Solutions to Debt Problems
If you are struggling with debt then there are a number of options open to you. The suitability of each
of these potential debt solutions will depend on your individual financial situation. It is advisable to seek independent
professional advice before you commit to any particular option.
A brief overview of each debt solution can be found below -
Debt Administration Order
A Debt Administration Order is an option if you owe less than £5000 in unsecured debt and this money is owed to at least
two different creditors. Under the terms of the Administration Order your debts would be consolidated down to one single monthly
payment. This payment is made to the Court who administer the Order and distribute the money between your creditors. To apply for an
Administration Order you can obtain the relevant forms from your local County Court.
Debt Consolidation Loan
A Consolidation Loan will allow you to group your debts into a more manageable single payment. This however is only a suitable option
if the rate of interest on the loan is low enough for the loan to be paid off over a resonable length of time. A debt consolidation loan may
also be difficult to obtain if your personal credit rating has already been badly affected.
Debt Management
Debt Mangement means making an 'informal agreement' with your creditors to reduce the amount of your debt repayments. A debt management
company or the Citizens Advice Bureau will negotiate individually with each of your creditors to get them to accept a lower payment. If you decide to enter into a debt management
agreement then you need to be certain that all interest and charges relating to the debt have been stopped. As the arrangement is informal your creditors will have no
legal obligation to not take any further legal action to recover the debt. Additionally any fees charged by the debt management company will be added to your existing
debts meaning it will take longer for the debts to be cleared.
More information - Debt Management
Individual Voluntary Arrangements (IVA's)
An IVA is a legally binding agreement that will consolidate your debts to one single monthly payment. To qualify you must usually owe greater than £15000 and
have at least three different creditors. The IVA will generally last for around five years at the end of which all the remaining debt will by written off by
your creditors, leaving you free of debt. Under the terms of the IVA up to two thirds of your debts may be written off. For many people with significant debt problems an Individual Voluntary Arrangement is the most attractive solution.
More information about IVA's can be found at our specialist IVA website.
Bankruptcy
Bankruptcy is often seen as a 'last resort' option for people with debt problems, however in many cases it is also the most suitable. While becoming bankrupt is the least costly way to resolve
your debt it does have a number of negative consequences which should be considered. If you are made bankrupt the bankruptcy order will be advertised in your local newspaper,
your home could be repossessed and you may have difficulty obtaining credit even after the bankruptcy is complete.
Further reading - Bankruptcy
If you are stuggling with debt and you would like more information about how you can overcome your financial difficulties then contact us for assistance. To speak to a trained debt advisor either call us
on freephone 0800 043 50 43 or complete our debt enquiry form.
A full list of ways in which we can be contacted can be found here.
