Unmanageable debt - your options…
Posted in: Finance, Front Page, By: admin, At: August 6th, 2010
If you are struggling with unmanageable debts, don’t panic - you may have several options.
You may feel that you’ve reached ‘the end of the line’, and that you’ll never be able to repay your debts… but there may well be a solution to your problems.
Take a look at the two solutions described below - one of them may be your route out of debt.
Debt management plan
A debt management plan may be suitable for you if you can’t afford to keep up with the repayments to your unsecured debts as you had originally agreed, but you can repay your debts within a reasonable period of time (under different terms, however).
In simple terms, a debt management plan works by asking your lenders to accept changes to the repayment plan. If they believe accepting these changes is the best way forward, they may agree to lower monthly payments and a freeze/reduction in interest and charges.
Just be aware that repaying any debt more slowly can damage your credit rating, since you’re not sticking to the repayment plan you originally signed up to. You should speak with a professional debt adviser about all your options before entering a debt management plan.
IVA
An IVA (Individual Voluntary Arrangement), on the other hand, may be suitable for you if you are struggling with an unmanageable level of unsecured debt that you can’t afford to repay, but that you can commit to making regular reduced monthly payments towards.
An IVA will - in most cases - last for five years, and is a legally binding debt solution. Once your IVA draws to a successful close (i.e. assuming you’ve done everything you were required to), your creditors will write off any remaining unsecured debt.
Just bear in mind that it’ll have an impact on your credit rating - and if you own your home, you’ll probably have to release equity from it so you can repay more of your debt.
To find out if you’re eligible for an IVA, you’ll need to seek IVA advice (Individual Voluntary Arrangement advice). By seeking IVA advice, you’ll be able to have a professional debt adviser take a look at your situation and let you know what they believe is the most suitable way forward - whether it’s entering an IVA or not.