Finding that you have debts that you are unable to repay is an extremely distressing experience. Many people find themselves in this situation for many different reasons, and often the initial reaction is denial, however burying your head in the sand is never a solution.
Debts will not go away by themselves. Fortunately, whatever your circumstances, there are many ways of dealing with debt that ultimately will allow you to become debt free. In this article we will outline the principle ones: debt management, debt consolidation, and IVA.
If you believe that, given more time, you would ultimately be able to repay your debts then probably debt management is your preferred solution, particularly if you perceive that your situation will improve in the future.
Debt management involves negotiation with your creditors in order to persuade them to accept reduced repayments and possibly stop late payment charges and interest. In most instances this is carried out by a professional debt manager who will negotiate on your behalf. You then make a single affordable monthly repayment to the debt manager who distributes the money to your creditors. The monthly repayment will include a fee paid to the debt management company.
Debt consolidation is appropriate for people with relatively low debt levels. This involves taking out an additional loan which will cover all your other loans and after repaying them will leave you with a single monthly payment which will be less than you were paying previously.
Naturally the repayment time will be longer. If you have significant equity in your home to use as security on the loan you should be able to obtain a lower interest rate.
If you are unable to repay your loan in full over a reasonable time scale then an IVA might be your preferred option. An IVA (Individual Voluntary Arrangement) allows you to write off a substantial portion of your debt but it is only applicable in certain situations. Your unsecured debts must be at least £15,000 and you must have a minimum of three creditors. You also need to be in employment and receiving a regular income.
An IVA is set up through an insolvency practitioner. You would need to come up with an acceptable proposal to make repayments towards your debts for a period of five years after which time all remaining debts would be written off, though any accumulated equity in your home might be used to make further debt reductions before you are discharged of the IVA.
Call our specialist debt team on 08000 915 004 to find out how we could help you.