Whatever option you choose, the following applies:
Unsecured debts only
None of the options affect the rights of secured creditors, for example a bank or building society that has a mortgage or legal charge over your home. They continue to have the right to take possession of your home if you don’t keep up payments. Having a charge on your home means that if you don’t repay the debt, the creditor has a claim on the proceeds if the property is sold.
Your credit rating
Formal solutions affect your credit rating and show up on your credit record. It is advisable to obtain a copy of your credit record before making your final decision to see how you may be affected.
Many considering a debt solution find that their credit rating has already been damaged by missed payments, arrears, accounts in default, or court judgments.
Where entering into an informal solution such as debt management; you are making reduced payments to creditors and in doing so breaking the term of credit agreements. This can result in defaults being recorded on your credit report
Shortfall on repossessed items
If your home has been repossessed, or you want to voluntarily surrender your home, then any mortgage or secured loan shortfall becomes an unsecured debt, and so can be included in these solutions.
Creditors can make unsecured debt secured
Most debts involving credit and loans are unsecured such as credit cards and bank overdrafts. This means that if you don’t pay the debt, the creditor is not automatically entitled to take something of yours, such as your home. However, in some circumstances they may go to court if you fall behind with your payments. If they then get a court judgment, they may be able to get the court to secure the debt on your home.
Using any of the formal options to help with your debt may occasionally affect your employment. Under the terms of your employment, you may have to inform your employer about it. You should seek advice from your employer or a Trade Union to see if your employment may be affected.