There are a number of debt management measures which can provide effective relief from your financial difficulties but they are not a one size fits all – which course of action you choose will depend on a number of factors and you should always seek impartial and professional advice before you decide on which course of action you should take – and the sooner you seek advice the better!
Bankruptcy
With bankruptcy all your debts are forgiven, that is, they are completely written off. On the downside, all of your assets are sold off to repay creditors and that includes your home. After 12 months of supervision you can be declared discharged and your bankruptcy is at an end but you ought to understand that the court can order an income payments agreement which may last for 3 years.
Insolvency Voluntary Arrangement
An Insolvency Voluntary Arrangement or IVA, allows you to write of up to 65 of your debts but the downside is that it lasts for 5 years (compared to 12 months for bankruptcy). An IVA freezes all interest and charges and significant amounts of debt are written off while you will no longer be subjected to doorstep collection calls or visits from bailiffs as all this is brought to an end. You will need to keep to the fixed repayment agreement which may be reviewed to ensure you are repaying as much as is affordable and the IVA arrangement may be entered on your credit file.
Debt Management
Debt management is an informal arrangement whereby you and your creditors come to an informal agreement to repay your debts. Typically, your repayments are rescheduled with the agreement of your creditors at an affordable level – interest may be frozen though some commercial lenders may charge for the cost of administering the arrangement. It has no legal standing and will not legally protect you from creditors should they decide to pursue you for the debt outstanding.
Debt Consolidation
By rolling all your loans and credit card balances into one arrangement, you can arrange for a lower monthly repayment which is more affordable for your budget and result in significant interest savings by moving debt from high interest credit cards to a low interest loan. The repayment period may increase as may the total amount you have to repay over the life of the arrangement.
Debt Relief Order
This is a relatively new measure and has been introduced for those with debts less than £15,000 and less than £300. There is no need to go to court and debts are usually fully discharged within 12 months.
Summary
Which route you decide to pursue will depend in large part on your own circumstances but the golden rule is to seek advice as soon as possible. The sooner you take professional and impartial advice the better the outcome is going to be for you and your financial future. Bankruptcy may be appropriate if you owe far too much money that can never be reasonably repaid though an IVA may keep you in your home though take far longer to complete.
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Author Resource:
Jensen Carlyle writes for Talk About Debt. Talk About Debt is the UK's premier online portal and web forum for free debt resources including links to all the major debt charities and professional organisations. CLICK HERE for Talk About Debt http://talkaboutdebt.co.uk
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