It’s said that more than three million people in the UK are living with ‘persistent debt’, in that they are paying more in interest and charges than they are off their debt over the course of the last 18 months.
These are people stuck in a debt cycle who need a break to help them break free. There are millions more people struggling with money who will want to avoid getting stuck in the same rut.
If you are in trouble, it’s important to know what options you have available. Many people who are in debt are also in the dark, struggling alone without the support they can tap into.
The first, and most important, thing to note is that you’re not alone. You can tap into a wealth of free and impartial advice that is worth its weight in gold. There’s a wealth of free financial guidance and advice available online that’s provided by government organisations, debt advice charities and financial experts.
During the course of your advice, you might be encouraged to consider the following:
A Debt Management Plan (DMP): Taking a DMP might allow you to make one affordable payment to one provider, instead of having to pay different debts at different rates with a range of creditors. It’s most suited to those with ‘non-priority’ debts.
A Debt Relief Order (DRO): This is a possible way of freezing the debts of people with very few assets. They’re for people without their own home or much spare income and who have debts of less than £20,000.
An Individual Voluntary Arrangement (IVA): This is a legally binding agreement that you make with your creditors to pay back an agreed sum over a number of years. It’s a long-term commitment to pay back as much as you can afford at a pace that you can manage.
Bankruptcy: Most people have heard of bankruptcy and will be aware with the seriousness of being declared as bankrupt. However, while this will impact upon your credit rating for years to come and might result in you losing some assets in the short term, it is also a way to give you a fresh state and write off your debts in extreme circumstances.
Offer in full or final settlement: You can make an offer to pay a lump sum to your creditors, with a view to them accepting this payment and writing the remainder of your debt off. This might be suitable if you have a lump sum available but you have lost your job or have become seriously ill and might no longer be able to service a debt going forward.
Administration Order: This is an order that you can apply for from the court if you have a County Court Judgement or High Court judgement against you and owe less than £5,000. In this case, you agree to pay money from your monthly income to the court, which then distributes it to your creditors.
Speak to an advisor and feel free to ask them in more detail about the options above – they’ll help you to choose the right way forward and work towards a brighter financial future.
Like Us? Sign Up!
Subscribe to get the latest budget buzz via email.