Recommended links:
Major debt problems need immediate action. There is no use thinking about what to do, you need to do one thing and that is get advice. There are a number of routes to take when things get too much, and these paths are best travelled with someone guiding you.
Debt Management Plans
This is where you enlist the help of a professional debt management company to look at your income and expenditure, look at your debts and work with them to come up with a viable budget and plan. This plan is presented to your creditors who will, if the plan is properly worked out and justified, agree to it and accept lower payments and even wipe off a portion of the debt.
- Payments are reduced
- Interest stops building up
- Some portion of debt can be wiped off
- You make a single payment to the debt management company who distribute the payments to creditors
- You will know a date in the future when you will be guaranteed debt free
- You keep your home
- You keep your car
- You keep your bank account
- It's not public knowledge - even friends and family will not know unless you tell them
Although your credit record will be affected, it would be anyway because of the situation you are in.
BEWARE: There has been a huge growth in debt management companies over the last few years, most of whom advertise on TV with flashy claims of unbelievable debt relief. The optimum word there is unbelievable. As at 1st May 2007, The Office of Fair Trading has told 17 of these firms to remove their advertised claims because they are misleading or false.
Unfortunately this has given debt management a bad image, but in most cases it is the best option and one best handled by professionals. Although they charge for their services, often the end result is better than DIY plans.
Find a reputable debt management company
IVA's - Individual Voluntary Arrangements
There has been a lot of news about IVA's. For most people they are not suitable, a fact reported on BBC News, 29/01/2007. More recently there are claims of people being 'mis-sold' IVA's by debt management companies.
Fortunately, there are some reputable debt management companies that do not promote IVA's as best solutions.
Bankruptcy
Bankruptcy or Insolvency is where all your debts are wiped off, but at a price. Your assets, including your home, might be sold off to raise money to pay as much as possible back to your creditors.
- Your name is publicly listed in various locations
- You are unable to obtain credit for more than £250
- Your credit record is affected for many years after
- You lose control of your assets
- You cannot be a company director
Find out more about bankruptcy and if it's right for you
Additional Reading: