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How to Become Debt Free in the UK

Updated for 2026

If you want to become debt free in the UK, the first step is understanding exactly where you stand. This guide walks you through the practical steps and formal debt solutions available to help you clear what you owe.

Work Out What You Owe

Before anything else, you need a clear picture of your debts. Write down every creditor, the balance owed, the interest rate and the minimum monthly payment.

Separate your debts into two categories:

  • Priority debts: council tax arrears, rent or mortgage arrears, energy bills, court fines and TV licence arrears.
  • Non-priority debts: credit cards, personal loans, store cards, catalogues, overdrafts and money owed to friends.

Our Solution Finder can help you work out which debt solution might suit your situation.

Create a Realistic Budget to Become Debt Free

A budget is the foundation of any plan to become debt free. List your total monthly income after tax, then subtract your essential spending.

Whatever is left after essentials is your disposable income available to pay towards your debts each month.

If your disposable income does not cover minimum payments, you may need a formal debt solution. The GOV.UK debt options page outlines the main routes available.

Debt Solutions That Could Help You Become Debt Free

In England, Wales and Northern Ireland, several formal and informal debt solutions exist.

Individual Voluntary Arrangement (IVA)

An IVA is a legally binding agreement. You make affordable monthly payments over 60 months, and remaining debt is written off. Read more: Can I Get an IVA?

Debt Management Plan (DMP)

A DMP is an informal agreement with reduced monthly payments based on affordability. Free providers include StepChange and PayPlan.

Debt Relief Order (DRO)

A DRO is for people with low debt, few assets and little spare income. You can apply if you owe up to £50,000 with assets under £2,000.

Bankruptcy

Bankruptcy costs £680 to apply online and is typically discharged after 12 months. See: The 5 Stage Process of Dealing With Debt

Avoid Common Mistakes When Trying to Become Debt Free

  • Ignoring the problem: debt does not go away on its own.
  • Borrowing more to pay off existing debts.
  • Paying for debt advice: legitimate advice in the UK is free.
  • Only making minimum payments on credit cards.
  • Not checking your credit file for errors.

Read: 5 Myths About Debt Consolidation Loans

How Long Does It Take to Become Debt Free?

  • IVA: typically 60 months with remaining debt written off
  • DMP: often 5 to 10 years
  • DRO: 12 months
  • Bankruptcy: discharged after 12 months

Read: How Long Does an IVA Last?

What Happens to Your Credit Score?

Any formal debt solution will appear on your credit file for six years. However, a formal solution gives you a structured path to clearing what you owe.

Read: 7 Practical Tips for Dealing With Debt

Take the First Step Today

Use our Solution Finder to get a quick, free assessment of your options to become debt free.

This article is for general information only and does not constitute financial advice.

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