What to Do When You Cannot Pay a Bill

When money runs short, the instinct is usually to pay whoever is asking most persistently. That is frequently the wrong order, and it can make a difficult situation considerably worse.

Debt advice has a clear framework for this, and free help is available from several organisations. Nobody should pay for debt advice.

Here is how to approach it.

Priority debts come first.

Debts are divided into priority and non-priority, based not on the amount owed but on what happens if you do not pay.

Priority debts are those where the consequences are most serious: rent or mortgage arrears, where you could lose your home; council tax, which can lead to enforcement and, in extreme cases, imprisonment; energy, where supply can be disconnected or a prepayment meter installed; court fines; TV licence; and child maintenance.

Non-priority debts include credit cards, overdrafts, personal loans, catalogue accounts, buy now pay later arrangements and money borrowed from family.

Non-priority creditors are frequently the most persistent, which is precisely why people pay them first. The consequences of missing them are real but far less severe than losing a home.

Contact creditors before missing payments.

Creditors have obligations to treat customers in financial difficulty fairly, and most will negotiate.

Energy suppliers must offer affordable payment plans to customers in arrears, taking account of ability to pay, and many operate hardship funds that can write off part of a debt.

Councils will generally accept payment arrangements for council tax arrears, but it is important to act early, because once a liability order is obtained the options narrow and costs are added.

Landlords and mortgage lenders both have processes for arrears, and lenders in particular are required to consider forbearance before possession action.

Breathing Space stops the pressure.

The Debt Respite Scheme, generally known as Breathing Space, gives legal protection from creditor action for a defined period.

During it, most enforcement action must stop, and interest and charges on qualifying debts are frozen.

It is accessed through a debt adviser rather than applied for directly, and there is a separate longer version for people receiving mental health crisis treatment.

For anyone struggling to get space to think, this is the single most useful mechanism available, and it is free.

Know your rights on enforcement.

If council tax or certain other debts reach enforcement, enforcement agents, still commonly called bailiffs, may become involved.

They must give notice before visiting. They cannot force entry to a home for most consumer debts on a first visit, and they cannot enter through a window or push past you.

They cannot take goods belonging to someone else, essential household items, or tools of your trade below a value threshold.

If you are vulnerable, including through disability, serious illness, age or having young children, you should tell the enforcement company, which has obligations to take that into account.

Fees are fixed by regulation, and challenging incorrect fees is possible.

Energy disconnection has protections.

Suppliers must follow a defined process before disconnecting, and there are protections for vulnerable households, including a ban on disconnecting certain customers during winter months.

Registering on the Priority Services Register provides additional protection and support, and it is free to join for anyone who is disabled, chronically ill, of pension age, or has young children.

If a prepayment meter is proposed as an alternative to disconnection, there are rules about when this is permitted and safeguards for vulnerable households.

Water cannot be disconnected.

Domestic water supply cannot be cut off for non-payment in England and Wales, which is not widely known.

That does not mean arrears should be ignored, since debt still accrues and can be pursued, but it does mean water sits lower in the priority list than energy.

Water companies operate social tariffs, arrears matching schemes and hardship funds, and Northumbrian Water publishes the support available.

Formal debt solutions exist.

Where debts cannot realistically be repaid, formal options include debt relief orders, individual voluntary arrangements and bankruptcy, each with different eligibility criteria, costs and consequences.

These are significant decisions affecting credit, employment in some professions and, in some cases, home ownership.

They should only be entered into after free independent advice, never on the recommendation of a company that charges fees.

Avoid paid debt management companies.

Free advice is available and is at least as good as anything charged for.

StepChange, National Debtline, Citizens Advice and Newcastle City Council's welfare rights service all provide free debt advice. Advisers can negotiate with creditors, arrange Breathing Space and set up formal solutions without charge.

Be extremely cautious of companies advertising debt write-off, particularly those charging upfront fees or contacting you unsolicited.

Check entitlements at the same time.

A significant proportion of people seeking debt advice are found to be missing benefit entitlements.

A full benefits check should be part of any debt conversation, and free advice services do this as standard.

Local welfare assistance, discretionary housing payments and charitable grants may also be available, and an adviser will know what applies in Newcastle.

Share your thoughts.

Did you know water cannot be disconnected for non-payment?