Personal Debt In The UK

Right up until the banking crisis in 2008 borrowing money in the United Kingdom was generally very easy and the array of credit products wide and varied. For those with good credit the first port of call would usually be their bank who could provide an overdraft facility, personal loan or credit card. It wouldn’t be unusual for someone having maxed out all their bank borrowings to approach a second bank for another current account, overdraft, credit card and loan and exhaust their credit facility there as well. By this time, they’ve likely realised they are getting in over their heads with debts. At that point, the sensible thing would be seek debt advice and draw up a plan to repay those borrowings before they got any worse. But sadly for very many people they would go to another lender for a debt consolidation loan to pay off all the existing borrowings. Now, in some instances, that may work out okay but many people would pay off the borrowings with the new loan and then start using the credit again that they’d just paid off.

That will be a familiar story to some reading this. It is typical of someone finding themselves in a debt spiral that they struggle to get out of.

So what should someone do that finds themselves in over their heads with debts they can’t repay? Seek professional advice from a debt advisor or insolvency specialist about the options available. We know a great insolvency advisor in Liverpool. They work all over England and Wales and are very experienced.

Debt Management

The debt management industry has grown quickly in the UK which is not surprising. It works best for people with a small number of creditors and not too much debt. We are aware though of people going into a debt management plan with  a large number of creditors and fairly substantial unsecured debt. The advantage of debt management is that a plan is easy to set up through one of the various debt management companies and with no upfront fees payable usually. There are fee charging companies and other debt management firms that do not charge a fee.

Debt Relief Order

DROs haven’t been around for long but as long as you have few or no assets and debts under £20,000 they can be a great solution. A DRO lasts only a year and that’s probably the biggest advantage of them.

Individual Voluntary Arrangement

An IVA works a bit like debt management- you pay a monthly payment from income but for a fixed period which is usually 5 years. It is more formal than debt management and you may not have to pay all your creditors back in full- the balance owed is written off at the end of the IVA.


Bankruptcy is always the most serious option for individuals with debts, particularly if you have assets. No-one should file for bankruptcy without taking professional advice first. Still, if all the above options have been exhausted then bankruptcy may be the only way. Any assets (things you own) will be claimed by the Official Receiver or Trustee. There are some exempt assets like household furniture, tools of trade and low value car. Also filing for bankruptcy is expensive. A new system is about to be rolled out in England and Wales and the fees total £655.