Getting out of debt

How to get rid of credit card debt

There is one decision that matters more than any other, and it is not which method you pick. It is whether you pay a fixed amount every month or whatever the card asks for. The minimum payment is a percentage of the balance, so it falls as the balance falls and stays barely ahead of the interest. Paying the same amount every month instead means each payment does more work than the last.

Here is what that is worth on £5,000 at 24.9% APR, run through the credit card repayment calculator.

£5,000 at 24.9% APR, no further spending on the card. The minimum row models the regulated floor, 1% of the balance plus that month's interest, with a £5 cash minimum. Your own card may set its minimum higher.

If the balance is large and the rate is the problem rather than the payment, a 0% balance transfer buys time at a fixed fee · see how balance transfers work. With several debts at once, the order you attack them in matters: the snowball and avalanche methods compared.

How to get your payments lowered

If the payments themselves are the problem, there is a statutory route before any of the formal ones. Breathing space, the Debt Respite Scheme in England and Wales, gives you up to 60 days during which enforcement action cannot be taken against you, creditors cannot contact you about the debts included, and creditors cannot add interest or charges. It is a pause to get advice in, not a solution in itself.

You cannot apply for it yourself. A debt adviser applies on your behalf, and free advisers are findable through MoneyHelper. You cannot have used the scheme in the previous 12 months, unless the earlier one was a mental health crisis breathing space, which runs for as long as the crisis treatment plus another 30 days.

Beyond that, a debt management plan lowers what you pay each month by agreement with your creditors rather than by law · how a DMP compares with an IVA, a DRO and bankruptcy. A plan set up through a free service costs you nothing, and the free ones do the same job as the paid ones.

Can debt actually be written off?

Yes, but only through a formal route, and each one costs something other than money. The statutory routes and their conditions are set out on gov.uk. A Debt Relief Order normally lasts 12 months, and the debts included are written off at the end of it. To qualify in England and Wales you must owe less than £50,000 in total, have savings or valuable items worth less than £2,000, own a vehicle worth less than £4,000 if you sold it today, and not have enough left at the end of the month to make your repayments. You also need to have lived or worked in England and Wales in the last three years, and not have had a DRO in the previous six.

An IVA writes off what is left at the end of an agreed term, and binds every creditor once those holding 75% of the debt have agreed. How long it runs is set by the insolvency practitioner from what you can afford, not by a standard length. Bankruptcy discharges most unsecured debt, with exceptions. All three are insolvency, all three show on your credit file for years, and all three are decisions to make with a free adviser rather than from a web page.

One thing that is often mistaken for a write-off is not one. A debt that has gone statute-barred under the Limitation Act 1980 · six years in England and Wales with no payment, no written acknowledgement and no judgment · can no longer be enforced through the courts, but it still exists and can still be asked for, and a payment or a written acknowledgement restarts the clock. It is a limit on enforcement, not an ending.

Figures and schemes here are England and Wales · Scotland and Northern Ireland run different ones. Nothing on this page is debt advice, and every route above is a decision to take with an adviser rather than off a web page. MoneyHelper, Citizens Advice, StepChange and National Debtline all give that help for nothing.