Debt has a serious impact on overall health as it is incredibly stressful. The important thing to do is identify that a debt problem exists as early as possible, conduct research and decide which debt solution to proceed with.
Cut Spending & Boost Income
Most people spend too much so making a few lifestyle changes can form the basis of a debt solution in it's own right. Put together a breakdown of all incomes and expenditures and identify ways of cutting bills. It really can make a huge difference as most have excesses in their spending.
Administration Orders Are a Debt Solution For Unsecured Debts Under £5,000
An Administration Order is a debt solution that can be applied for when personal debts are below £5000. There also must be at least one County Court Judgement (CCJ) registered against a name. Only a single payment to the court is made but they take a 10% administration fee and pass on the rest to creditors to prevent creditor harassment.
Escape Credit Harassment With a Debt Management Plan
A Debt Management Plan is a debt solution that allows a debtor to make a single payment to a company that passes this on to the creditors, subject to their own 15% fee. They deal with creditors which means that this debt solution helps remove a lot of the stress associated with debt problems.
Debt Management Plans are a debt solution that is suitable for debts under £15,000 where there are more than 3 creditors. Interest and charges can usually be frozen, but the full debt will still need to be paid off. A Debt Management Plan is a voluntary agreement and can be amended by either party at any time.
Right Off Debt With an Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement is a debt solution that constitutes a legally binding contract between with personal creditors. In order for it to be approved it must be agreed to by 75% of creditors in terms of value. If it is voted against bankruptcy is the likely outcome.
If voted for it is necessary to keep up with the payments for a period of 60 months. The main advantages are that one can usually keep a professional status and home. The insolvency isn't made public. It is theoretically possible to right off up to 75% of what is owed.
It is necessary to appoint an Insolvency Practitioner, but this is always taken care of by Individual Voluntary Arrangement provider. An IVA is only really suitable for those with serious debts of upwards of £15,000, largely due to the cost of appointing an Insolvency Practitioner.
Solving Serious Debt Problems With Bankruptcy
Personal bankruptcy is the best known debt solution for serious financial problems, but doesn't have the same stigma attached these days. It is advisable to only use this debt solution if no other option is possible as the ramifications for credit files are the most serious.
A person will normally be discharged after a period of 12 months unless a bankruptcy offence has been committed. An offence would include speculation (gambling and shares), but not excessive shopping unless it was realised from the outset that they would never be in a position to repay the debt.
Personal finances will be heavily scrutinised so it is important to be up front and honest from the outset. The cost of declaring personal bankruptcy is currently £395.
No financial problem is beyond help, but it is imperative that the right debt solution is opted for. If uncertainty exists, it is advisable to consult a free debt advisory service, such as the Citizens advice Bureau (CAB), before proceeding.
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