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What to do when you have debt you cannot pay

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Being in unaffordable debt is a huge worry for most people.  Before I even hit age 20 I was really quite stupid with money and got into a lot of personal debt.  It was definitely my fault as I was spending way more than I earned, going out for restaurant meals, clubbing every weekend, buying new clothes almost every day and basically living a life I couldn’t afford.  There are lots of reasons why I got a shopping addiction and tried to live this way, but at the end of the day I should have known better and should have managed my money a lot better than I did.

I'll explain some of my debt story below, but you can also read a very honest account of how I ended up in £17500 of debt by the age of 20 or find the full story on my main debt page.

Basically, I ended up in debt crisis.  This is where I was paying of debt with debt and never actually paying anything back.  I was using overdrafts and credit cards to pay off each minimum balance each month and getting further and further into debt.  It was a downwards spiral and I thought there was no way out.  I had several store cards, two loans, an overdraft and credit cards!

So what should you do if you find yourself in a sutuation with debt you cannot afford to pay?  I'll explore your options in this blog post.

What to do when you have debt you cannot pay

Should banks take some responsibility for people ending up in unmanageable debt?

As much as I know it is my fault, I also think the banks and credit companies should take some responsibility.  At ages 18 and 19 I was able to open 10 store cards, 3 credit cards, have a huge overdraft of around £1000 and I took out two loans.  At no point did anyone look at the amount of credit I already had available to me, realise I wouldn’t be able to pay it back should I max it all out and therefore refuse me for whatever new credit I was applying for.  I was young and stupid and if I wanted something I just opened a store card.  I’d worry about paying it back later.  I was always accepted at first as my credit score must have been good, and so became hooked on shopping and hooked on getting what I wanted.  Because I could.

The fun didn’t last though as I soon maxed out all avenues and quickly realised I couldn’t even afford all the minimum payments.  I was paying debt off with credit and I was in trouble.  Luckily I knew to go to the Citizen’s Advice and we worked out my debt.  I was shocked to see I was in £17500 of debt!  An amount of money I could only dream of.  This was around 14 years ago and my full-time shop assistant wage was around £10000 a year!  I had debt of 1.5 times my annual income.  Ridiculous!

Luckily I was signposted to a debt management company who took over contacting all my creditors and acted as my third party.  They were even able to stop the interest on most of my accounts so I could just pay back what I owed and quicker.  It took a while for some of the creditors to stop hassling me though.  They found out where I worked and rang constantly, to the point where my manager was so sick of it he told them I didn’t work there anymore.  Some of the debt had been passed on to third parties and they are not always the nicest people!  They’d constantly hassle me, even though I was doing the right thing setting up a debt management plan and paying it back.

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Getting out of debt with a debt management plan

We discussed bankruptcy, but I was so young and as it was unnecessary debt I could have been classed as bankrupt for the rest of my life.  I also didn’t qualify for an IVA as I could pay it back in five years.  It took me around 5.5 years in the end, but I paid back every last penny and I learnt my lesson!

Yes, I’m in debt now, but it’s affordable.  I have a mortgage and home improvement loan, but we can more than afford these.  Having a huge mortgage is quite scary, but it’s an investment and the other option is to rent and pay someone else’s mortgage.  At least we are paying something off and will have something to show at the end.  I’m also keen to overpay and get it paid off as soon as possible! 

I will never again get into a load of personal debt I cannot afford for things I don’t need.  In a way I’m glad I learnt my lesson so long ago and I’m much better at managing my money now. 

In fact I’m obsessed and check our bank accounts every morning and track outgoings daily!

I cant pay my debt, what should I do

I can't pay my debt, what should I do?

Not surprisingly website Talk About Debt found that 88% of people who have debt are kept awake at night worrying about it.  For me it was one of the darkest periods of my life so far.  I suffered tremendous amounts of stress worrying about the debt and whether debt collectors would call round.  Just the thought of debt collectors in person was enough to set me into a panic.  I saw no way out, but I wish I’d realised sooner there is a lot of help available out there.

It is no secret that debt collectors don’t stand out with a good reputation and in most cases are unpleasant to deal with. No matter if you are in the US, UK or elsewhere, if you feel you are being harassed by debt collection companies then you can seek legal help and advice. No-one should feel threatened and if you genuinely cannot pay your debt, then you have options.

If you are struggling to pay your debt, don’t feel like you are alone.  There is a lot of help out there.  Don’t suffer in silence.  It can all be sorted and there are people to help you. 

Here are some of the options available to you:

  • Talk to your creditors

Firstly, especially if you think the debt is manageable, speak to your creditors.  Many of them are not scary at all and they will have dedicated helplines for people struggling with repayments.  They may be able to freeze interest or allow a repayment holiday for a period of time whilst you get your finances on track. They will also be able to direct you to debt advice companies for more information.

  • Apply for an IVA

If you’re wondering what is an IVA, it’s an Individual Voluntary Arrangement that’s suitable for most people with large amounts of debt who may otherwise be considering bankruptcy.  A legally binding agreement is set up between you and the creditors for you to pay back as much as possible in five years.  The rest of the debt, up to 70%, is then written off.  It is set up on your behalf through a third company and they can manage all the negotiations and they’ll also take a fee out of your monthly repayments.  Interest and charges can be frozen.

  • Go on a Debt Management Plan

The debt management plan I used didn’t cost me a penny.  Some of them will charge a fee and add it to your outstanding debt balance, but PayPlan who I used did not.  They can negotiate on your behalf with all your creditors and come to an arrangement.  This helps to take the stress away from you and let you get on with your life knowing you are paying back the debt. 

A Debt Management Plan (DMP) is suitable for those who are able to pay the full amount back over a reasonable period.  It’s also really easy to manage as rather than paying each company individually on different dates.  I paid PayPal one lump sum each month and they divided it between my creditors.

Find out more about a PayPlan Debt Management Plan here.

  • Seek professional advice

One of the best things to do is to seek advice.  There are lots of professional debt advice companies offering free advice to those struggling with debt.  I used the Citizens Advice Bureau who referred me to PayPlan when I had my debt.  The CAB were able to look at all my debt with me and tell me who was the best company I should approach.  PayPlan were then able to tell me which option was the best option for me. 

Click here for online help from CAB about debt and money management or pop into your local branch for in-person assistance.


Do not suffer with your debt problems in silence!

The thing I cannot stress enough is to seek help and don’t face it alone!  There are so many companies offering free debt advice who genuinely want to help and point you in the right direction. 

Though it may feel like there’s no way out, there really is and there is light at the end of the tunnel. 

Ten years ago I was in the depths of despair paying back my debt with no money left over for anything else at the end of each week and a £20 to £30 budget for food and sundries each week after all bills and debt were paid.  It was hard and depressing, but I got through and paid it all back. 

Ten years on and I’m married with two wonderful children, I run my own successful business and I'm a homeowner with a mortgage... something I never EVER imagined I could do after so many debt problems. 

It really is possible to turn it all around and create a better life for yourself in the future.  Take charge and seek help. 


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Originally posted in February 2018 and updated in December 2021