Many people will face difficulties with paying off their monthly bills at some stage. In these circumstances, it is always better to take action promptly rather than push the problem to the back of your mind until it escalates out of control. There are various options available when deciding how to deal with your repayments.

What should I do?

The first thing to do is to sit down and make a list of all your debts or outstanding bills and prioritise them to see which are the most vital to pay. Priority debts would be outgoings such as mortgages or rent, council tax, electricity or gas bills. These are the most urgent as you could lose your home or have your energy supply cut off. Once these are sorted, you need to sort out non-priority debts such as credit or store cards and student loans.

You can then contact your creditors to explain your situation and see whether you can come to an arrangement to pay off your loans or arrears; otherwise, they may think you are trying to avoid paying and send in a debt collector or take legal action.

How can I pay off debts by instalments?

You could take out an individual voluntary arrangement (IVA), which has to be set up by an insolvency practitioner and is a legal agreement to pay back the money over a period of time. This means you only have to make one monthly payment through your insolvency specialist. It covers most debts, but not all; therefore, while people may be thinking should I consider an IVA as an option, it is advisable to contact a specialist to see whether this is the right route.

Another option is to take out a consolidation loan, which is a loan used to pay off existing debts. To do this, you will need to get advice from an independent financial adviser regulated by the Financial Conduct Authority. Whatever you do, make sure you do not borrow from an unlicensed loan shark.

A further choice is to apply for an administration order, whereby you make a monthly payment through the courts to pay back your debts. As a last resort, bankruptcy is a consideration; however, this will have a major impact on your life.