There are a number of ways to deal with debt and finding the right debt solution that suits your current financial situation as well as the longer term is essential. It is crucial that you contact your creditors before considering any of the debt solutions below as they may put you on a temporary arrangement which may give you the extra time needed to get control of your finances.
The four most common debt solutions are:
- Debt Relief Order
- Debt Management
- Individual Voluntary Arrangement
- Bankruptcy
Debt Relief order
You can’t apply for a debt relief order if you:
- own things of value or have savings of over £300
- own a vehicle worth more than £1,000
You can only apply for a debt relief order when:
- you have debts of £15,000 or less.
- you have spare available income of £50 or less a month after paying household expenses
- the things you own and any savings are worth £300 or less.
- in the last 3 years you must have lived, had a property or carried on a business in England or Wales.
Debt Management
A Debt Management programme is a great way of clearing your unsecured debt in a simple and effective way. A Debt Management Plan could turn all your loans, credit cards, store cards and outstanding overdrafts in to one single reduced monthly repayment.
Using Debt Management, we will consider your priority debts, which include mortgage or rent payments, utilities, living expenses and other monthly essential payments; we will then be able to calculate an amount you can afford to pay. Any money left over is put together into a single monthly payment and shared out between all your creditors.
Individual Voluntary Arrangement
An IVA or Individual Voluntary Arrangement is a financial arrangement made with your creditors to repay your outstanding debts within five years. An IVA takes the form of a formal proposal for repayment that is presented to creditors via an Insolvency Practitioner. If the proposal is agreed, you enter into a contract with your creditors to repay a set amount over a period of five years. A proposal is put to each of your creditors, and they then vote on whether to accept the IVA or turn it down. If creditors representing at least 75% of your debt vote in favour of the IVA, your Individual Voluntary Arrangement will begin.
Bankruptcy
When you are made bankrupt your bank accounts and credit cards are closed. Your bankruptcy may be announced in the local newspapers and you can face restrictions on what work you can do in the future. It can also be hard to get financial services in the future.
We view Bankruptcy as being the very last debt solution that should be considered. We will be able to advise you on the best solution that will benefit your circumstances.
