Drowning in debt? Here’s how to get to shore

According to the charity Debt Justice, there are 6.7 million people struggling with financial difficulties in Britain, with a surge in inquires and requests for assistance with problem debts. The Insolvency Service revealed that there were 10,136 individual insolvencies registered in February 2024, which was 23% higher than a year ago. But there are plenty of ways you could get help.

One of these is MoneyHelper (Opens in new window) a free, impartial service that offers guidance on money and pensions. It's provided by the Money and Pensions Service, which is an arm's-length body of HM Government.

MoneyHelper can put you in touch with free debt advisory services, give you advice on managing your money better, help you to potentially get out of debt faster and check whether you may be able to claim any benefits or entitlements. They will keep anything you tell them confidential.

Ways out of debt

You can pay your debts in instalments by setting up a debt management plan (DMP), an administration order, or an individual voluntary arrangement. The Breathing Space scheme will give you temporary protection from your creditors. You can read more about each of these below, but please consult an expert debt advice service if you'd like more information. The following schemes all offer free debt advisers.

Debt management plan

This is for non-priority debts, such as credit or store cards, overdrafts, or personal loans. Your DMP provider – they can be fee-charging or free – will help you work out what you can pay each creditor, which will usually need to be £5 or more per month. You will then pay the provider, who will pay the creditors for you. If you choose a fee-paying provider, check that it's authorised by the Financial Conduct Authority (Opens in new window)

Administration order

This is a formal, legally binding agreement between you and your creditors to repay your debts over a period of time. Debts must be no more than £5,000 in total, and you must have two or more debts to qualify. You can apply to the county court for an administration order if you have at least one county court judgment or high court judgment against you or if you want to stop the people you owe money to from taking further action against you. Once the order is agreed, you will make regular monthly payments to the court for the full amount you owe to all your creditors, and the court will distribute the money between them. The court will include fees for each repayment, but this cannot be more than 10% of the total amount you owe.

Individual voluntary arrangement (IVA)

This freezes your debts and allows you to pay them back over a set period. Any money you still owe after this period is then written off. You’ll need to show you have a regular long-term income, as the repayments will usually cover a period of five or six years. If you have debts that can't be included in the IVA, such as student loans or child support arrears, you'll have to pay those separately. Beware, fees for an IVA are generally high, so if your total debt is less than £10,000, an IVA might not be the best option.

Debt relief order (DRO)

This is possible if you’re on a low income with very few assets, and there are specific criteria to meet. This freezes debt for a year, then writes it off completely if your circumstances haven’t changed. Not all debts are covered by a DRO, such as magistrates court fines relating to criminal activity, social fund loans and student loans. Having a DRO will stay on your credit record for six years, and it could affect your tenancy agreement.

Breathing Space scheme

This can provide much-needed time to sort out a long-term solution if you're struggling to sort out your debts. It lasts for up to 60 days, can freeze most interest, fees and charges on debts, and can pause most enforcement action and contact from creditors. To apply for the Breathing Space scheme, you will need to talk to a debt adviser.

Please be aware that with any of these methods, there may be additional repercussions, such as your bank closing your account, so you'll need to open a new one somewhere else. These methods may only be available to specific regions of the UK, but Moneyhelper does provide alternative options depending on where you live. Your credit score may also be affected.

Money education and budgeting support

Debt health advice charity Crosslight Advice (Opens in new window) provides face-to-face advice together with money education and budgeting support to individuals and families in need in London, the South East and the South West. It also offers the Money Course (Opens in new window) in practical financial skills.

Mark is one of Crosslight’s success stories. He explained how he managed to get out of debt with the charity’s help. 'Debt was an anchor that held me down under the water; I was drowning', he says. 'Things were really difficult, and I became homeless for about a year before finding somewhere to live. It really knocked me for six. I was struggling day-to-day. I was living just keeping my head above water and the unpaid bills just piled up. It got to the point that every day was just so debilitating; I was like the walking dead'.

Mark was referred to Crosslight by his GP. First, the organisation organised for him to get his expensive prescriptions free. He was terrified of becoming homeless again, and they showed him how to get Universal Credit. They helped him file for bankruptcy, raising the £600 he needed to pay for the process.

They have also helped him with budgeting support on his current wages. 'This is the first time I’ve had income that wasn’t going straight onto debt or other living costs. I always ended up short each month, which now no longer happens. I can now manage'.

'There is a lot of fear attached to debt. If I didn’t have people like my debt adviser, I wouldn’t have been able to navigate through it. I am a different person today. Before, I wouldn’t talk to anyone. Now I’m talking to strangers, walking down the street and smiling. There are benefits to society when people come out of debt; relationships blossom when they couldn’t have before'.

As Mark found, there can be plenty of expert advice and help available if you're in what seems like uncontrollable debt. This help can extend, once you have cleared what you owe, to teaching you to become better at budgeting to help ensure you don’t fall into debt again.

To support customers with actioning their budgets, Chase lets you set up multiple current accounts, up to 20 in total. Since you can spend from these directly, they might help you track your spending throughout the month.

18+, UK residents.

Recommended reading

• Financial help organisations
• Debt stories
• How to separate joint debt after divorce

Disclaimer: The Hub is intended as a knowledge portal to provide information on a range of topics, including financial products. Articles may reference products and services that Chase UK does not currently offer and Chase does not offer specialist debt advice. This article is for information only and does not constitute financial advice. Some links go to organisations and Chase is not responsible for the advice or service provided by these external organisations.