Credit card and personal loan debts

Credit cards, store cards, catalogue credit, overdrafts and personal loans are non-priority debts — but that does not mean you can ignore them. Falling behind can spiral quickly.

Why these debts grow

• Interest compounds monthly.
• Minimum payments often cover interest only, so the principal barely reduces.
• Missed payments trigger default charges, late fees, and increased interest.
• A typical credit card balance of £3,000 on minimum payments can take 30+ years to repay.

What to do when you fall behind

1. Stop using the cards and accounts. Lock them away if helpful.
2. Tell the lender. Most have a collections or vulnerability team. Explain your situation and ask for help.
3. Ask about forbearance: temporary payment holidays, reduced interest, or a structured repayment plan.
4. Negotiate a payment plan based on what you can afford — even £1 per month recognises the debt and reduces creditor action.

Beware of high-cost lenders

• Payday loans and short-term lenders charge very high interest (though FCA rules cap the total cost).
• Guarantor loan lenders may pursue your guarantor — talk to them honestly before signing anything.
• If you have aggressive debt collectors chasing, see Creditor harassment — your rights and how to stop it.

Credit cards and bankruptcy

Credit card debt is one of the most common reasons people consider bankruptcy. Credit cards are unsecured, non-priority debts and are fully written off when you are discharged from bankruptcy.

Before you file:

• Stop using your credit cards. New borrowing just before bankruptcy can cause problems.
• Do not prefer one creditor. Paying off a friend or family member shortly before filing is "transactional" preference and the OR can reverse it.
• Do not take cash from a credit card as bankruptcy approaches. Cash advances within months of bankruptcy can complicate things.

All your credit cards will be cancelled when you are declared bankrupt. If you have a card jointly with someone, the joint account holder remains liable for the full balance.

After discharge, you may be able to rebuild credit slowly — start with a basic bank account and possibly a "credit-builder" card. See Rebuilding your credit file after bankruptcy.

Options if you cannot repay

• DMP (Debt Management Plan) — informal, flexible, may freeze interest.
• IVA (Individual Voluntary Arrangement) — formal, 5–6 years, partial write-off.
• DRO (Debt Relief Order) — if you owe under £30,000, with low income and no assets.
• Bankruptcy — if you have no realistic way to repay within a reasonable time.

Use the Options assessment to compare these for your numbers.

Important

Non-priority does not mean it doesn't matter. It means the consequences move slower. The earlier you tackle them, the more options you have.

England & Wales only. General information, not legal advice.