Painting - Peeling bathroom paint

I desperately need to paint my bathroom but I dont know where to start. My ex never used the exhaust fan and now the ceiling is peeling as well as the walls about 2ft from the ceiling all the way around.

I have heard that I need to get a power sander and sand all the walls before painting. That is one option, however, I am afraid I will sand right through the wall. :) Sorry, but I am new to this and determined to do it myself. The other way is to peel all the paint, (which is peeling EVERYWHERE), and then fill in the gaps with a spackle or something. THEN Sand and then paint.

Are these my only two options. Is there something I am missing?

Please help. I have been living with this for 6 months now and I am ready to fix it, I just dont know where to start.

Thanks in advance. :)

I have painted my bathroom twice, and have been living in the house for less than one year. The first time, I just primed and painted. That pealed within six months. The second time I sanded, primed and painted. I used 60 grit sandpaper with the power sander. In addition, for the big areas of paint peeling, I spackled and sanded. I have not had any problems regarding the bathroom since I did it the second time. In addition, I would strongly consider utilizing a mold-resistant primer. Hope that this helps.

The peeling paint will have to be removed. Scraping it lightly with a putty knife might be the fastest and cleanest approach prior to sanding. Use a random orbital sander to avoid digging into the walls. Traditional joint compound will do to repair any gouges. Be sure to vacuum the walls clean before priming.

Generally, paint peels because the bond to the surface is lost. Likely due to moisture. Make sure the vent fan is large enough and the vent piping is not blocked to the outside.

Latex primer and paint would seem the likely choice for painting after this task.