What help can you get if you can’t pay your important bills and debts?
in March 2023, it has been a hard winter for millions. And many bills are increasing in April.
If you don’t think you can manage to pay everything, this article looks at your options for priority and nonpriority debts. And how to get help, with debts and with benefits.
Get a budget & know what is top priority
When there isn’t enough money to pay for everything, you have to make choices.
It’s important to know what must be paid first and in full, even though this leaves not enough to pay other debts. See What debts and bills are top priority? for a list of priorities and non-priorities.
Paying your rent/mortgage, car finance, food, clothes and heating may leave little or nothing for unsecured loans, credit cards or catalogues. This may sound alarming, but non-priority creditors know that they are bottom of the list and that priority bills have to be paid in full.
Try this online budgeting tool from National Debtline. Even if your income or expenses are changing, this will still help:
- it lists expenses so you don’t forget something;
- it converts everything to monthly amounts;
- it works out which debts and bills are most important;
- it shows how to divide up the money you have;
- you can download it to show creditors or a debt adviser. This can save you from having to explain your budget on the phone to lots of different people.
Priority bills and debts
Energy bills – will your supplier help?
Energy bills more than doubled in 2022. The government’s energy price Guarantee will remain unchanged from April 2023, but standing charges are going up which will hit low-income households hardest. And the £400 help with electric bills over the winter will not be repeated this year.
If you already have arrears, Ofgem says:
Suppliers must work with you to agree on a payment plan you can afford under Ofgem rules. This includes reviewing a plan you have agreed before.
Talk to your supplier and ask if you can pay arrears over a longer period. It’s important to say if people in your household have health problems. If you are having deductions through a prepayment meter for existing debts, ask if the deductions can be reduced or halted.
The British Gas Energy Trust supports all energy customers on prepayment meters no matter who your supplier is. They can make grants.
The following energy companies offer help to their customers in difficulty:
- E.ON Energy Fund
- EDF Energy Customer Support Fund
- Scottish Power Hardship Fund
- Ovo Debt and energy assistance
- Octopus (including previous Bulb customers).
If your supplier wants you to pay more than you can afford to arrears, talk to your local Citizens Advice about how to complain and what your options are. Citizens Advice may also be able to give you a Fuel Voucher if you have a prepayment meter.
Energy bills – help from the government from spring 2023
In April energy prices will rise again by about 20%. The amount the average household will pay in a year will go up from £2500 to £3000.
There isn’t going to be any replacement for the £400 help with electric bills.
Extra help will be available to people on benefits or getting a pension:
- £900 to people on means-tested benefits such as Universal Credit, Pension Credit and tax credits. This will be paid in three parts of about £300 in the Spring and Autumn and the last payment in Spring 2024;
- £300 for pensioner households. This will be paid in Winter 2023-24; and
- £150 for people on an eligible disability benefit. This will be paid in the Summer 2023.
If you don’t qualify for any of that extra help, you will be worse off because of the rising standing charge and the removal of the £400 electric help.
Energy bills – how should you pay them? What sort of meter?
If you are thinking of cancelling your direct debit, make this an informed decision:
- if you think the direct debit amount is wrong, you should challenge this. Direct debit is the cheapest way to pay for energy and allows you to budget easier by paying the same amount throughout the year, so it’s worth trying to get this set at the right amount;
- Should you cancel your direct debit if you can’t pay your energy bill?
If you are in arrears on your bills, your supplier may want you to get a prepayment meter. At the moment there is a temporary ban on suppliers force-fitting pre-payment meters but this may not last.
Would this make it easier to budget? Probably not as they make it harder to manage the cold winter months, see Should I ask for a prepayment meter?
If you want to try to avoid having to have a prepayment meter:
- here are 9 practical steps you can take that may help;
- you should probably also avoid getting a smart meter as your supplier can just switch that to work as a prepayment meter without you agreeing!
Rent and Mortgage
Universal Credit can get you some help with the cost of renting. SMI gives some help with mortgage costs through UC but it doesn’t start until you have been on UC for 13 weeks.
