Other options for dealing with debts

If you can’t pay back your non-priority debts in a reasonable time, you should speak to a free debt advice agency straight away. These include StepChange Debt Charity, Citizens Advice Bureau, PayPlan or National Debtline.

Your options might include:

  • Bankruptcy or sequestration – your creditors write off your unsecured debts.
  • Debt Relief Order (DRO) – available in England, Wales and Northern Ireland. Your debts are put on hold for 12 months.
  • Minimal Asset Process (MAP) bankruptcy – only in Scotland. Your debt may be written off if you don’t own very much, and if you have a low amount of income and savings.
  • Individual Voluntary Arrangement (IVA) – available in England, Wales and Northern Ireland. You make reduced payments over five or six years and then your debt is written off.
  • Protected Trust Deed – only in Scotland. You make reduced payments over four years and then your debt is written off.
  • Equity release – you might be able to access some of the money that your home is worth.
  • Consolidation loan – you take out a loan to cover your existing debts. Then you just pay one monthly payment.
  • A balance transfer on your credit card.

It is important to speak to an adviser before deciding on any of these options.

Seek professional advice


Options for cancelling (writing off) debt

Options for cancelling debts are different across the UK.

Bankruptcy (sequestration in Scotland)

If you go bankrupt, your creditors will cancel (write off) your unsecured debts. This will give you a fresh start.

Bankruptcy (sequestration in Scotland) is normally only suitable if you can’t pay back your debts in a reasonable time. Any assets you own, such as your house or car, will usually be sold to pay off your debts. Bankruptcy is unlikely to be the best option for you if:

  • your property and belongings are worth more than your debts
  • all of your payments are up to date and you can afford to keep paying them.

Debt Relief Order (DRO)

A Debt Relief Order (DRO) is only available in England, Wales and Northern Ireland. A DRO can help you to write off debt that you are unable to repay in a reasonable amount of time. If your DRO is approved:

  • your debts are put on hold for 12 months
  • your creditors cannot pursue you for the outstanding debt during the 12 months.

If your financial situation hasn’t changed after the 12 months are over, all of your debts are written off.

To apply for a DRO, you must:

  • owe less than £20,000 (£15,000 in Northern Ireland) in unsecured debts
  • not own your home
  • have no more than £1,000 (£300 in Northern Ireland) in assets
  • have less than £50 a month left over after you have paid all of your living costs.

DROs must be applied for by an approved DRO adviser such as StepChange Debt Charity or Citizens Advice.

Debt Relief Order (DRO)

A Debt Relief Order (DRO) is only available in England, Wales and Northern Ireland. A DRO can help you to write off debt that you are unable to repay in a reasonable amount of time. If your DRO is approved:

  • your debts are put on hold for 12 months
  • your creditors cannot pursue you for the outstanding debt during the 12 months.

If your financial situation hasn’t changed after the 12 months are over, all of your debts are written off.

To apply for a DRO, you must:

  • owe less than £20,000 (£15,000 in Northern Ireland) in unsecured debts
  • not own your home
  • have no more than £1,000 (£300 in Northern Ireland) in assets
  • have less than £50 a month left over after you have paid all of your living costs.

DROs must be applied for by an approved DRO adviser such as StepChange Debt Charity or Citizens Advice.

Minimal Asset Process (MAP) bankruptcy

This is only available in Scotland. MAP bankruptcy can help you to write off debt that you are unable to repay in a reasonable amount of time. To apply, you must:

  • be on a low income (either made up solely of income-related benefits or you have nothing left over after paying essential living costs)
  • have debts of more than £1,500 but less than £17,000
  • have a car worth £3,000 or less
  • have other assets worth less than £2,000 in total, with no single item worth more than £1,000
  • not own your home
  • not have been bankrupt in the last five years.

Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement (IVA) is only available in England, Wales and Northern Ireland.

This is a legal arrangement where you make reduced payments over five or six years. At the end of this time, your debts are written off. These must be set up by an authorised debt specialist and there are costs involved. An IVA should be carefully considered as there may be restrictions made to your spending and to your employment. It will also affect your credit rating.

