Disc brakes not working

I really should have sorted this a while ago, so I'm humbly asking for some help.

I few weeks ago my rear brake seemed to fail. I think the rear disc was rubbing on the callipers as I had a new wheel done by the local bike shop (hub broke), so the callipers weren't adjusted correctly as I only took in the old broken wheel to be replaced not the whole bike. I've been a bit (a lot) skint lately, so put of sorting it and thought I'd get by with the front brake for the moment. Well, naturally, same thing happened to the front brake. Both had a gradual loss of braking ability on a ride, by the end of the ride were basically dead. I checked the pads and cleaned the mechanism itself (initially thought it was dirt and muck in there) and the pads seem to still have enough er, can't think of the correct word, but material on the surface to brake with. I've read you can use them until less than 3mm? Well there's more than that. Long story short, I think either the pads or the disc may have been contaminated. What's my best course of action? New pads? New braking set up entirely?