We always get emails asking what debt solutions are available if you are facing financial trouble.  On occasions we will recommend the ones we think will be best for you.  However it’s important that you know all the possible debt solutions so you can make an informed choice.

Taking that into account, we are going to look at all the options available to you when you are in debt.  We will summarise all of the possible debt solutions, to enable you to make an informed choice

We will look into what you can do to freeze interest, or the more formal Government backed debt solutions.  Which debt solution you choose should depend on how much debt you are in, if you own your home and how money you have spare after all of your living costs.

A – An Informal Arrangement with your creditors

If you have got yourself into temporary debt and missed a payment or two, the first step you should take is to contact your creditors and explain your situation.  Try to offer a repayment arrangement that you can realistically afford and request that they freeze interest on your debt.  This is always the first step you should take however please be aware that some creditors are more obliging than others to helping someone in this situation.
B. Debt Management Plan

If your debt goes beyond missing a payment or two, the next logical step is to get a 3rd party to try and negotiate a Debt Management Plan with your creditors.  A good debt management company  will act as a go-between and will contact all of your lenders and put together a repayment strategy. Once the debt management plan is ready and has been accepted by your lenders, you will pay the debt management firm a monthly payment.  The Debt Management firm will then divide this payment to your creditors.

C. Debt Relief Orders

Debt relief orders have come into existence within the last few years.  A debt relief order, and is a form of insolvency.  These orders are for people that have hardly any disposable income and very little assets.  A debt relief order will fast-track through the court system with no appearance at court required.  Your debts should be lower than 15k if you are going to be eligible for a DRO.
D. Individual Voluntary Arrangement’s (IVA’s)

An IVA is different to a Debt management plan in that it is a formal contract between you and your lenders.  In this contract you will detail your current financial situation and an offer of payment on you can afford, each month,  These payments are normally paid every month over 5 – 6 years. On rare occasions, a one off lump sum payment can be negotiated to clear your debts.

If the IVA is accepted, it becomes a legally binding agreement which means that lenders cannot contact you to try and increase your payments or they cannot add further interest.  Once an IVA has reached its conclusion, the total debt is legally discharged, meaning you own nothing more.

E. Bankruptcy

Bankruptcy in the UK is a lawful way of discharging your unsecured debts and it works for most people who have debt they simply cannot pay back.  Many people in the UK think that Bankruptcy is an easy option in order to clear their debts but nothing could be further form the truth.

Every bankruptcy case that is assessed in the UK is thoroughly reviewed and your financial history prior to going bankrupt is investigated.  If you feel you can stack up on the credit card spending, knowing that you have no way of paying it back and then declaring yourself bankrupt, you can think again.

If your Bankruptcy is granted, you will be assessed to see if you can make a payment for a period of three years from the date of your bankruptcy order.

There is also the possibility that the official receiver could enforce a bankruptcy restriction order.  A bankruptcy restriction order means that you will not be released from bankruptcy for many years.  The official receiver can enforce this if you were found to be reckless with your spending before you applied for Bankruptcy.

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