What to do if you are in debt and need help

From 6 April in England and Wales there will no longer be a £90 fee for applying for a debt relief order. A DRO lets people who have got into severe difficulties start afresh. So what can you do if you find yourself in difficulty? First, work out how much you owe, who to, and what you need to pay each month.

Identify which bills and debts are most urgent and pay them first, says debt advice charity StepChange. Check which benefits you are entitled to on the independent Money helper website, backed by the government, or using benefits calculators. A trained debt adviser can talk you through the options available. Information and support is free of charge.

StepChange advises trying to make the minimum payments on every debt. It also includes gas and electricity bills, child support and maintenance payments, council tax, income tax, VAT and other taxes. If you do not pay these off, their cost can spiral and could lead to legal action or bailiffs. If you can’t afford to pay, you can apply for a pre-payment plan.

The plan is designed to help you pay off your debts over a longer period of time. If you are still in debt, you may be able to pay off the debt by paying it off at a later date. A debt relief order (DRO) is designed for people with few assets on low incomes. Your debts must not exceed £30,000 (rising to £50,000 at the end of June) If your application is accepted, some of your debts will be frozen for one year, then written off.

Under an IVA you make smaller payments over several years and then the rest of the debt is written off. Full bankruptcy, which is also usually completed within a year, can result in you having to sell assets such as a house to pay your debts. There are three alternatives: a Debt Arrangement Scheme, a Debt Management Plan, or a Trust Deed.