How to Write off Debt with a Debt Solution
Individual Voluntary Arrangement, Debt Management Plan, Serious Debt
Feb 21, 2009
Research by Grant Thornton showed that the total outstanding UK consumer debt amassed through mortgages, loans and credit cards has increased by 7.3% to £1.444 billion over the past year.
Millions of people are struggling with unsecured loans and credit card debt. This is leading them to turn to debt solutions, such as debt management plans and Individual Voluntary Agreements, to deal with financial difficulties and write off debt. These debt solutions allow people to manage or write off debts, as well as preventing creditor harassment.
How an Individual Voluntary Arrangement Can Help Write off Debt
An Individual Voluntary Arrangement is an agreement between a debtor and his creditors to write off debt. Some insolvents have been able to write off debt amounting to 75% of the amount owed with an Individual Voluntary Arrangement. An IVA allows someone to become debt free in as little as 60 months.
Due to an IVA being a legally binding debt solution, it is against the law for a creditor to pursue someone for serious debts once they enter it. Should any creditor harassment occur, this should be reported to the Insolvency Practitioner immediately as it can be stopped.
An Individual Voluntary Arrangement is a debt solution that serves to exclude the family home from the agreement. This means that someone with serious debts, which includes credit card debt and unsecured loans, can continue to live in their home. However, an IVA requires that a remortgage be taken out for up to 80% of available equity at the end of year 4. This will be based on affordability.
An Individual Voluntary Arrangement has a number of advantages over personal bankruptcy. The principle benefits of this debt solution include: an insolvent can keep their professional occupation, no publicity and individuals involved in speculation won't be subject to a Bankruptcy Restriction Order (BRO).
How a Debt Management Plan Can Help Someone Manage Financial Difficulties
A debt solution, such as a debt management plan, allows someone with financial difficulties to put all unsecured debts, including credit card debt and unsecured loans, under one roof. This does not include: mortgages, secured loans, taxes payable to the exchequer or Child Support Agency payments.
Monthly payments start from as little as £100; management fees are usually 15% of cumulative contributions. Although a voluntary agreement, a debt management plan can help prevent creditor harassment. All negotiations with creditors are performed by a professional account manager.
A debt management plan is a more flexible debt solution than an Individual Voluntary Arrangement or personal bankruptcy. This is because a debtor can adjust their level of contribution into the debt management plan should their financial difficulties diminish.
A debt management plan helps someone to manage more modest financial difficulties. However, if struggling with serious debts of in excess of £15,000 an Individual Voluntary Arrangement may be a more appropriate debt solution. Accruing further credit card debt and taking out further unsecured loans should be avoided. Use a debt solution to deal with serious debts and become debt free.
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