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Check your options for getting out of debt

This advice applies to England

If you have lots of debts and are struggling to pay, there are things you can do to help you get out of debt.

You might be able to talk to your creditors and arrange a way to pay them, or make a formal agreement called a 'debt solution'.

You’ll need to decide what the best solution is for your situation. It’ll depend on things like:

  • the type of debts you have
  • the total amount of debt you have
  • how much money you can pay towards your debts

If you have some money to pay your debts, you could arrange to pay off your debts over a few years. You might be able to get a debt management plan, an administration order or an individual voluntary arrangement (IVA).

If you don’t have any money to pay your debts there are still options that could help you. If you owe less than £20,000, you might be able to apply for a Debt Relief Order (DRO). If you owe more than £20,000 applying for bankruptcy might be an option.

Different debt solutions can affect your life in different ways. For example, they might affect your credit rating, mortgage or savings, or restrict the work you can do. Make sure you understand how you'll be affected before you apply for a debt solution.

If you need more help understanding the different options and their risks, contact your nearest Citizens Advice.

Talk to your creditors

Before you explore any debt solutions it's important to talk to your creditors. You might be able to come to an agreement with them to pay off your debts, or get more time to work out your situation. Find out about making a plan to pay your creditors.

If you've already agreed to make payments to your creditors you should still check if other debt solutions could help you - there might be a better way forward.

If you don’t feel able to talk to your creditors directly, or they won’t agree to your offers, check if you can use another solution. 

Check how much money you can pay towards your debts

Before you explore any debt solutions, you’ll need to:

If you have money to pay your debts

Try to make an agreement with your priority creditors before you explore any debt solutions.

If you can’t make an agreement with them you should still pay them what you can afford, but this might not stop them taking action against you. Check which debts to pay first.

If you have money left after paying your priority debts, you might be able to:

  • set up a debt management plan (DMP) - this means you’ll pay off your debts through an independent company

  • apply for an administration order - this means you’ll pay off your debts through the court

  • set up an individual voluntary arrangement (IVA) - this means you’ll pay off your debts through a specialist called an insolvency practitioner

Even if you have money to pay your debts, going bankrupt might be an option for you. To check if bankruptcy is right for you, contact your nearest Citizens Advice.

Check if you can get a debt management plan (DMP)

If you get a debt management plan you agree to pay off your debts with one monthly payment to a DMP provider. The DMP provider is an independent company. They’ll deal with your creditors for you and make your payments.

How long your DMP lasts will depend on how much debt you have and how much you can pay off each month.

Anyone can get a DMP - it doesn’t matter how much debt you have. You might be able to get a DMP if:

  • you can pay your priority debts but you’re struggling to pay other debts like credit cards and loans
  • you can pay at least £5 a month towards each of your debts

You can change your DMP at any time, for example if your income increases and you can afford to pay more.

You can cancel your DMP at any time if you decide it’s not the right debt solution for you or you’re struggling to pay. If you haven’t finished paying off your debts you’ll need to contact your creditors to arrange another way to pay.

Check if a DMP is right for you

If you’re thinking about getting a DMP it’s important to know:

  • it doesn’t usually include priority debts so might not help you if you’re struggling with your rent or council tax, for example
  • it can take a long time to pay off your debts if you’re only making small payments
  • your creditors don’t have to agree to the plan and they can stop accepting it or ask for more money at any time - it isn’t a legal agreement
  • your creditors can still contact you about the debts you owe
  • it could make it harder for you to borrow money in the future - check how a DMP might affect your credit rating

Getting a DMP

Don’t pay for a DMP - you can get one for free. If you pay for your DMP the DMP provider will take part of your monthly payment to cover their fees. This means less money will go to your creditors and it’ll take you longer to pay off your debts.

Find out how to choose a debt management provider.

You should only use a DMP provider who is regulated by the Financial Conduct Authority. You can check if a DMP provider is regulated on the FCA website.

