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Effect of Covid-19 on Personal and Household debt

While the richer percentage of society may have enjoyed increased savings due to lockdown and Covid-19, debt has spiralled out of control for those most financially insecure. 14 million people have been negatively affected by Covid-19, of which 30% are in severe financial distress, according to research by StepChange. Citizens Advice found that disabled people are particularly hard hit in terms of debt, with 46% of disabled people taking on some kind of debt since the start of the pandemic, compared to 33% of people with no disability.

While Covid-19 destroys the finances of society's most vulnerable, the debt collection business is unfortunately booming. We spoke to debt advisors at IVA Advice, who said that if you fall into arrears (missed payments) for too long, your creditor (person or company you owe money to), could sell your debt to a debt collector. This can be a confusing experience, as, for example, you may think owe money to your energy or phone company, and suddenly find debt companies like Witt International chasing you for the debt.

In this article, we'll look at the effect of Covid-19 on personal and household debt, in terms of rent, utilities bills and council tax. We'll also look at exactly what you can do to access support if you're falling behind on payments in any of these areas.

What is the effect of Covid-19 on personal and household debt?

The effect of COVID-19 on personal and household debt is that:

  • 13.9% of people had to take out credit or borrow money more than usual since the start of the COVID-19 pandemic.

  • 18 million people took out some kind of debt to cope financially between March and September 2020.

  • 54% of families in the lowest income fifth borrowed more from March to June 2020 to cover essential costs like food and housing.

  • 6 million UK adults fell behind on at least one household bill during the Covid-19 pandemic.

  • 3.9 million UK adults fell behind on credit card and overdraft payments.

  • 60% of families on Universal Credit and Child Tax Credits had been forced to borrow money since the start of the crisis.

5 steps to take if you can't pay your rent

Rent is what we call a 'priority bill', which means it is one you need to focus on paying above, for example, credit card debts. This is because it could have immediate, serious effects on your life if you don't pay it, for example, your landlord may have the right to evict you. If you are struggling to pay your rent, you're not alone and there are many things you can do to try and get some support in place. If you're struggling to pay your rent because you've lost your job or your business has had to close due to Covid-19 related issues, for example, you may be able to get financial help from the government, which could help you meet your rent payments.

Even if you're working some hours, you may still qualify for Universal Credit (which is being phased out to replace Tax Credits for working families on a low income), if you're on a low income. If you have responsibility for a child or a health condition or disability that impacts your ability to work, you can get what is called a 'work allowance'. This means you can earn up to £512 a month, or £292 if you don't receive support for housing costs, without this affecting your universal credit payments. It's definitely worth checking what benefits you may be entitled to, as this could really help you to pay your rent. Use free benefits calculators at Turn2us and entitledto.

If you're self-employed or a member of a business partnership and your business is struggling due to Covid-19, you may be able to get a grant through the government's Self Employment Income Support Scheme. This grant is worth 80% of your average monthly trading profits, and you'll get it in a lump sum covering 3 months' worth of profits. It is capped at £7500, and may offer some financial relief to you as you try and meet your essential bills at this difficult time. Make sure you check the website to see if your business is eligible to any tax relief, which may also ease your finances.

Contact your landlord as soon as possible

If you anticipate that you'll have trouble paying your rent, the best thing you can do is contact your landlord and let them know. If you fall into rent arrears and ignore your landlord's request for payment, they may take action to evict you. However, if you communicate with them early on, there are many options you can consider to help you pay your rent. Your landlord may agree to:

  • Give you a payment holiday, or more time to pay. This means that you don't have to pay your rent for a fixed amount of time, but you will pay back the arrears (missed payments) at a later date. You should be careful about agreeing to something like this if you know you'll struggle to pay the rent arrears, though. However, if you know your financial issues are only temporary, or you have a cash flow issue that can be fixed, this may be a good solution for you, as it will help you to keep your home.

  • Not seek to possession for rent arrears or take action to evict you for a period of time, and allow you to pay a lower level of rent (possibly to be paid off over a longer period of time).

  • Give you the chance to pay off missed payments in affordable instalments, rather than demanding the money all at once.

Remember that even if your landlord refuses to let you pay your rent in affordable instalments or give you a payment holiday, you should pay off what you can. Then, if your landlord tries to take you to court, you can prove that you were responsible and reasonable enough to pay off what you could manage of your rent.

Mediation may be an option if you can't come to an agreement alone with your landlord. Mediation is when a third-party person helps you sort out your disagreement with your landlord, and come to a solution that works for both of you.


