Who can help with debt?
The people who can help you with debt can be split into two groups:
- Creditors - the companies and organisations you owe money to. These could be banks, lenders, your local council, or HMRC.
- Debt advice bodies - organisations and charities set up to provide free advice and assistance to those in debt.
Lenders and debt advice bodies can help you in different ways.
How to get help with loan debt
If you're struggling to repay a loan, it's important that you speak to your lender about it. Under FCA regulations, lenders must treat you with forbearance if you're struggling. This means:
- They should take your circumstances into account.
- Working with you to find an affordable way for you to repay what you owe.
- Avoiding measures like court action, unless as a last resort.
In addition, your lenders must not pressure you to:
- Pay what you owe in bigger instalments or more quickly than you can afford.
- Borrow more money to pay what you owe them.
- Take money from your pension or sell property to pay your debt.
Many lenders have specially trained teams who can help if you can't repay what you borrowed. They won't judge you for the situation you're in. They just want to help find an affordable way for you to repay what you owe.
Lenders can help by:
- Giving you more time to make a payment that's overdue.
- Freezing interest and charges on your account.
- Setting up a repayment plan that allows you to pay off your debt in smaller instalments.
- Providing you with time to seek advice and make a plan.
- Accepting small "token" payments from you.
- Referring you to a not-for-profit debt advice body.
How to get help with Council Tax debt
If you've fallen behind on your Council Tax payments, it's important to speak to your local council straight away.
Your local council may be able to:
- Set up a plan to pay your Council Tax in smaller amounts.
- Check if you're eligible for any Council Tax reductions.
- Cancel your bill altogether if you're in severe financial difficulty.
- Help you find free debt advice.
Council Tax is a priority debt. This means it could affect your home and health, lead to legal problems, or result in further debt from fines if it's not paid. So it's important to seek help quickly if you're struggling.
How to get help with tax debt
If HMRC has told you that you owe Income Tax that you can't afford to pay, it's important to contact them straight away.
They may be able to set up a 'time to pay agreement'. This will either give you more time to pay what you owe or give you a schedule to pay your tax arrears in instalments. It will not, however, freeze interest and penalty fees. HMRC typically continues to charge these for as long as you have Income Tax overdue.
Being granted a 'time to pay agreement' isn't a guarantee. HMRC will consider your circumstances and let you know their decision. It's usually easier to gain their agreement if you contact them before the deadline to pay your tax bill has passed.
If you're not granted a 'time to pay agreement' and you think you should have been, you can escalate your request or make a complaint. You may also be able to get help from the charity TaxAid. They provide online advice and have a helpline for people who earn less than £20,000 a year and haven't been able to sort out their problem with HMRC themselves.
What charities can help with debt?
If you need help with debt, then there are a range of not-for-profit organisation you can get advice from. These include:
Debt charities and advice bodies can help you in several ways, including:
- Making a budget.
- Giving you information and advice on debt solutions.
- Helping you make a plan to repay your debts.
- Dealing with your creditors for you (including making payments to them).
- Supporting you with any paperwork or ongoing admin required of the solution you choose (for example, writing an IVA proposal for you).
- Referring you to government schemes that can help with your debts.
In many cases, the advice and much of the assistance you receive are free. However, some of the debt solutions they may recommend, such as IVAs, come with fees that you will need to pay if you choose them.
Are there government debt help schemes?
The government offers a number of schemes and solutions that can help you with your debts. You can access some schemes by yourself. For others, you'll need to speak to a debt adviser or be referred by a social worker.
Government debt solutions
Government debt solutions are formal agreements to repay your debts. They are set up by an insolvency practitioner and finalised by a court order. For example, an individual voluntary agreement (IVA). The government debt solutions available depend on which part of the UK you live in. The options on offer in England and Wales are different to those in Scotland.
Support for Mortgage Interest (SMI)
SMI is a government loan that's designed to help pay the interest on up to £200,000 of your mortgage. To be eligible, you must be receiving certain benefits and be carrying out home improvements that make your home fit to live in. For example, replacing your boiler or repairing a leaky roof. The amount you'll receive is calculated according to a rate set by the government. This is currently 3.16%.
The loan is paid directly to your lender (reducing your monthly payments) and is secured to your home. You'll usually repay it, plus interest, when you sell your home or transfer its ownership to someone else. If there isn't enough money to repay the loan when you sell your home, you must repay what you can. The rest will be written off.
The Breathing Space scheme
The Breathing Space scheme in England and Wales can give you temporary relief from contact by your creditors. The "debt moratorium period" in Scotland is similar. This scheme is free to access, but you need to apply through a debt adviser. If you're accepted, you'll be protected from creditor contact, interest charges and enforcement action for up to 60 days.
Welfare assistance schemes
Welfare assistance schemes are run by local councils. They can help if you don't have enough money to live on. For example, they may be able to give you vouchers to top up prepayment energy meters, supermarket vouchers, or help with your housing costs if you're on benefits. The schemes available vary from area to area. You may also need a referral from a social worker or debt adviser to be able to access them.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Helen Fox
Personal Finance Editor
Helen is a personal finance editor who’s spent 11 years (and counting!) in the finance industry. She creates content on everything money with the goal of getting people thinking – and talking – about their finances in ways they may not have done before.
