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I had debts of £57,000 costing me £986 per month. Now all I pay is £190 per month for 60 months"
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Step by Step Guide to Get Debt Free

Below is a comprehensive step by step guide to helping you sort out your finances.

Step 1: How much do you owe your creditors?

Start by making a list of all arrears, loans, credit cards and any other credit commitments and when they are due. Some debts will be higher priority than others, i.e. your mortgage and bills. You must deal with these first.


  • Rent/mortgage arrears (you could lose your home). Don’t simply hand over the keys and walk away, you will still be liable for the debt.
  • Second mortgage or secured loan (you could lose your home).
  • Council tax arrears (Failure to keep up payments could land up in court).
  • Household bills, i.e. water, electricity, gas (you could be cut off).
  • Hire purchase debts (if you've paid less than one third, your goods could be repossessed (without a court order).
  • Maintenance payments (via Child Support Agency).
  • Court fines (there can be penalties if you do not pay these)

Remember, if you are struggling keep your creditors informed. At least you have peace of mind that you have made them aware of your situation and this will also buy you some extra time to straighten things out with your finances. Penalties and court action time in most cases will be extended to help you. Think of it from the creditors point of view, the bottom line is they do not want to lose money and they know that if you are struggling and they keep pushing you, you can end up bankrupt and then they wont receive a penny. So it is there best interests to provide some breathing space to enable you to straighten out your finances.

Step 2: Maximise your income

Get a piece of paper and write down all your income sources, This could include wages, income benefit, housing benefit or child benefit.

Also make sure you are receiving all the benefits you are entitled to. If you are unsure contact your local Citizens Advice Bureau or Benefits Agency and check you have all the correct entitlements for your current situation.

Is there anything you can sell to bring in more income? Ebay is a great place to sell second hand items. www.ebay.co.uk. If you have a lot of items you could even setup an online shop on Ebay.

Step 3: Calculate your total expenditure for your household

When calculating your total household outgoings include your rent, mortgage, food, utility bills, other bills (including phone, internet, insurances etc.) traveling expenses to and from work. Don’t forget to include basis necessities like haircuts, housekeeping, prescriptions, opticians etc. Remember don’t skin yourself! You have to be able to live relatively comfortably. If you try and live on a very fine line of income you will end up borrowing again to live and in turn end up financially worse off than you are now. For help with this try our Free Budget Planner. Once you have done this calculate how much disposable income you have and divide this among all your creditors, taking into account the ones you owe the most to should get a higher percentage of what you are prepared to pay back, This is called Pro-Rata. i.e. if your total debt is £6,200 over two creditors, £3,500 to one and £2,700 to another and you have a disposable income of £115, This needs to 66% / 44% split. The 66% to the £3,500 and the 44% to the £2,700. Some people find this a little difficult to calculate. For help with this contact us free on 0800 987 5337.

Step 4: Still more going out than in?

If you find you still have more going out than coming in ask yourself “where can I make more savings?” Cut down on things like eating out. Look at where you shop and look for cheaper alternatives. Cut down on cigarettes and alcohol. Unfortunately sacrifices have to be made in order to help you become debt free.

Step 5: Talk to your creditors

  • Take out all your statements and jot down the contact number for each creditor on your sheet of paper.
  • Contact each one and explain that you are going through financial difficulty. Ask them for a correspondence address.
  • Send your creditors your financial statement showing your income, outgoings and how much you are willing to pay them back. Explain your offer to pay off your debt and any steps you are taking to either increase your income or reduce your spending. The idea here is to show how much you need to live on and that your offer is fair.
  • Don't make an offer you can't afford. A small but regular payment is better than no payment at all, or one that you can't keep up.
  • Ask to freeze interest and charges whilst you are in this period of financial difficulty. Not all creditors will do this. You may need specific advise from a specialist. For help with this contact us.
  • Keep copies of all letters you send each company and their replies. Make notes of any phone calls with the dates and the name of the person to whom you spoke.
  • You must try to stick to any agreement made about reduced payments. If you have made any arrangements by phone, it is important that you follow this up with a letter stating clearly what has been agreed.