Debt Solutions for Personal Debts under £15,000
Financial Difficulties, Debt Management Plans and Debt Relief Orders
Mar 4, 2009
Financial difficulties are worsening in the UK. The Citizens Advice Bureau (CAB) dealt with an average of 4,760 personal debt problems each day during 2008. However, it is possible to become debt-free with a debt solution, such as a debt management plan or a Debt Relief Order.
What is a Debt Solution?
A debt solution is a way of dealing with unsustainable personal debts. Debt solutions seek to either manage unsecured personal debts or perform a complete debt write-off. As the terms of the credit agreement have been broken, it will mean that adverse credit is registered with all leading credit reference agencies.
Deal with Personal Debts under £15,000 with a Debt Management Plan
A debt management plan is a completely voluntary arrangement between a debtor and his creditors. It involves putting all personal debts under one roof and making a single payment. The minimum monthly payment is £100 and there normally needs to be a minimum of three creditors.
Debt management plans are a debt solution that seeks to manage rather than write-off debt. However, it is sometimes possible to freeze interest and charges. There is normally a 15% charge imposed for administering a debt management plan.
Creditor harassment is not legally prevented, but is vastly less likely once a debt management plan is in place. An account manager is assigned to each client and this person will deal with creditors on the debtor's behalf. Unlike a Debt Relief Order, it can take quite a while to become debt-free.
How a Debt Relief Order Can Help Someone Become Debt-Free
A Debt Relief Order is the government's latest debt solution for dealing with personal debts below £15,000. As it is designed to help low income families, there are very strict qualification criteria. A debtor must have a maximum disposable income of £50 and personal assets under £300. This debt solution is not available for home owners, only tenants.
Provided that a debtor meets the criteria of a Debt Relief Order, no monthly repayments will be necessary and there will be a complete debt write-off. The only instance that a payment would be necessary is if the debtor received a windfall payment, such as inheritance. It is possible to become debt-free with a Debt Relief Order in just 12 months.
Many debtors seek to escape financial difficulties by taking out further loans, but this only serves to exacerbate money problems. Pursuing a debt solution, such as a debt management plan or Debt Relief Order, can help free someone from the shackles of personal debt.
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