Credit card, overdraft, personal loan and store card debts can quickly mount up leaving consumers with a challenging situation when trying to resolve their debt problems. High interest rates and charges mean failing to meet your contractual payments will push you further into the red.
Personal debt problems are prominent throughout the UK with the average person in debt owing money to over 7 different creditors. The question is, what debt solutions are on offer for people in debt?
Taking the first step
Making the decision to seek debt help is never an easy choice and there is no such thing as a quick fix. Most debt solutions will affect your credit rating for 6 years if any defaults have been added. Therefore, before any
decision is taken you must fully understand the consequences of the debt solution you are choosing to pursue.
The first step is to ensure the company you contact has a consumer credit licence. You can check this on the Office of Fair Trading website. Ask what knowledge and qualifications your debt advisor has – this is essential to guarantee you receive complete advice. Finally, ask how an organisation is funded as you may have to pay for advice with a for-profit organisation.
Debt charity Debt Support Trust can advise on some of the available debt solutions available to people struggling financially.
Solutions to debt
There are a number of solutions to personal debt problems, for some people this will mean they have a choice as to the solution they enter.
Debt Management Plan – this is an informal debt solution option. You would repay all of your debt over a longer than agreed period. In some instances interest and charges will be frozen.
Protected Trust Deed – This is a debt solution for people living in Scotland only. The Protected Trust Deed is an insolvency solution which enables a person to put a proposal to their creditors. The person in debt agrees to make an agreed monthly contribution towards their debt, usually for 3 years. A percentage of the debt would be written off at the end of the solution. Your unsecured debt level should be above £10,000 and you must be able to repay at least 10% of the money borrowed (excluding the insolvency practitioner’s fees).
IVA – The IVA (Individual Voluntary Arrangement) is usually a 5 year debt solution where a person in debt makes an agreed monthly contribution towards their debt. If the solution is completed satisfactorily then at the end a percentage of the debt will be written off. At least 25% of the money borrowed must be repaid (excluding the insolvency practitioner’s fees). Your unsecured debt level should be above £12,500.
Bankruptcy – If you cannot meet an IVA / Trust Deed because of the criteria and your debt problem is too severe then Bankruptcy may be the best option. If you can afford to repay something towards your debt then your Bankruptcy may last for 3 years.
For debt advice and support you may wish to contact a debt charity such as Debt Support Trust on 0800 085 0226.