Using the law

Bankruptcy will free you from the pressures of your creditors, but may mean losing many of your valuable possessions, including your home. You also have to pay to apply for bankruptcy. It will have a serious, long term effect on your credit rating so think very carefully before pursuing this route.

An Administrative Order can help if your debt is less than £5,000. This is an option for people who have CCJs or who have been refused credit in the past. You’ll be able to make repayments that you can afford but it will adversely affect your credit rating so don’t enter into it lightly.

A debt management company (DMC) can help you deal with your debts, although they charge a fee. They usually only deal with non-priority debts such as credit cards, overdrafts and loans, so if you’re struggling to pay your mortgage or your household bills, a DMC will be unlikely to help.

This will allow you to resolve your debt by making reduced payments to your creditors. Your debts will usually be clear after five years. However, it will adversely affect your credit rating and it’s very expensive to prepare so make sure you consider other options too.

Your creditors may issue proceedings against you in the County Court if you fail to pay them what you owe. If the court finds in favour of your creditors, you will have a County Court Judgment (CCJ) issued against you, which will be visible to anyone carrying out a credit check on you for the next six years, adversely affecting your ability to borrow money.