try to come to an arrangement whereby you can restructure your debts into affordable payments. This may even involve you paying a token amount, such a £1 per month, for a period of six months to give you time to get your finances back on track.
  • IVA
    • An Individual Voluntary Arrangement may be agreed upon if you simply will not be able to pay back everything that you own. This will usually involve your creditors writing off a certain amount of the money that you owe them and let you repay a certain amount back each month over a five-year-period. If you do go down this route then you will not be able to take out more credit whilst you are part of an IVA.
  • Bankruptcy
    • often seen as the last resort, this will involve all of your debts being written off but may mean that any assets that you have will be seized to help pay off lenders as part of the bankruptcy. This will also be on your credit file for up to six years and make any form of credit hard to come by.


  1. Hi,

    There is some good advice here in terms of prioritising debts and making a budget sheet.

    There are other debt options excluding the 4 you mention. For example, making token payments to creditors because you can’t afford to pay anything back at present. In Scotland, the equivalent to the IVA is a Trust Deed and a similar solution to debt management, but legally binding, is a debt arrangement scheme.

    • Hi,

      I agree with Steve, this is really good advice.

      It is worth noting that an IVA is not restricted to monthly payments but a debtor can also make an offer of a lump sum. The issue here, of course, is whether creditors agree to the terms.

      Great post!

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