Neither a borrower nor a lender be” Hamlet Act 1, Scene 3

Debt: “The state of owing money to someone, or something”.

Debt is a four letter word, and for some people, a dirty four letter word as they wish they were not in it (debt), or do their best to try and avoid it (debt).

Getting into debt can be easy, getting out of debt is not so easy.

Being in debt can also take time, and one usually does not find one’s self in debt overnight. It may take years. And just as it can take time to get into debt, it can take time to get out of debt. Both getting into debt, and getting out of debt, is a process.

How Can I Get Out of Debt?

This has to be the biggest question of the ages since man, and women, first started borrowing and finding themselves in debt.

Many people find themselves in debt obviously by borrowing too much and overextending themselves. This may be their fault as in knowingly continuing to borrow when they cannot pay it all back, or just using credit to get by as they are not earning enough to fully make ends meet.

Then there are those that find themselves in a difficult spot such as no longer being able to work through illness or being made redundant or losing one’s job.

But however you find yourself in debt, the next step is to get out of debt.

One concern many people have when looking at options, or solutions to get out of debt, is their credit and credit score. They are concern that what they may do to get out of debt will impact their credit in a negative manner.

This is a valid concern, however, for the moment this concern needs to be set aside.

If you are heavily in debt, then your credit score has already been affected, as being over-extended or using the majority of your credit limits, or in essence, “maxing out” a credit card or account, is 30% of what makes up your credit score.

So by being heavily in debt, your credit has already been affected in a negative way.

If you have missed any payments, or are in arrears and struggling with repayments, then your credit also has been affected negatively.

So the priority needs to be finding a solution to get out of debt. Any credit concerns will take care of themselves once the debt issue has been resolved.

It is easy to say “don’t get into debt” then you won’t need to find ways to get out of debt, however that can be easier said than done. So let’s put that piece of advice aside, and look at ways to get out of debt.

Stop Debting

In focusing on paying off your debts, you need to stop incurring or creating any additional debt. You need to stop using any credit cards or lines of credit or overdraft(s) you may have.

Trying to pay off accounts that you are still using is like trying to shoot a moving target, much more difficult.

Pay More Each Month

A good option for getting out of debt, but it may be easier said than done.

Where do you get the extra money each month?

You may want to review your budget and track your spending for a few months to see if there are any areas you can cut back, or reduce your spending, to have extra money paid on the accounts.

By just making the minimum monthly payments on a credit card, it can take many, many years to pay the account off.

You may want to look at a second, part-time job, using all of what you earn to pay down the accounts.

The point here is you need to pay as much as you comfortably can towards the accounts each month to get them paid off.

Balance Transfers

Balance transfers can be helpful in getting out of debt, but you need to maximise the transfer.

An example may be you transfer a £3000 balance from a credit card with a 19% interest rate to a new credit card offering a six (6) month zero interest period. During that six months you need to pay as much as you can towards the balance as all the money you pay goes to the principal balance, none to interest.

This is where you need to possibly have resolved the first tip to getting out of debt, and have some extra money to pay towards the debt.

Once the introductory low rate has expired, you can inquire with the lender if they would extend the low rate for a few more months.

This also can work without doing a balance transfer as you can inquire with your current credit card company as to if they can offer a lower rate than what you currently have. You can ask if they can offer you six months at zero % or some rate lower than what you now have.

Consolidation Loans

Consolidation loans are loans that basically pay off a few smaller loans or credit cards.

An example may be you have two (2) credit cards totalling £2,000, an overdraft of £500, and an unsecured personal loan of £3,000.

You would look to take out a new loan for £5,500 to pay off the credit cards, overdraft and personal loan.

The consolidation loan would be for a lower interest rate than the credit cards, and the term could be extended, this is the number of payment you make, in order to reduce the monthly payment.

So instead of making four (4) monthly payments of possibly £400, you make one (1) monthly payment of £200. You have reduced your monthly outgoings by £200, and also making it easier to get out of debt.

The caveat here is you need to have resolved what brought you to the point of needing a consolidation loan. How did you find yourself in debt to begin with? If you have not resolved that issue, a consolidation loan may be like a taking a pain killer, it helps, but it is not the cure.

More Serious Ways to Get Out of Debt

If someone is in arrears with their accounts, it can be a very stressful time. They may no be thinking as clearly as they would if they were not under the stress. Collection agencies phoning, notices being posted regularly, it can all add up to a mountain of stress.

The following solution to getting out of debt are more serious in that they may involve the help and assistance of a third party, and someone professionally trained in insolvency and debt advice.

Which option is best for you will depend on your circumstance, what you are looking to ultimately do, and how much debt you have.

Do Nothing

Doing nothing, burying one’s head in the proverbial sand is an option, albeit not a good one, and not a good option for the long haul, as you will not get out of debt.

However, some people become paralysed by the fear, which is usually a fear of the unknown. The more they learn as to what they can do, the less they have to fear.

