What Do I Do If I Can't Pay Off My Debts?

If - even after budgeting carefully, prioritising your debts so that you aim to pay off those with the highest interest rates first and looking at ways of increasing your earnings - you are still finding it impossible to pay off your existing debts then there are a number of other steps you can consider taking.  You could approach your creditors and offer to pay off the debt at an amount you can afford, even if it's only a small but regular amount.  Most creditors will realise that this is only what a court would order anyway so they have nothing to gain from taking you to court.  This might involve your creditors writing off some of the debt by entering into an Individual Voluntary Arrangement (IVA) with you.  This legal contract can help you clear your now-reduced debt over a fixed period and your home will not be at risk.  The ultimate option is bankruptcy, which is a more palatable process following recent legislation that has reduced the bankruptcy period to 12 months maximum.  But remember that bankruptcy requires you to sell assets - including your house if you own one - to put towards repaying your debt.