What's The Best Debt Solution For Me?

By Tom Doerr

Many people in Britain, particularly in the last few years, have found themselves with increasing debts and an inability to make repayments. Millions of people have lost their jobs and have struggled to make ends meet let alone repay their mortgages. When monthly outgoings exceed income it's time to look for a solution for your debt and there are several main options to choose.

If you simply have too many monthly repayments and you even find the quantity of them hard to keep on to of, you might benefit from a debt consolidation loan. The idea of borrowing even more money might sting but this kind of loan can allow you to reduce your monthly outgoings, spread your payments over a longer time and manage just one monthly repayment. Consolidating your debt won't even affect your credit rating, as long as you keep up with your repayments, you will be seen as a responsible borrower. Depending on who you buy from, there will be interest added to your debt but unfortunately nothing is free and this is the price you will need to pay to manage your debts.

If you cannot get a consolidation loan, the next best thing is to try and get help with a Debt Management Plan. There are many financial advisers who may not charge for setting up a debt management plan, they can do all the negotiating between you and your creditors and reduce your repayments into a figure you can manage. Although they cannot freeze interest or charges, they can allow you to decide when you pay and how much you can realistically afford. Your credit rating may be affected as a debt management plan is a negotiation of repayments different to an original contract, but this is not always the case.

If your debts are too large to be considered for a Debt Management Plan; you may need to seek approval for an Individual Voluntary Agreement (IVA). An IVA involves considering a debtor's capital, income and priority payments. To arrange and approve an IVA requires an insolvency practitioner and the arrangement must be approved by the creditors and can be arranged post-bankruptcy. You may wish to consider an IVA as, unlike bankruptcy, your credit rating is not as damaged, you will be able to continue trading and your property will be excluded from the arrangement.

If all else fails, there is one last option; to file for bankruptcy, this can be voluntary or involuntary depending on the size of the debt. Becoming bankrupt can immediately free you from debt repayments but it does come at a price. All of your assets will be shared equally among your creditors and you cannot act as a lawyer, accountant, justice of the peace, Member of Parliament and many other professions. There are severe consequences for your credit rating for many years after the annulment and you will have to obtain special permission to obtain credit over the value of 250. Some people see bankruptcy as the end of the road but it is a legitimate method of escaping damaging debt, after all its only money. - 32196

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