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Made redundant with debts: what to do first

Losing your job does not have to mean losing control of your debts. Here is the order to do things in during the first few weeks.

Applies to: England, Wales & Northern Ireland

Written by The My Debt Cleared editorial teamLast reviewed 18 October 2026Next review 18 April 2027Jurisdiction England, Wales & Northern IrelandEditorial policy
After redundancy, claim any benefits straight away, check whether any loans or cards have payment protection insurance, then make sure your priority bills — rent or mortgage, council tax and energy — are covered before anything else. Tell your other creditors in writing what has happened and ask for reduced payments and frozen interest while your income is lower. Breathing Space can pause most interest and enforcement for 60 days while you get advice.

What to do now

  1. Check what benefits you can claim — benefits and grants check.
  2. Cover priority bills first with the Bill Prioritiser.
  3. Write to non-priority creditors — the hold action letter.

The first week

  1. Claim benefits straight away; many are not backdated.
  2. Find any payment protection or income protection insurance on loans, cards or your mortgage and claim.
  3. Tell your council — you may now get Council Tax Reduction.
  4. Do a new budget for your lower income.

Using redundancy pay

It can be tempting to clear debts with a lump sum. First make sure you have enough to cover essentials and priority bills until you have new income. Paying off a non-priority debt in full may make sense, or a reduced full and final settlement may stretch the money further — get free advice before you decide.

If you have a mortgage

Tell the lender early. It must consider options such as a temporary payment reduction. If you claim certain benefits, you may be able to get a loan towards mortgage interest. Mortgage arrears.

Breathing Space

A free debt adviser can start a 60-day Breathing Space that freezes most interest and charges and stops most enforcement while you get your finances in order. Breathing Space explained.

You can get free, impartial debt advice

You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.

Common questions

What should I pay first after redundancy?

Priority bills: rent or mortgage, council tax, gas and electricity, and anything where you could lose your home or essential services. Then share what is left between other creditors.

Should I use my redundancy pay to clear debts?

Only after you have kept enough to cover essentials and priority bills until you have new income. Get free advice first — there may be better uses, such as a reduced settlement.

Can I get help with my mortgage if I'm made redundant?

Talk to your lender straight away about a temporary arrangement. If you claim certain benefits, you may be able to get a loan towards mortgage interest.

Benefits and grants checkBill PrioritiserBreathing SpaceBudget calculator
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