By doing nothing means you do not make payments, you just sit and wait. This does not mean your creditors will sit and wait. They very well may pursue all options available to them to collect what is owed.

This can exacerbate the situation by possibly having a County Court Judgment issued or worse yet Bailiffs. It is then that a more serious approach to handling the debts needs to be looked at.

Token Payment Arrangement

This is where you make ‘token payments’ to your creditors each month of £1 or £5 to each account.

It is asked in this arrangement that the creditors freeze the account(s) to any interest and charges; it is asked, but not mandatory that the creditors do this.

The main issue with this option is that while your creditors have to accept the small payment, they can still pursue you for more; what you may find is that many creditors/banks will work with you to some extent taking these small payments, but at some point they may want more, and may begin other collection processes.

This arrangement is something you can do own your own or through the assistance of a third party.

Most creditors, especially in these times where so many people are on furlough, due to the Covid pandemic, or worse yet, made redundant, will work with you in accepting token payments. They usually will want to revisit, or review your circumstance every six (6) months.

Debt Management Plan

A DMP or Debt Management Plan, is similar to a token payment plan in that you make payments each month of what you can afford towards the debts, but these payments are a higher amount than just a few quid each month.

And again it is asked of the creditors to freeze the accounts to all interest and charges.

A detailed income and expenditure is completed, same as would be in a token arrangement, but after your living expenses you have an amount as surplus that is then distributed to your creditors on a pro-rate basis.

You will find again, that many creditors/banks will work with you in this type of plan, especially if it s documented well as to what you can afford and also if the forms are completed by a third party.

Most DMP companies that assist you can charge a small fee each month to administer these types of plans, however, these fees are to be transparent, and there are charity services who will assist you for free.

Again, while a DMP is a good option for people who have property that has equity and would lose this property in another form of insolvency, it is not the best option for the long-term as it can take many years to pay off the debts. But it does offer the most flexibility.

IVA/Individual Voluntary Arrangement

Individual Voluntary Arrangements are a formal arrangement between you and your creditors where you make payments of what you can afford each month, again documented by a detailed income and expenditure form, for five (5) years. At the end of the five years, the remaining balances on the accounts are written off. During this period the accounts are frozen to all charges and interest.

If you own property in an IVA, you are expected to release a portion of this equity, usually through re-mortgaging, in the 5th and final year of the IVA.

Since this is a formal arrangement, once it has been voted on and the majority of your creditors agree, it is binding to all the creditors involved.

IVA’s are set-up and handled by Insolvency Practitioners and there are fees involved to do an IVA. These fees are included as a part of the payback to your creditors and most IP’s setting up IVA’s do not charge any fees upfront to set-up an IVA.

Options For Getting Out of Debt That Involve the Courts

There are instances where someone in debt cannot follow through with a Debt Management Plan or an IVA, or they may not qualify.

Someone’s circumstances may have changed suddenly, like in the instance of being made redundant or loosing their job.

It also may be a person just wants the quickest way out of debt. They have struggled with the debts for years and are tired. They just want to become debt free.

That is when making use of the insolvency laws and having the courts intercede on your behalf can be the best option in getting out of debt.

There is a price to pay for some of these options, such as having someone appointed to look over and monitor your finances. However, these options will get you out of debt quickly.

Administration Orders

Administration Orders are for people who have debts of 5K or less, no assets such as property, and want the courts assistance in setting up a repayment plan. You fill out the forms, go to the courts, and you are allowed to pay what you can afford towards the debts and your creditors have to accept these payments.

Debt Relief Orders

Debt Relief Orders, or DRO’s are for people who have less than 20K of debt, no assets, and no more than £50 of surplus each month after their allowed living expenditures.

DRO’s are a form of insolvency similar to bankruptcy; I like to call them a mini-bankruptcy.

The gap that DROs fill is for people whose debts are less than 20K and also this form of insolvency is less expensive than bankruptcy and can be a bit quicker, not that you are discharged any sooner, but the process is streamlined.


Bankruptcy is a form of insolvency is for people who have any amount of debt, and are looking for the quickest route to be debt free.

You can be debt free within 12 months, similar to a DRO, but if you have assets or debts exceeding 20K, bankruptcy may be an option for you.

An Official Receiver is appointed in your bankruptcy to review your forms and interview you regarding your situation. If you have a surplus of income each month that exceeds £20, you can be required to pay a percentage of this surplus into the bankruptcy for a period of three (3) years.

Even though your bankruptcy can be discharged, or over within the 12 months, you would continue the monthly payments for another two (2) years.

If you own property and go bankrupt, this can be an issue, as if there is equity in the property, the Trustee may want this equity to be paid into the bankruptcy. They also will look at affordability to insure you can afford the property and any costs associated with it.

There are many options and solutions to getting out of debt. As to the best way for you to go to get out of debt will depend on many factors.

In some instances getting professional advice from someone trained in these matters is a must. You need to be advised as to how each of these options relates to your personal situation and what you are looking to accomplish.

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