What To Do If You Can’t Pay Your Bills

Unemployment or redundancy, injury or ill-health, and relationship breakdown are the three most reported...

What To Do If You Can’t Pay Your Bills

Unemployment or redundancy, injury or ill-health, and relationship breakdown are the three most reported...

Unemployment or redundancy, injury or ill-health, and relationship breakdown are the three most reported reasons for personal debt in the UK.

Whether it’s a low income, an unexpected bill, or a change in circumstances that trigger your financial problems – like quicksand – it’s far easier to get into debt than work your way out of it.

Living with debt is emotionally difficult. Solutions are often long term rather than instant fixes. The uncertainty of the situation can take its toll on your mental health, turning deep-seated anxieties into a genuine, unpleasant, and overwhelming reality.

Your first step towards a debt-free future is recognising there’s a problem, and facing it head-on. Read on for our top tips for dealing with debt and further information about where to access help and support.

The best way to combat anxiety is through action.

Don’t Ignore the Problem

The best advice anyone can give you. When fear and overwhelm kick in, it’s tempting to hide from the problem and sweep financial difficulties under the proverbial carpet. However, this approach increases the feelings of helplessness, and you’ll accumulate more debt as it doesn’t address the problem.

Work Out How Much You Owe and to Whom

Your first step to regaining control of your finances is sitting down and working out the scale of the problem. Work out whom you owe money to and what for. Then categorise your debts into two categories: priority and non-priority debts.

Priority debts

Debts to include in this category include your mortgage, rent, council tax, and energy bills. They are categorised as priority debts because if left unpaid, the consequences are severe. They can affect your life and liberty.

For example, defaulting on your mortgage or rent can result in the loss of your home. Unpaid council tax can result in a county court judgment against you and bailiffs attending your home. Unpaid energy bills can result in disconnection (as a last resort).

When negotiating repayment plans (see below), prioritise these debts above all others.

Non-priority debts

All other debts, things like mobile phone contracts and credit cards.

Calculate Your Income and Outgoings

Once you’ve worked out how much you owe and to whom, the next step is to work out your income and outgoings. What money do you have coming in, what’s going out every month, and how much, if any, is leftover?

MoneyHelper’s free budget planning tool is excellent to help you with this, as it prompts you to think of additional costs you might not consider.

Completing a budget in this way helps you identify what repayment options you have. If you’re in deficit (there’s more money going out than coming in), you’ll know you need to look at ways of increasing your income. In contrast, if you have income available, you’ll see what you can offer your creditors in the form of a repayment plan.

Find Out if You’re Eligible for Financial Support

A great place to start is the Turn2Us Benefits Calculator using the details you’ve already gathered above to see what benefits your household might be eligible to claim. An alternative option is contacting your local Citizens Advice Bureaux for advice about your benefit entitlement.

If your research shows that you’re not entitled to any support, you may consider borrowing money to repay your debts short term and repay the loan over an extended period. Additional borrowing isn’t advised and should only ever be a last resort. Always ensure that any lender is Financial Conduct Authority (FCA) registered if you decide to borrow.

Talk to Your Creditors

Once you’ve assessed the scale of the problem, mapped your income and outgoings, and determined if you’re eligible for financial support, the next step is to talk to your creditors.

Do this as soon as possible.

The earlier you can talk to your creditors to inform them about what’s happened, the better. Creditors are very understanding in situations like this and do their best to help you. There may be repayment options available to you that you’re not even aware of, so it pays to talk to them early before arrears build up to unmanageable levels.

Your mortgage company can offer a payment holiday of up to six months, where you pause making payments while you get back on your feet. Your local authority can support you to reduce your council tax repayments by spreading them across 12 months instead of 10, and so on. There’s also the Breathing Space debt respite scheme while you get your debt solution in place.

Keeping your creditors informed about your situation and what you’re doing to resolve the situation keeps them on your side. Ignoring the problem has the opposite effect.

Don’t Struggle Alone

Financial difficulty is an unfortunate fact of life at some point in everyone’s life and sometimes it’s unavoidable. Seeking support is nothing to be ashamed of. Don’t be too hard on yourself.

Financial difficulty and mental health problems go hand in hand, so take care of yourself during this difficult time. If you’re experiencing a low mood or anxiety due to your debts, make sure you talk to someone you trust and contact your GP.

Further Support and Guidance

Here are some useful sources of further advice to help you on your way to a debt-free future:

MoneyHelper offers free and impartial help with debt.
Citizens Advice help you find a way forward, whatever the problem.
StepChange: offer expert debt advice and fee-free debt management.

It could not be easier to make an application to the BSB. If you, or anyone you know who qualifies, would like to seek financial assistance, click apply now

Staying in touch with BSB