Being in debt is a reality that many people face in the current economic climate, but the good news is that if you’re in the United Kingdom, there are ways in which you can deal with that debt to ensure that you are able to start again financially without high payments hanging over you. The following options are open to you if you are in debt, and by choosing the right one, you can ensure that you can get hold of your finances and build a more secure financial future.
Debt Management Plan
This may be a good option for you if you have debts such as credit cards or store cards that are not secured against property like your home or car. Your Debt Management Plan provider will work with you to decide upon a monthly payment that you can afford, and they will then inform your creditors. Taking this option means you are only paying what you can afford, and your creditors will be fully informed about your situation.
Debt Relief Order
If you are on a low income, and don’t have many assets, a debt relief order might be the right option for you. This gives you a year of relief from your repayments, during which time nobody can try to seek any more money from you. It gives you the chance to get your finances back in order, and if your situation has not changed by the end of the year, your debts will be completely written off. This is only an option for you if you have less than £50 to spare at the end of each month after you have paid for your essentials.
Individual Voluntary Agreement
This is an agreement where you offer to pay a single monthly payment for a period of around 5 or 6 years. This is a legal contract that will be signed by you and your creditors, so once they have agreed to let you do it, they are not able to back out of it. This gives you the security of knowing exactly how much you’re going to be paying, and for how long those repayments will last.
If you have a certain amount of money available to you, but it isn’t enough to cover the full amount that you owe, you have the option of offering this amount to your creditors and asking whether they would be willing to write off the rest of the debt. When people are in a lot of debt, much of the repayments are due to accruing interest, so if you can make them an offer that covers the original capital borrowed at least, they may be willing to write the rest of the interest off.
This is often seen as the last resort with debt management, however there are some plus points to taking this option, as it means that you will be able to make a fresh start without having any debts to settle. When you are declared bankrupt, all of your debts will be written off, allowing you to start again. However, if you have any assets such as a house or a car, you will be asked to sell these – so it might not be the most desirable option to everybody.
Scottish Debt Relief
If you live in Scotland, the rules may be slightly different, but there are still various ways in which you can get out of debt if you find yourself in trouble. The most common Scottish debt relief process is a Scottish Trust Deed, where you are able to pay back a portion of what you owe to your creditors. Monthly payments that you can afford will be paid for a period of 3 or 4 years and then the rest of your debt will be written off at the end of the process.
You also have the option of sequestration, which is available for you if you are in at least £1,500 of debt with no way to pay the money back. Though this might affect your credit score and also your ability to get finance in the future, it at least means that you get the chance to make a fresh start financially.
So, no matter where you are in the United Kingdom, you have the option of getting rid of your debts and starting again. This is great news, as financial issues can worry many people – and the knowledge that there are options out there gives you the chance to look at your situation more positively.