Budgeting when you're facing unexpected financial difficulties may seem such an obvious solution it's not worth mentioning, but actually, many of us don't know how to budget properly and where we can save money to put towards other things (such as rent!). A study in 2017, showed that over half of Brits don't track their spending. Even if you have a vague budget, you may not realise how much you can save with a few tweaks.

A great way to budget and see what money you can save to put towards rent, is the three accounts budgeting system. Developed by the charity Christians Against Poverty, it separates your money into three different accounts for three different purposes. One account is for all your standing orders and direct debits, for example, your mortgage or rent, household bills and loan repayments, one is for your weekly spending (this should be a simple cash account, with no overdraft) and one is for saving.

See if you qualify for a discretionary housing payment (DHP)

If you meet certain criteria, for example, you’re claiming housing benefit or universal credit without housing costs, you may be able to get payments from your local council, if they decide that you need extra help to meet your housing costs. These extra payments could really help you cover a rent shortfall, if you’re unable to meet them for any reason. You’ll be able to apply via your local council, either online, by downloading an application form through the council website or by calling them, depending on your individual council.

Seek free debt support from a local charity

Everybody’s situation is different, and one of the best things you can do if you’re struggling with rent payments, is to get personalised debt support through a debt charity such as StepChange, National DebtLine or Christians Against Poverty

I'm already in rent arrears. What should I do?

If you're already in rent arrears, you should still contact your landlord as soon as possible, and explain the situation. They may still allow you to have more time to pay your rent, or to repay your rent arrears in instalments, rather than taking action to recover the debt all at once.

5 Steps to take if you can't pay your utilities bills

Similarly to rent, paying your utilities bills is another priority debt. If you fall into arrears with, for example, your energy supplier, they could fit a prepayment meter in your home (which could end up being more expensive), or, in rare cases, get a court order to cut off your supplies (suppliers must give you 7 days notice in writing before they do). If you are struggling to pay your utilities bills, try not to worry - there are many things you can do to access some support with your bills. According to IVA Advice, you should

Contact your suppliers

The first thing you should do when struggling with utilities bill payments, is to contact your suppliers (the companies who provide your water and electricity) and make them aware of the situation. All energy suppliers are governed by rules which say they must take specific steps before simply cutting off your energy supply. Suppliers are not allowed to disconnect you between 1st October and 31st of March if you're:

  • a pensioner living alone

  • a pensioner living with children under five

If you have a prepayment metre, the government has given you certain rights during the Covid-19 pandemic, which mean that your energy can't be cut off even if you can't afford to top it up. Your energy provider pay add a fund to your account, or sent you a pre-loaded top-up card. However, you'll still need to pay back any energy debts you accrue at a later date.


If you're having trouble meeting your energy expenses, you could look at your incomings and outgoings and see if there are any savings you can make to put towards your energy payments.

Check if you're eligible for financial help

Just like if you're struggling to pay your rent, you should check if you're eligible for any financial assistance which could help you pay your energy bills. Check if you qualify for universal credit or any other benefits (you can still get many of these if you're working and on a low income), using free benefits calculators at Turn2Us and entitledto.

You may also be able to get grants and benefits to help you pay your utilities bills. These include:

  • Winter Fuel Payment. This is an annual, single payment to help you pay for heating in the winter. You'll usually get this if you were born on or before 5th October 1954.

  • Cold Weather Payments. These are one-off payments that can help you pay for the extra heating costs that you accrue when the weather is very cold. You'll get a payment when the temperature drops to a certain temperature for a certain amount of time. You'll only get these if you're entitled to certain benefits.

  • Warm Home Discount Scheme. This gives you £140 off your electricity bill if you're on a low income or getting the guarantee credit element of Pension Credit.

See if you can switch energy providers, and save energy in general

You could save a lot on your energy bill without even realising it, simply by switching suppliers. Go to and check out which is the cheapest supplier for you. This should help make your energy bills more manageable. You can also try installing a smart thermostat. Smart thermostats save you money on heating by only heating the rooms you're using.

Get free debt advice from a charity

If you anticipate that you'll soon go into debt over your utilities bills, it's a good idea to get in touch with a debt advice charity like StepChange or National DebtLine. They will give you personalised advice on how to deal with your utilities suppliers and get support in place for paying your utilities bills.

I'm already in utility bills arrears. What should I do?

The good news is there is support out there if you're already struggling with utility bills debts. Your utilities providers can't cut you off if you've reached out and made a payment plan with them.

