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Pay off my debt

Nobody likes to be in debt and if you are to pay off your debts to your creditors the money has to come from your surplus income or from the sale of some or all of your assets or with funds provided by a friend or relation who is willing to help you (whether or not they expect you to repay them in the future) or you must find some way of getting your creditors to accept less than full repayment or from some combination of these – that is, assuming you do not win the lottery!

So how do you go about paying off your debts?

Assuming you are unable to repay your debts from your surplus income (or from the sale of your assets) as and when they fall due and assuming that  no friends or relations are able or willing to help you out, then the first option you are likely to consider is a Debt Management Plan. Basically a Debt Management Plan is an agreement between you and your creditors to repay all of your debts. You make regular payments out of whatever surplus income you do have to a licensed debt management company and that company shares out your money between your creditors on a fair basis, retaining a portion of your money to cover their costs. There are many debt management companies out there who can assist you but of course you could agree a repayment plan with your creditors yourself and so avoid the cost of paying a debt management company. Such an arrangement is sometimes called a self-administered debt management plan.

In Debt

If you should decide on a Debt Management Plan, you should choose a company licensed by the Office of Fair Trading and once they have worked out a payment plan they will contact your creditors and ask them to agree to the plan. You will have to give the company details of your financial situation: your income, debts assets (if you have any) and the creditors to whom you owe the money. Be aware of what the company will charge you for its services. They are likely to charge you a set up fee and a handling fee each time you make a payment. They will only deal with your unsecured debts and you will have to make sure you are retaining enough money to pay your secured debts such as your mortgage in full each month. Be aware that your Debt Management Plan can be cancelled if you don’t keep up the monthly payments and that the Debt Management Plan can last a long time until all of your unsecured debts are fully paid off.

If you have a county court or High Court judgment against you for a debt of less than £5,000, you can look to get an administration order from the court whereby you make monthly payments to the court which divides this money between your creditors. The court fee for this service will be no more than 10% of your debts. Remember your total debts must be no more than £5,000 owed to at least two creditors. Again you need to keep up the monthly payments or otherwise the court can take money from your wages by an ‘attachment of earnings order’ or it can cancel the administration order altogether.

The third option you might consider is an Individual Voluntary Arrangement or IVA whereby you make payments to creditors via an insolvency practitioner or IP for a period of about five years. At least 75% of your creditors, as measured by the size of your debts, must accept your IVA proposal before it can be approved. You must be insolvent to avail of an IVA and of course your IP will charge a fee for their services. Since you only pay what you can afford and because the term of the IVA is limited (usually five years, although it can sometimes be extended to perhaps seven years) a certain amount of your debts can be written off at the end of the term and your creditors cannot pursue you for any unpaid amounts, provided you comply with and adhere to the terms of the IVA as agreed at the outset.

If your debts are less than £30,000 and you have little spare income (less than £75 per month) and you have few assets (less than £2,000 in value and for example, you don’t own your home) you might be eligible to apply for a Debt Relief Order. It usually lasts just one year, you normally have no payments to make to creditors and you are discharged from your debts after one year. A Debt Relief Order can be an attractive option for those who are eligible to avail of it.

If you have already been made bankrupt, you may be eligible for a Fast-track Voluntary Arrangement or FTVA. In a FTVA your assets are sold to pay your debts and your bankruptcy is annulled or cancelled. You send a FTVA application to the Official Receiver and if 75% of your creditors accept it the FTVA commences.

To explore any of the above please contact us at National Debt Relief.

National Debt Relief belongs to a firm of leading chartered accountants who are one of the largest insolvency practices in the UK. We offer a complete portfolio of personal insolvency services in relation to IVA, Debt Management Plan and Bankruptcy. All our debt advice is confidential and with no obligation.

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Fees and key info

We are happy to provide you with debt advice only. We only charge a fee if you opt for one of our debt solutions. Fees will depend on which debt solution we provide and what your personal circumstances are. All fees will be discussed prior to commencement of any service or debt repayment plan. Click here to read our fees and key info. Please note: From time to time we may refer you to other services providers or charities such as the CAB.


If you’d like more information on other sources of free debt help and advice you can visit MoneyHelper – an organisation, backed by government and set up to offer free and impartial advice to those in debt. - Click here to visit MoneyHelper