What do I do when a letter says I owe money?

Two things make a demand for money worse: ignoring it, and panicking into an arrangement you cannot keep. Both are common. The middle path is to verify it, understand it, and get free advice before committing.

Safety

Step by step

1. Check it is genuine before anything else.Scam debt letters and calls are common. Do not use contact details from the letter — look the organisation up independently. Genuine creditors do not object to being verified.
2. Do not ignore it.Debts do not go away and escalation adds costs. Even if you cannot pay, responding puts you in a far better position than silence.
3. Ask for proof of the debt in writing.You can ask a creditor or collection agency to prove the debt is yours and provide a statement. If they cannot, they should not be pursuing it.
4. Check whether it is actually yours and current.Mistaken identity, a debt already settled, an old debt, or one relating to a previous occupant of your address are all common.
5. Work out its priority.Rent, mortgage, council tax, energy and court fines have more serious consequences than credit cards and catalogues. Priority debts come first — this is where free advice earns its place.
6. Get free debt advice before agreeing anything.Established debt charities give free, confidential, independent advice and can negotiate on your behalf. Never pay a company for this — the good services cost nothing.
7. Only offer what you can actually sustain.An arrangement you cannot keep is worse than no arrangement. Work out a realistic budget first, with help if needed.
8. Get any agreement in writing.The amount, the schedule, and confirmation that they will not take further action while you keep to it.

Tips

• Free debt advice is genuinely good and genuinely free. Paid "debt management" companies charge for something charities do better at no cost.
• Debts in England, Wales and Northern Ireland generally become unenforceable after six years without acknowledgement or payment — but acknowledging one can restart that clock. Take advice before responding to a very old debt.
• Keep every letter and note every call. If it becomes a dispute, the timeline is what matters.

Common mistakes

• Ignoring the letters — Costs escalate and it can proceed to court. Responding — even to say you cannot pay yet — puts you in a much better position.
• Agreeing a payment plan you cannot sustain — Breaking it damages your position and your credit. Work out what is realistic first, with free advice.

Questions people ask