If you have debts with an energy supplier, you might be able to get a grant to pay it off. British Gas Energy Trust offers grants that you can apply for whether or not you're a customer, for example. Companies who offer grants for customers include:

  • npower Energy Fund

  • Scottish Power Hardship Fund

  • Ovo Debt and energy assistance

  • E.on Energy Fund

  • EDF Energy Customer Support Fund

  • Bulb Energy Fund

IVA Advice says: "all energy suppliers had to adhere to government regulations, and you have several rights as a customer, even if you've fallen into arrears. If your supplier has disconnected you (this is a rare case) and you pay back all the charges or agree a repayment plan with them, they should reconnect you within 24 hours. If they don't, you're entitled to a £30 refund from your energy supplier. They must do this within 10 working days and if they don't, they have to pay you an extra £30 for the delay, so make sure you claim this money if you're entitled to it".

5 Steps to take if you can't pay your council tax bills

Council tax bills are another priority debt, as the consequences for not paying them on time are significant. IVA Advice says that you should never ignore council tax debts, as the council can take you to court quickly, and may add court costs and bailiff fees to your debt. Let's look at what you should do if you can't pay your council tax bills.

See if you qualify for a council tax discount or reduction.

With Council Tax Reduction, you can get a discount of up to 100% of your bill if you're eligible. You can apply whether you rent or own your own home. Contact your local council via the website, to apply for Council Tax Reduction. You may also be able to get a Council Tax discount, depending on where you live. Enter your postcode on the website to see if you're eligible.

Contact your local council, and set up a payment plan

Contact your local council as soon as possible, if you anticipate that you'll struggle to make your council tax payments. If you do this, you'll be able to come to a much easier and financially better solution than going to court.

Check if you qualify for financial assistance

Similarly to if you're struggling with rent or utilities payments, you should check if you're getting all the benefits you're entitled to. If you're on a low income, you can still qualify for universal credit, and if you have a dependent child at home or you have a disability, you can earn £512 a month before your universal credit payments are even affected, which may help you to meet council tax payments. If you're on a low income and your finances are affected because you're having to self-isolate, you could get a one off £500 payment from the government. If you're self-employed make sure you check out the government's Self Employment Income Support Scheme, and see if you're eligible for a grant. You'll get 80% of your average monthly trading profits, and you'll get it in a lump sum covering 3 months' worth of profits.


If you're having trouble meeting your council tax bills, make sure you look at your incomings and outgoings and see if there are any savings you can make to put towards your energy payments.

Seek free debt advice from a charity

There are many different reasons you may be struggling to pay your council tax bills, and the best thing you can do is access unique, free debt support at a debt charity such as StepChange, DebtLine or Christians Against Poverty. You'll can talk to qualified debt advisors who will help you work out how to contact your council, and work out a payment plan or debt support for your unique situation.

I'm in serious debt that I can't get out of. What are my options?

Struggling with serious debt can feel really debilitating, and the first thing to know is that you have lots of options to deal with debt, and even write some or all of it off forever! The UK has a number of formal, government approved solutions to deal with insolvency (financial distress, with inability to pay off your debts). Let's look at them now.

Individual Voluntary Arrangement (IVA)

An IVA s a government approved debt help scheme, which helps you if you're struggling to repay your debts. An IVA allows you to pay back a small percentage of your total debt, and get the rest of it cleared. You get legal protection from your creditors and they are not allowed to contact you. At the end of the IVA (which runs for 5-6 years), no matter how much money you have left to pay back, the debt is written off. You will make small, monthly payments towards your debt, based on what you can afford.

Debt Relief Order (DRO)

A Debt Relief Order gives you legal protection against your creditors, and stops them from contacting you. The DRO writes off your debt after around 12 months. You can include council tax arrears, rent arrears and utilities debts in a DRO. However, a DRO will affect your credit score, and you will only be able to get one if you have very few assets that can be sold to pay your creditors, and less than £50 of disposable income.


Going bankrupt is another way to deal with debt, but it has a very serious affect on your life and credit rating, and you should only consider doing it after you've taken free debt advice. Bankruptcy will clear your council tax and rent arrears and utilities after around 12 months, and your creditors will be legally prevented from contacting you. However, any assets you have may be sold off to pay your creditors.

There is no doubt that, despite the fact that Covid-19 may have improved the financial situation of some, it is those who were already struggling to make ends meet before the pandemic (so often marginalised groups in society such as ethnic minorities and the disabled), who have been hit disproportionately with greater debts and financial difficulties. We have covered 5 steps you can take if you're struggling to pay your rent, utilities bills and council tax, and we hope you've found this blog a useful guide. Remember that if your debt is really serious, you can include rent, utilities bill and council tax debts in insolvency solutions such as IVAs or DROs.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes

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