You can get advice about IVAs from StepChange Debt Charity or your nearest Citizens Advice office.

Protected Trust Deed

This is only available in Scotland. A trust deed is a legal arrangement where you make reduced payments over four years. At the end of this time, your unsecured debts are usually written off.

These must be set up by an authorised debt specialist and there are costs involved. A Protected Trust Deed should be carefully considered as there may be restrictions made to your spending and to your employment. It will also affect your credit rating.

You can get advice about Protected Trust Deeds from StepChange Debt Charity or Citizens Advice.


Equity release

If you are in or near retirement and own a property, you could consider equity release. This is a way of accessing some of the money that your home is worth. You may be able to release a tax-free cash lump sum or set up access to a flexible loan. It is important to remember that you will not need to move home if you do this.

How much you can release varies between providers. It usually depends on:

  • your age
  • the value of your home
  • your health, occasionally.

There are different types of equity release. They normally involve you borrowing against the value of your home while you still live there. You may make some payments for this or you may choose to have the mortgage and interest paid off when your home is sold after your death.

Equity release can affect your tax position and entitlement to means-tested benefits. It can also reduce the value of your estate. This means that there will be less to pass on to the people who inherit your money and possessions (your beneficiaries) after you die. We have more information about debts you leave behind.

It is very important to speak to an adviser before deciding to release equity from your home.

You can search the Financial Services Register for companies and individuals authorised by the Financial Conduct Authority (FCA) to lend money.


Consolidation loan

If you have a good credit rating, you may be able to take out a debt consolidation loan. This is a loan that you use to pay off your existing debts. You then end up with one monthly payment instead of lots of smaller ones.

There are illegal moneylenders who often charge very high interest rates. They are called loan sharks. Call the following numbers to report loan sharks:

  • England – 0300 555 2222.
  • Scotland – 0800 074 0878.
  • Wales – 0300 123 3311.
  • Northern Ireland – 0300 123 6262.

Advantages of a consolidation loan

  • You make one monthly payment, meaning it is easier to budget each month.
  • It can be easier to keep track of how much you owe with only one creditor.
  • It can improve your credit rating, if you keep up with payments.

Disadvantages of a consolidation loan

  • It can be a risky option if you are unsure you can meet the payments.
  • The lender may ask for it to be secured against your home – you could lose your home if you can’t keep up with payments.
  • It could make your debt problem worse if you get into any further debt.


Credit cards

If you use credit cards and don’t pay off your balance in full every month, you may be paying interest. You could transfer your balance to another card. Some of them offer 0% interest deals for a limited period. There may be a charge for doing this, so you’ll need to weigh up the savings against any possible charges.

To find the best credit card deals, you could use an online price comparison website such as moneysavingexpert.com or uswitch.com Many newspapers also include comparison tables in their personal finance pages, in print or online.


Balance transfer

You could transfer your balance to another card. Some cards offer 0% interest deals for a limited period. If you do this, you will need to weigh up the savings against any balance transfer fee.

To find the best credit card deals, look at the tables published in the personal finance pages of newspapers, or use a price comparison website.

A balance transfer may work in the short-term, but it isn’t a long-term fix for an underlying debt or budgeting problem.


Effect on credit rating

If you pay less than your minimum monthly credit card payment, your creditors will add a note to your credit file. This can stay on your file and affect your credit rating for up to six years. This means you may find it much harder to get further credit.

If you are struggling to make payments to your creditors, borrowing more money may make your situation worse.

If you are unable to repay your non-priority debts in a reasonable amount of time, seek specialist advice from a free debt advice agency such as StepChange Debt Charity, Citizens Advice, PayPlan or National Debtline.

Back to Managing debt and borrowing

Debt and borrowing overview

Living with cancer can bring extra expenses. Learn how to manage your debts using a clear step-by-step process.

Step 1: Increase your income

Increasing your income is the first step to managing your debts. Check your entitlement to benefits and insurance payouts.

Step 2: Reduce your expenses

Once you have made sure you have as much money coming in as possible, there are ways you can reduce your expenses.

Debts you leave behind

If you have debts when you die, it reduces the value of your estate. This means your beneficiaries will receive less money.