How Can I Get Out of Debt? A Step-by-Step Guide for UK Adults

Getting out of debt requires a clear plan, not a miracle. The first step is to work out exactly what you owe, to whom, and at what interest rate. From there, you can choose a strategy that fits your situation, whether that is cutting spending, consolidating debts, using a debt management plan, or in serious cases, pursuing an IVA or bankruptcy.

What should I do first if I am in debt?

Write down every debt you have. Include credit cards, overdrafts, loans, buy-now-pay-later balances, council tax arrears and any money owed to family or friends. Note the interest rate and minimum payment for each one.

Then write down your monthly income and every essential outgoing: rent or mortgage, utilities, food, transport and any other unavoidable costs. The difference between income and essential spending is the money available to repay debt.

If your essential outgoings exceed your income, this is a crisis situation and you need free professional debt advice immediately. Contact StepChange on 0800 138 1111 or visit stepchange.org.

How do I prioritise which debts to pay first?

Not all debts are equal. Priority debts carry serious consequences if you fall behind, including loss of your home, disconnection or prosecution. Non-priority debts carry fewer immediate consequences, though they still damage your credit file.

Once priority debts are covered, pay off non-priority debts starting with the one carrying the highest interest rate. This approach, sometimes called the avalanche method, saves the most money overall.

What is a debt management plan and is it right for me?

A debt management plan (DMP) is an informal agreement between you and your creditors, managed by a third party. You make one monthly payment to the DMP provider, who distributes it between your creditors. StepChange and National Debtline offer DMPs for free.

A DMP works best if you have multiple non-priority debts, a small but consistent monthly surplus, and creditors who are willing to freeze interest. It will affect your credit file and is not legally binding, meaning creditors can still add charges or pursue legal action, though this is uncommon once a DMP is in place.

Never pay a commercial company to set up a DMP. The charity sector provides the same service at no cost.

What is an IVA and when should I consider one?

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay a portion of your debts over a fixed term, usually five or six years. Any remaining included debt is written off at the end. According to the Insolvency Service, around 65,000 IVAs were registered in England and Wales in 2023.

An IVA is worth considering if you have total debts over £10,000 owed to two or more creditors, a regular income but cannot realistically repay the full amount, and want to avoid bankruptcy. You need a licensed insolvency practitioner to set one up. There are fees involved, which come out of your monthly payments.

An IVA will remain on your credit file for six years from the date it starts. It also appears on the public Insolvency Register. If you work in finance, law, accountancy or the public sector, check your employment contract before proceeding.

Is bankruptcy the right option for me?

Bankruptcy is suitable for people with no realistic prospect of repaying their debts, no significant assets, and no job that would be affected by bankruptcy status. You apply online through the government website and pay a fee of £680.

Bankruptcy typically lasts 12 months, after which most debts are written off. However, it stays on your credit file for six years. If you have equity in your home, the official receiver can force a sale. Certain jobs, including company director, local government councillor and some financial roles, are legally barred to bankrupts.

Bankruptcy is not a shameful last resort; it is a legal process designed to give people a fresh start. For the right person in the right circumstances, it can be the quickest and cleanest solution.

How can I reduce my debt without formal arrangements?

If your debt is manageable but growing, these strategies can help before you need professional intervention.

The avalanche method: put every spare pound towards the highest-interest debt while paying minimums on the rest. Once the highest-interest debt is cleared, move to the next one.

Balance transfers: if you have credit card debt, transferring the balance to a 0 per cent card from a provider such as Barclays, HSBC or Halifax stops interest accruing for a set period. You must clear the balance before the 0 per cent period ends, or interest resumes at the standard rate.

Debt consolidation loans: combining multiple debts into one loan can simplify repayments and reduce the interest rate. Be cautious; extending the repayment term over a longer period often means paying more interest overall.

FAQ

How long does it take to get out of debt?

This depends entirely on how much you owe and how much you can repay each month. A small debt of a few thousand pounds can be cleared in one to three years with consistent effort. Larger debts handled through a DMP may take five to ten years. An IVA typically lasts five to six years.

Will getting debt help affect my credit score?

Any formal debt solution, including a DMP, IVA or bankruptcy, will affect your credit file. However, if you are already missing payments, your credit file is already being damaged. Taking action now prevents the situation from getting worse.

Can I get out of debt if I am on a low income or benefits?

Yes. Bankruptcy is available to people on benefits. Debt Relief Orders (DROs) are also available for people with debts under £30,000, few assets and little surplus income. StepChange can advise whether a DRO is suitable for your situation.

Should I use my savings to pay off debt?

Usually yes, if the interest rate on your debt is higher than the interest rate on your savings. Most savings accounts pay less than most credit card or loan rates. Using savings to clear high-interest debt is almost always the rational financial decision.

Can I negotiate directly with my creditors?

Yes. Creditors often prefer to negotiate rather than take legal action. You can contact them directly to request a payment holiday, a reduced interest rate or a repayment plan. However, if you have multiple creditors or complex debts, it is usually better to let a free debt charity such as StepChange negotiate on your behalf.