Dealing with debt

We set out the basic steps to help you deal with a debt problem here. However, you should get independent advice to help you find the best way to deal with your debt problem.

If you are in the UK you can get free and independent advice from organisations like The Royal British Legion, Citizens Advice and the National Debtline. Or if you’re stationed abroad you can contact The Royal British Legion.

See Where to get help if you are in debt for more information.

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.

Money fitness tip

Print off our ten-point Getting out of debt checklist and tick it off things as you go along.  

Priority debts usually include things like:

  • mortgage repayments (if you have your own home)
  • secured loans
  • rent (if you live off-site)
  • Council Tax (if you have your own home)
  • 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
  • doorstep loans
  • 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 The Royal British Legion, Citizens Advice and the National Debtline.

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.

Use our Budget planner to help you. Or you can get free and independent help working out your personal budget from organisations like The Royal British Legion, Citizens Advice and the National Debtline. There are also self-help packs and online tools you can use to help you.

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.

For details about your options see the National Debtline website. There are different options if you live in England and Wales or Scotland.  If you live in Northern Ireland you should contact a local agency for more information.

Money fitness tip

Make sure you deal with your priority debts first.

It’s important you get independent advice to help you find the best way to deal with your debts – see Where to get help if you are in debt.  

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 – see Dealing with creditors.

Last reviewed: 04/06/2018