Find out more about getting a debt management plan if you think it’s right for you.

Check if you can get an administration order

If you have an unpaid county court or high court judgment, you might be able to get an administration order to help you pay off your debts. This means you agree to pay off your debts with one monthly payment to the court.

The court decides how much you have to pay. Your creditors can object to what the court suggests but the court has the final decision. The court will pass the money on to your creditors and deal with them for you.

Your creditors can’t contact you about the debts included in the order while it’s in place or take any action against you to get their money back. They also can’t add interest to the amount you owe them.

You might be able to get an administration order if you:

  • have more than one debt
  • owe less than £5,000
  • have an unpaid county court or high court judgment

Check if an administration order is right for you

An administration order might not be the best debt solution for you. It’s important to know:

If you have rent or mortgage arrears, you could still be evicted from your property even if you include them in the order. Check what to do if you have mortgage or rent arrears and are thinking about an administration order.

Getting an administration order

You’ll need to fill in an application form and list all your debts. Then you’ll need to take it to the court and sign it in front of a court officer.

Check how to get an application form and how to fill it in. 

Contact your nearest Citizens Advice if you need help filling in the form.

Check if you can get an individual voluntary arrangement (IVA)

If you get an IVA you agree to pay off your debts with one monthly payment, usually over 5 years.

Your IVA will be organised by a specialist, called an insolvency practitioner. This will usually be a solicitor or an accountant and they’ll deal with your creditors for you.

You’ll have to pay the insolvency practitioner for their services. The fees will be added to your repayments. The fees for an IVA can vary and are usually much higher than for other debt solutions. If you get an IVA you should make sure you understand how much you’ll have to pay the insolvency practitioner and when.

Not all your creditors need to agree to an IVA for you to get one. You'll need the agreement of creditors who cover at least 75% of the total amount you owe. Read more about how creditors agree to an IVA proposal.

Your creditors can't contact you about the debts included in the IVA while it's in place or take any action against you to get their money back.

An IVA might be a suitable option if you:

  • have more than one debt and 2 or more different creditors
  • owe more than £10,000
  • have a regular, steady income
  • can pay at least £100 a month towards your debts

You should get advice from your nearest Citizens Advice before you try to get an IVA.

Check if an IVA is right for you

An IVA might not be the best debt solution for you. It’s important to know: 

Getting an IVA

Getting an IVA can have a big impact on your life. It's important you get advice before you get an IVA. Contact your nearest Citizens Advice - they can help you compare your options and decide if an IVA is right for you.

If after getting advice you think an IVA is right for you, you’ll need to find a specialist insolvency practitioner. You won’t be able to set up an IVA on your own. You can contact different practitioners to compare costs and find the best deal for you.

It’s worth finding a specialist close to where you live because it's usually best to meet them in person.

If you're sure an IVA is right for you and you've had an advice to help you decide, you can find a specialist insolvency practitioner in your area on GOV.UK

You'll need to prepare for your first meeting. Check what you need before you meet your insolvency practitioner.

If you have little or no money to pay your debts

If you don’t have any money left after paying your priority debts and living costs, or you only have a small amount, check if you can increase your income. You should also check if you can reduce your living costs.

If you still don’t have enough money to pay your debts you might be able to:

  • get a Debt Relief Order
  • apply for bankruptcy

Check if you can get a Debt Relief Order (DRO)

If you get a DRO, you won’t pay anything towards the debts in the order for 12 months. At the end of the 12 months you'll no longer owe those debts. While the DRO is in place your creditors can’t ask you to pay any debts included in it or start any action against you.

You might be able to get a debt relief order if:

  • you owe £20,000 or less
  • you have £50 or less left over each month after paying your living costs
  • you don’t own your home or a car worth £1,000 or more
  • you have £1,000 or less in savings and other assets
  • you haven’t been given another a DRO in the last 6 years
  • you’ve lived or worked in England or Wales for the last 3 years

You might find it harder to get a DRO if in the last 2 years you’ve made payments to one creditor but ignored others, given away valuable things you own, or sold things you own for less than they were worth. 

