| Debt Help — Key Facts | |
|---|---|
| Breathing Space | 60-day moratorium stops interest, fees and enforcement on qualifying debts |
| DRO threshold | Debt Relief Orders available for debts up to £30,000 from April 2024 |
| IVA fee warning | IVAs involve fees of £3,000–£6,000+ taken from your payments before creditors receive anything |
| Statute-barred | Unsecured debt becomes unenforceable after 6 years without acknowledgement (Limitation Act 1980) |
| Free advisers | StepChange, National Debtline, Citizens Advice — all free and FCA-authorised |
| Priority first | Always pay mortgage/rent, council tax and utilities before credit cards and loans |
The right debt solution depends on your total debt, your assets and your income. The organisations listed below are free to use and are the regulated starting point for all debt problems.
Priority vs Non-Priority Debt
The most important concept in debt management is understanding which debts are priority. Priority debts carry serious consequences — loss of your home, disconnection, or (rarely) imprisonment. Non-priority debts (credit cards, personal loans, overdrafts) carry no such immediate consequences. Always pay priority debts first with whatever money is available.
| Debt type | Priority? | Worst consequence | First action |
|---|---|---|---|
| Mortgage arrears | Yes | Repossession | Contact lender — see MCOB 13 |
| Rent arrears | Yes | Eviction | Contact landlord or council housing |
| Council tax arrears | Yes | Bailiff, liability order, imprisonment (rare) | Contact local council |
| Gas and electricity arrears | Yes | Disconnection | Contact supplier for payment plan |
| TV Licence arrears | Yes (criminal fine) | Prosecution | Contact TV Licensing |
| Credit card debt | No | Default, CCJ, collection | Minimum payments; seek advice if unmanageable |
| Personal loan | No | Default, CCJ, collection | As above |
| Overdraft | No | Account closure | Negotiate with bank |
Breathing Space — The 60-Day Pause
The Breathing Space scheme (Debt Respite Scheme Regulations 2020) gives you 60 days where creditors cannot add interest or charges to qualifying debts and cannot start new enforcement. Access it through a free debt adviser (StepChange, National Debtline or Citizens Advice). You must engage with an FCA-authorised debt adviser to qualify. A Mental Health Crisis Breathing Space lasts for the duration of treatment plus 30 days with no fixed end date.
| ⚠️ Warning: Breathing Space does not suspend your obligation to make normal mortgage or rent payments. It only protects you from creditor enforcement on existing arrears. |
Debt Relief Order (DRO)
A DRO is available if you owe up to £30,000 (raised from £20,000 in April 2024 by the Insolvency Service), have assets under £2,000 (excluding a car worth under £4,000), and have disposable income under £75 per month after essential expenses. The fee is £90. A DRO lasts 12 months — if your circumstances do not improve, the debt is written off. It appears on your credit file for 6 years. You must use an authorised intermediary (typically from a free debt advice charity) to apply. (Source: Insolvency Service — gov.uk)
Individual Voluntary Arrangement (IVA)
An IVA is a formal agreement with your creditors to pay back a proportion of your debt over a fixed period (usually 5–6 years). It requires 75% of creditors by value to agree. The significant risk of IVAs is the fee structure: Insolvency Practitioners typically charge nominee fees of £1,000–£1,500 and supervisory fees of 15–20% of all payments. On a 5-year IVA paying £200/month (£12,000 total) the IP may take £3,000–£4,000 in fees. Creditors receive the remainder. Always get free advice before entering an IVA — for many people a DMP or DRO is more appropriate. (Source: Insolvency Service IVA guidance)
Bankruptcy
Bankruptcy costs £680 to apply (in England and Wales). It typically lasts 12 months after which most unsecured debts are discharged. Your assets (including equity in your home) may be sold by the Official Receiver. Bankruptcy remains on your credit file for 6 years and restricts your ability to act as a company director or hold certain professional licences during the bankruptcy period.
Statute-Barred Debt
Under the Limitation Act 1980 an unsecured debt in England and Wales becomes statute-barred (legally unenforceable) after 6 years from the date of last acknowledgement or payment, if no county court judgment has been obtained. A creditor cannot successfully sue for a statute-barred debt, but they can still contact you. Acknowledging the debt in writing or making a payment resets the 6-year clock. Do not acknowledge or pay a debt you believe to be statute-barred without taking advice first. (Source: Limitation Act 1980, section 5)
| Disclaimer: This article is for information only and does not constitute financial, legal or tax advice. Figures are correct at date of publication but may change. Always check primary sources (gov.uk, FCA register) and consult a qualified adviser for guidance tailored to your situation. |
Frequently Asked Questions
Will debt collectors come to my home?
Bailiffs (enforcement agents) can only visit your home once a liability order has been obtained from a court (for council tax) or following a CCJ (for other debts). Debt collectors are not bailiffs — they have no legal power of entry and you are not obliged to let them in. The FCA's Debt Collection guidance requires collectors to treat you fairly.
Can I go to prison for debt?
Not in England and Wales for most consumer debts. However, council tax arrears can in extreme cases lead to a committal hearing where imprisonment is possible as a last resort (local authority must prove culpable neglect). Magistrates court fines and maintenance orders can also lead to imprisonment if wilfully unpaid.
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