Problem debt, sometimes referred to as unaffordable debt, is a rising issue that numerous households across the UK are facing due to unmanageable living expenses, the cost of living crisis, and much more.
In this article, we take a look at what problem debt is in more detail, including how to spot the signs and how to manage it.
What is Problem Debt?
Problem debt can occur when a person can no longer afford to repay their debts, and this becomes completely unmanageable. As a result, people can easily fall behind on their repayments, be in arrears to their creditors and feel overwhelmed or stressed by their situation.
In September of 2023, a Citizens Advice study found that ‘energy debts and council tax arrears are now the most commonly encountered problem debt’, showing a common trend in how UK households are struggling with their finances. A difficult cycle to deal with, those who face these challenges often feel like they cannot solve the problem.
What Can Be The Cause of Problem Debt?
Problem debt can be caused by a number of factors, commonly including:
- Job loss
- A loss of income, whether that be from employment or your entitled benefits
- Breakdown of a relationship, such as a divorce or separation
- Taking on more debts to try and pay off existing ones
Mainly, a large change in your financial situation could be a contributing factor to problem debt. As many people tend to feel ashamed or embarrassed by their debts, this may stop them from seeking help. We recently spoke about the main barriers to getting debt advice as part of Debt Awareness Week 2024, which you can read about here.
Common Signs of Problem Debt
If you think that you, or someone you know, might be struggling with problem debt, there are some common signs to look out for. This can include, but is not limited to:
- Being consistently behind on debt repayments to your creditors, including credit card loans, store cards and priority bills like rent and mortgage payments.
- Using credit cards for daily expenses, rather than larger purchases
- Using savings to pay off your debts
- Feeling increasingly overwhelmed and stressed by your debts
- Turning to friends and family to ask for money
No matter what the reason is for falling into problem debt, it’s important to know that there is support available to help your debts become manageable and get you back on track financially.
What Happens If I Can’t Pay My Debts?
This is a question that we come across frequently, and is something that many people will worry about if they are in problem debt. If you cannot afford to make your full payments, then you may receive a default notice from your creditor. A default notice shows that you have missed payments to the account and often means that the account has been closed, or you can no longer use it to access credit.
One of the most important things you need to do if you cannot make your repayments is to notify your creditors immediately. This will ensure they have knowledge of your situation, and may offer alternative solutions to help you pay your debts in a more manageable way.
How to Manage Your Debts
We understand that managing problem debt can be stressful, but help is available to get you back on your feet. Seeking confidential debt advice from a trusted company will help you to identify the most appropriate solution for your circumstances, but will also talk you through the stages of how to manage your problem debt, empowering you to make informed financial decisions.
Getting debt advice won’t damage your credit score, and allows you to get a plan in place to help you deal with your debts. This could include getting budgeting advice and creating a spending plan, entering an appropriate debt solution, finding out which benefits you could be eligible for and so on. Why not try our free benefits calculator to find out for yourself? It only takes between 5-10 minutes to complete.
In Need Of Debt Help?
We know how hard it is to break the cycle of problem debt. At Angel Advance, every debt advice journey is tailored to your individual situation, so you’ll know that our advice is based on your best interests.
You can get our confidential debt advice any time, day or night, and in a way that suits you. We are available via our 24/7 online debt advice tool, over the phone, email, WhatsApp or live chat – whichever option you prefer.
Problem Debt: FAQs
Problem debt is when someone cannot afford to repay the money they owe. This can result in:
- Using credit cards or borrowing more money to cover essential living costs or existing debt repayments.
- Stress, anxiety, and a negative effect on the person’s mental wellbeing.
- Falling further into debt as payments continue to be missed and interest and late payment charges are added, increasing balances over time.
Common signs of problem debt include:
- You have more money going out of your account than you do coming in.
- You feel sad, anxious, worried and withdrawn, or you might be having trouble sleeping.
- You live a lifestyle that is ‘beyond your means’, e.g. using credit cards or signing up to Buy Now Pay Later (BNPL) agreements to make purchases you wouldn’t have been able to afford without borrowing money.
- You don’t have enough money to pay your household bills, i.e. mortgage or rent, council tax or gas and energy bills, credit cards, loans, etc.
- You may have to rely on your savings to cover essential costs on a regular basis.
- You ask friends and family if you can borrow money.
Don’t let shame or embarrassment stop you from reaching out and getting the support you need.
If you have found yourself in problem debt and haven’t been able to make your repayments, your creditor(s) may send you a default notice. A default notice is a formal letter usually sent when you have fallen behind on payments. It gives you at least 14 days to get your account back up to date. An account can only default once, but creditors can take further action to collect your debt.
Here’s what happens next:
- The default notice is recorded on your credit file and if you don’t pay what you owe in time, this will affect your credit score.
- You can ask to pay in instalments, but your creditors don’t have to agree to this.
- Your creditor(s) can pass the debt to a debt collection agency or take court action.
Problem debt can feel impossible to solve, but you’re not alone. As of February 2024, figures from the Money and Pensions Service (MaPS) showed that 12.6 million people were struggling to keep up with bills or borrowing commitments, using high-cost credit, or were unable to afford food and other essentials.
By taking the following steps, you may be able to improve your situation:
- Make creditor contact: It’s important to let your creditors know you’re struggling so they can offer you some help. This could be a payment break or an arrangement to catch up on arrears over a set period. If you feel unable to contact your creditors, we can support you with this and, if appropriate, contact them on your behalf. They may agree to a reduced payment plan, either directly with you or through a Debt Management Plan (DMP), or they could even give you more time to work out your situation.
- Get regulated debt advice: We would always recommend getting regulated debt advice before taking steps to try and solve your problem debt. Angel Advance is authorised and regulated by the Financial Conduct Authority (FCA) to provide debt advice, so you can be confident you’re receiving safe, regulated support.
- Consider a debt solution: Depending on your circumstances, you could qualify for a debt solution, such as a Debt Management Plan (DMP) or Individual Voluntary Arrangement (IVA). Use our free* online debt advice tool to find out which solutions you might qualify for in just 10-15 minutes.
- Apply for ‘Breathing Space’: If you live in England or Wales, you can get temporary protection (for up to 60 days) from your creditors taking legal action. Breathing Space is not a long term solution, so it’s important to use this time to explore your options and put a sustainable plan in place. You’ll still need to make your debt repayments where possible. Learn more & apply for the scheme via the government website.
- Cut up your credit card: As of 30th May 2025, UK credit card debt rose above £70 billion, so it’s not just you who’s tempted to use your credit card to cover essential costs. But to avoid temptation, we would suggest cutting it up. This is a great first step towards stopping yourself from falling further into debt, alongside avoiding taking out any more credit (which you will be advised to do if you enter into a debt solution). If you need help covering essential costs without a credit card to rely on, check which state benefits you may be eligible for.
*Our advice is free, but if you sign up for a debt solution, a fee will apply for some solutions.