If it’s found that you made your situation worse, or acted dishonestly, you might be given a debt relief restrictions order (DRRO). A DRRO will extend your debt relief order so the restrictions last longer than 12 months. Read more about debt relief restrictions orders.

Check if a DRO is right for you

If you’re thinking about getting a DRO it’s important to know:

  • if you don’t meet the criteria or give extra information when you’re asked for it, your application could be turned down - check what to do if your DRO application is refused
  • it costs £90 to apply - you can pay this in installments but you won’t get it back if your application is refused
  • it won’t cover all debts - you'll still have to pay back child maintenance arrears, court fines, student loans, social fund loans, personal injury compensation and any debts caused by fraud
  • if you have rent arrears in a DRO your landlord can’t force you to pay what you owe, but they can still try to evict you
  • it might make it harder to borrow money in the future - check how a DRO will affect your credit rating
  • you’ll have to tell the creditor about your DRO if you want to borrow more than £500 during the 12 months
  • you won’t be able to set up your own company or be a director of another company, even under a different name, without the court’s permission

If you get a DRO but your situation improves during the 12 months - for example if your income goes up or you get a payment for backdated benefits, the DRO can be stopped. You won’t get your £90 application fee back. Check what to do if your circumstances change.

Getting a DRO

You’ll need to apply through an authorised debt adviser, called an 'approved intermediary'. You won’t be able to apply for a DRO on your own. They should help you gather the information you need to apply for a DRO. They also have to:

  • check you meet the rules to get a DRO
  • explain how a DRO might affect you
  • explain your responsibilities when you have a DRO
  • apply on your behalf

Check how to find an authorised debt adviser and get a DRO.

Check if you can apply for bankruptcy

You might be able to apply for bankruptcy if you can't pay your debts and the amount you owe is more than the value of the things you own.

The bankruptcy period usually lasts 12 months. If you go bankrupt your creditors won’t be able to contact you about your debts or take you to court.

Bankruptcy can have very serious consequences, for example you could lose your home or your job. It's important to understand how it could affect you and get help from your nearest Citizens Advice before applying. 

There are strict rules to follow if you apply for bankruptcy. Some of the rules apply for the time before you applied for bankruptcy. You could go to prison or get a fine if you’ve done anything that counts as a bankruptcy offence. You could also have restrictions put on you by the court which make your bankruptcy period longer. Check what counts as a bankruptcy offence.

If you have no spare income

You won't have to pay any money towards your debts during the bankruptcy period if either:

  • your only income is benefits
  • you have less than £20 a month to pay towards your debts

You won’t have to pay the money back but going bankrupt could still have a big impact on your life.

If you owe less than £20,000 and don’t own your home, a Debt Relief Order might be a better option for you.

If you're earning and have a small amount spare

You might be asked to make payments towards your bankruptcy debts during the 12 months. This is called an income payments agreement (IPA). IPAs usually last for 3 years.

If you don’t agree, the court can make an income payments order so your creditors get payments straight from your salary.

Find out about making an income payments agreement.

Check if bankruptcy is right for you

You'll need to pay £680 if you decide to apply for bankruptcy. Find out more about bankruptcy fees.

Going bankrupt might not cover all your debts. Debts like court fines, student loans and child maintenance arrears won’t be written off if you go bankrupt. Check which debts bankruptcy covers.

There are things you need to check before you think about applying for bankruptcy. You'll need to:

If you’re a solicitor, accountant, work in the financial sector or run your own business, you should check how bankruptcy could affect your job.

Applying for bankruptcy

If you want to apply for bankruptcy you should get advice first. Contact your nearest Citizens Advice to make sure it's the best option for you.

If you decide to apply, you'll need to fill in an online application form. Check the timeline for bankruptcy and how to apply.

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