Dealing with your debt

Article Written By: BrookeWebb

According to recent figures, personal debt in the UK now amounts to a massive 799 billion. If youre struggling with unfeasible levels of debt then you have a number of repayment options - the route you choose to take will depend on your personal circumstances and situation.

For many debtors, a debt management plan may be a good place to start. A plan like this can be implemented through a specialist company for a fee, and involves arranging with your creditors to pay your debts in monthly installments. The main advantage is that interest charges on your debt could be frozen. Not everybody qualifies for this type of plan, but its worth talking to a reputable debt management company about your eligibility.

A second option is to take out a consolidation loan, which combines all your current debts into one. This can reduce the stress of your repayments as well as allowing you to benefit from a lower interest rate. The disadvantage is that you could face a longer repayment time, so do your research before deciding to consolidate your debt.

Of course, these options do rely on your ability to repay your debts in the future. For those whose financial circumstances are more constrained, there are a number of other options.

If you are on a low income and have less than 15,000 in qualifying debts, a Debt Relief Order could be a possibility. This works by allowing you a year of respite, during which your creditors will be unable to take action against you. Its a good alternative for those temporarily experiencing unemployment.

Another option which applies to anybody with less than 5,000 in qualifying debts is to apply for an Administration Order. Under this arrangement, you pay a monthly sum to the court which then reimburses your creditors. The disadvantage is that you will be charged 10 per cent of your repayment as a handling fee.

A better route for those with larger levels of debt could be an Individual Voluntary Arrangement (IVA). This is essentially an alternative to bankruptcy - if you enter into an IVA then you will be required to pay off an agreed percentage of your total debt over a period of five years. The real advantage to this type of arrangement is that after this time your debt is generally classified as settled.

Finally, those with unviable levels of debt may have to consider bankruptcy. The advantage of declaring yourself insolvent is that it allows you to make a fresh start, but you will lose your home and other assets and could be discriminated against by creditors in the future. For most debtors, this should be a last resort.

About the Author

Kristan Brangers has lately been looking into services to help with debt management and has taken bankruptcy advice from Baines and Ernst.

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