Debt not only takes a hold of your finances, but it can consume your physical and mental health. However, there is light at the end of the tunnel, even if it doesn’t feel like it. Take a look at the following debt solutions that maybe worth a consideration.
Debt Management Plans
A debt management plan is simply an informal agreement between you and your creditors, which allows you to pay back your non-priority debts, such as a debit card, loan or store card. You will pay back an agreed, affordable amount each month, which will be divided between your creditors. It is, however, only a viable solution for those who can afford o make the monthly repayments.
Individual Voluntary Arrangements (IVA) is a formal and legally binding contract between both you and your creditors. The court approved solution requires you to pay off your debts over a set period, which will be set up by an insolvency practitioner, such as an accountant or solicitor. The insolvency practitioner will create an affordable repayment plan, which will most likely be spread out over a five-year period.
Debt Relief Orders
A debt relief order can be an effective way to deal with debt problems if you do not own your own home or have limited income. However, a debt relief order is only available for those who have debts of £20,000 or less.
Creditors cannot force you to repay a debt once you have a debt relief order in place, and you could write your debts off within a year. However, you will be responsible for paying any debts that aren’t included in the order, and you will be required to pay a £90 fee. If you cannot afford the £90, some charities can provide financial aid.
People in debt often dread the thought of bankruptcy – but can often provide the financial relief they crave. Bankruptcy is a viable debt solution for those who cannot pay back a borrowed amount, and you could be made bankrupt if you owe at least £5,000.
To apply for bankruptcy, you will have to pay a £680 fee; however, your debts will be wiped away and a creditor cannot force you to make a repayment. If you own your own home, it may be sold to cover the debt and some of your personal assets (such as a car or luxury item) could be taken away. Your pension savings could also be taken away, but you will be able to keep certain household items and an affordable amount to live on.
Bankruptcy will, however, affect your credit rating and could impact your immigration status. However, you will be free from debt to start a new life without the financial burden hanging over your head.