See What help is there when you can’t pay the mortgage? for the support lenders should give you if you are struggling and what you should ask for. There is a lot of help available but many lenders don’t list this on their website – you have to phone up and ask what your options are.
Get help as soon as possible. If you are worried about your mortgage or your rent, you have an eviction notice from your landlord or threatening letters from your mortgage lender, talk to your local Citizens Advice.
Council tax may feel less important than some other priority debts. If you have to choose between paying the rent and paying the council tax, the rent comes first! As does feeding the children and heating the house.
But councils are very fast to take action if you ignore council tax debt. They get through the legal processes much faster than other creditors and use bailiffs more often.
What to do if you have problems paying Council Tax looks at all your options here.
If those options will still you in arrears, talk to your local Citizens Advice. They can also help you with a Section 13A application for council tax reduction if your finances are so difficult you have a “negative budget”, that is when you don’t have enough money to pay your priority bills and essential expenses even if you pay nothing to your debts.
Water companies can offer payment breaks, extended payment plans and schemes that can reduce the amount you have to pay if you are on a low income. Contact your water company and see what help there is.
A water meter may save you money. More details on this and cheaper tariffs you may be able to get if you are on a low income in How to cut your water bills. If your surface water doesn’t go into the sewers, you may be able to get a discount – ask your water supplier.
You can ask the lender for a payment arrangement on car finance. But this is a priority debt and your car is at risk if you can’t pay it in full.
See Can you afford your car finance? for details of your options. Even if you want to keep your car you need to know about your right to end a car finance contract early. And you may be able to make an affordability complaint.
If you aren’t sure about what the best option for you is, talk to National Debtline.
Millions can get broadband costs reduced
If you are on Universal Credit, Pension Credit, ESA or some other benefits, you may be able to get cheaper phone or broadband. See the range of Social Tariffs that you may be able to switch to.
Ofcom says 4.2 million households could halve their broadband bills by taking up these special discounted packages. But so far only 55,000 have signed up.
Deductions from Universal Credit
Deductions from Universal Credit for other debts can be very high leaving you with not enough to live on. Sometimes you can ask for this to be reduced. Your local Citizens Advice can help with this.
Cards, catalogues, unsecured loans, overdrafts – the non-priority debts
FCA’s rules say customers who can’t make payments should be treated “with forbearance and due consideration” by lenders and debt collectors.
For unsecured debts like loans, credit cards, catalogues and overdrafts, this means lenders must consider taking lower payments and freezing interest.
“Consider” may sound vague – you may be worried your lender won’t be helpful.
But most banks, credit cards and other lenders do stop adding interest when asked. Especially if you explain that you have priority bills and debts to pay – your rent/mortgage, council tax, utilities.
Lenders know you don’t have much money and that paying the rent and feeding the kids has to come first. And if they don’t freeze interest you can complain you aren’t being treated fairly and go to the Financial Ombudsman.
So how can you get this help?
1) ask the lenders yourself
For unsecured debts such as credit cards, catalogues, loans, payday loans and overdrafts you can ask the lenders and debt collectors for a payment arrangement. Also ask for the interest and charges to be stopped, so your debts don’t get worse.
The online budgeting tool linked to above can tell you how much to offer to each lender.
Payment arrangements do affect your credit record, so you should only ask for one if you need it. If you aren’t sure, talk to a debt adviser so you can find out all your options and the pros and cons. of each.
2) look at a Debt Management Plan
StepChange operates debt management plans (DMPs) for hundreds of thousands of people. You make one affordable payment to StepChange each month and they divide it between your non-priority debts. There are no fees charged. And interest and charges are almost always stopped.
DMPs are good options if your situation may change because they are flexible. If you get a good job then you can repay the debts much faster. If things get worse, you can pay less or change to a form of insolvency.
Don’t go to any firm that charges for a debt management plan. Even if you think they are nice and friendly, you can get exactly the same plan with no fees from StepChange. Why pay money in fees for no benefit?
3) other debt options – token payments, insolvency
If a DMP isn’t right for you, a good debt adviser can advise on your better options, such as token payments, a debt relief order or bankruptcy.
