Write off your debts, become debt free in months and little known government legislation are phrases you may hear from advertisements for debt management services, but what lies behind them?
There are a number of options available and here are the most common.
Debt Management Plans (DMP) are an agreement between you and your creditors to pay off your debts in instalments from the money you have left over after you have taken out your monthly living costs. Commercial companies will provide this service and charge their own fees. The good news is that charities such as Stepchange and Payplan will provide this service free. You can also set up a DMP yourself.An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors to pay off your debts over a period of time.
You will usually need at least £100 spare income per month to qualify. You will need an insolvency practitioner to set up an IVA and there are fees involved.
Bankruptcy may be an option for if you have a large amount of debt. At the end of the bankruptcy period your debt will be written off, but you are likely to lose your assets, including your home. There are also restrictions that will apply during the bankruptcy period as well as other possible repercussions. A Debt Relief Order (DRO)could be an option if your debts are under £15,000, you don’t own your own home and your spare income each month is under £50. Your assets will need to total less than £300 and your car must not be worth more than £1,000. Come in and see us for further help and guidance on your options.