Alternative Debt Solutions
Deciding which debt solution is the most suitable for you is extremely important.
In fact, it's the most important decision you'll have to make in your journey to becoming debt free, because there's no doubt that using the wrong debt solution will cost you time and money.
So which debt solution is the correct one to choose?
Which Debt Solution?
Imagine the journey to debt freedom is the same as any other journey. You have to pick the most suitable vehicle to get you to your destination as quickly, as safely and as economically possible.
But it's only once you understand where you are, in financial terms, that you'll be able to work out which vehicle is best to get you to where you want to be.
It sounds obvious, but the first thing you need to do is analyse your financial situation, to find out where you are.
We can help
IVAorg CIC are professional debt advisers who specialise in helping people understand their financial position.
If you would like to have a free, 'no obligation' consultation call us on 0800 856 8569 where a professional debt adviser is waiting to speak to you.
And, once you have a clear understanding of your financial circumstances, we will assist you in selecting which debt solution is the most appropriate for you by making sure you understand the pros and cons of each.
What Debt Solutions Are There?
There are 2 fundamentally different ways to approach a personal debt problem.
Firstly, there are the 'none borrowing' options, listed below, which break the cycle of borrowing money to get out of debt.
None Borrowing Options
- Debt Management Plans (DMPs) All debt levels.
- Individual Voluntary Arrangements (IVAs) Debt levels above £10,000, England, Wales & Northern Ireland only.
- Debt Relief Orders (DRO) Debt levels below £30,000 - or £50,000 from 28 June 2024. England, Wales & £20,000 Northern Ireland.
- Administration Order (AO) Debt levels below £5,000, England, Wales & Northern Ireland only.
- Bankruptcy All debt levels. Also known as Sequestration in Scotland.
Debt Management Plans (DMPs)
Debt Management Plans fill a very useful requirement within the whole debt solution portfolio. They are especially helpful to people whose debt problem is short term, perhaps due to unemployment or illness.
However, they do not tend offer a practical solution to people with longer term debt problems. The effectiveness of a DMP will, therefore, depend largely on the size of the debts and the size of the monthly repayments. DMPs don't offer any debt forgiveness, therefore they will continue, indefinitely, until the whole debt has been repaid. Read more.
Individual Voluntary Arrangements (IVAs)
An IVA will help people who have built up debts of over £10,000 to 2 or more creditors and find themselves unable to afford their normal monthly repayments. The IVA option is particularly appropriate when someone has a large asset or a property they wish to protect, or a profession that might be put at risk by the bankrupt process.
An IVA is a fixed term agreement and any original debts left unpaid on the successful completion of the IVA must be legally written-off by creditors. This means you may not have to repay your whole debt. Read more.
Debt Relief Order (DRO)
This debt solution is the most recently introduced, being introduced on April 6th 2009. Debt Relief Orders have been designed to help people with less than £30,000 - or £50,000 from 28 June 2024 - of unsecured debts that have no assets above £2,000 - or £4,000 from 28 June 2024 - do not own their own home and have less than £75 per month available to deal with their debts.
Debt Relief Orders last 12 months and on completion all outstanding debts are written-off. Read more.
Administration Order (AO)
Administration Order provide help for people with 2 or more debts totalling less than £5,000, who have received a County Court Judgement against them.
The Order enables the debtor to make payments for the debts, based on proven affordability, directly to the Court. The court then distributes the payments to creditors on a pro-rata basis, after taking an administration fee of 10% for their work. Read more.
Bankruptcy
Which is, in most people's eyes, the debt solution of last resort.
When you petition for your bankruptcy you will be required to hand over your assets and control of your financial affairs to the official receiver (OR), whilst they assess your ability to repay your creditors.
You will be required to repay to your creditors whatever it is deemed you can afford each month, for up to 3 years and any assets you own will be sold for the benefit of your creditors.
It is worth bearing in mind not all types of debt are written off in bankruptcy so you should take professional advice before declaring yourself bankrupt, in order that you are fully informed of the bankruptcy process, its powers and the impact it will have on your personal circumstances. Read more.
Borrowing Options
Secondly, there are the borrowing options. Borrowing options usually rely on borrowing money over a fixed and, sometimes, longer period of time, but at a lower monthly cost.
Reducing the monthly expense of your debt by restructuring it is called debt consolidation.
- Consolidation Loans:
- Unsecured Consolidation Loans - Debt levels up to £25,000.
- Remortgage Loans - All debt levels - Homeowners only.
- Secured Loans - All debt levels - Homeowners only.
Unsecured Consolidation Loans
Consolidation loans enable a person's debts to be brought together under one new lower payment.
As a debt solution consolidation loans have only limited ability, as the size of the required loan may be beyond the reach of the applicant. It should also be mentioned that taking out a consolidation loan, without addressing the underlying financial problems, might lead to a larger debt problem in the future. Read more.
We Can Help
If you would like to have a chat with a professional debt adviser to discuss the most appropriate debt solution for your personal circumstances simply call one our helpline now on 0800 856 8569
Alternatively, complete this form and one of our advisers will contact you at your preferred time.