As a rule of thumb, when your situation may improve a lot in the next year it is usually better to avoid insolvency as you may not need it:
- you can’t go back from bankruptcy, a DRO or an IVA to just paying off your debts as normal;
- in an IVA you can end up paying more than your debts if your situation improves.
And if your situation may get worse, you should avoid an IVA:
- more than 30% of IVAs fail – a failed IVA leaves you back with all your debts after a lot of stress;
- bankruptcy never fails and DROs fail less than 1% of the time.
In particular, if you expect your mortgage or rent to get up over the next few years, you should not start an IVA unless you can get a clause included in the IVA that says that your monthly payments will be reduced when your mortgage/rent increases.
Debt advisers can explain your options and their pros and cons.
Already have a debt solution in place but now can’t afford it?
Payment arrangements and Debt Management Plans (DMPs)
If you are struggling to pay energy bills or other priority debts, you should reduce the amount you are paying to debt collectors and DMPs. DMPs are informal, flexible arrangements – they can be changed.
So talk to your DMP firm and ask to make lower payments or have a payment break.
The same applies if you have made a payment arrangement with a creditor yourself. Ask for it to be reduced, to zero if necessary, and tell the creditor if you have priority debts. If the creditor doesn’t agree, talk to a debt adviser about your options.
But if your problem is going to last a while, it’s a good idea to talk to a debt adviser about your insolvency options.
Insolvency – IVAs, bankruptcy, DAS & trust deeds
If you are bankrupt and paying an IPA, tell the Trustee in Bankruptcy that is handling your IPA that you are in difficulty and the IPA will be reduced, to zero if necessary. It won’t extend the length of the IPA – that can’t be more than 3 years.
If you can’t afford your IVA now because prices have gone up, ask your IVA firm to reduce your monthly payments or even complete your IVA.
But if you are renting, another option may be to fail your IVA and have a DRO instead. The DRO rules were changed in 2021 so you may now qualify for one even if you didn’t at the start of your IVA.
For DAS & Protected Trust Deeds (Scotland), see Can’t Pay Trust Deed or DAS? by a Scottish adviser.
Where to get help with debts
If this is confusing or you can’t decide what to do or you are too worried to talk to your creditors, debt advice can help.
You only need to talk to one debt adviser. Here is how to choose who to contact:
- if you have priority debts and bills which are a problem, talk to your local Citizens Advice or another local advice agency.
- if your problem is urgent and you can’t get an appointment with Citizens Advice quickly, phone National Debtline on 0808 808 4000 or use the National Debtline webchat.
- if you have some money to pay to debts talk to StepChange on 0800 138 1111.
- if you have little or no money for debts, talk to National Debtline about your options.
- if you are self-employed or have a small limited company, talk to Business Debtline.
Be careful. Some commercial firms trying to sell you an IVA use names that sound a lot like these good debt advisers. Make sure you are talking to the real thing!
Help from benefits
Websites such as Turn2Us can show you what you might be able to claim. Use this calculator even if you think you are already claiming everything you can, it is worth making sure.
If a benefit calculator suggests you would be better off claiming Universal Credit (UC) and you currently get tax credits or housing benefit, be careful. These benefits end when you claim UC and you can’t go back to claiming them.
I suggest you talk to your local Citizens Advice. They can do a “what if” calculation to double-check that switching to UC is the best option for you.
There may be other help you can get that doesn’t show up through a benefits calculator as it is “discretionary” – not everyone who applies will get it. Most of this comes from your local council, so looking on their website is a good start.
- You may be able to get a Discretionary Housing Payment (DHP) from your council if your Universal Credit or Housing Benefit doesn’t cover your full rent or you are being hit by the benefit cap or bedroom tax.
- Some councils have extra help with Council Tax, in addition to Council Tax Support. This may be called something like Discretionary Council Tax Support Hardship Payment.
- Councils have been given more money for a Household Support Scheme from April 2022. They may also have an Emergency Support Scheme that often gives out vouchers for food or fuel rather than cash.
Your local Citizens Advice can say if you may be able to get one of these payments and help you apply.