If you're in debt, it's likely you'll want to repay that debt as soon as possible. But what could you do to clear your debts? And what is the best debt solution for your specific needs?
Well, different debt solutions are suitable for different levels of debt, so it's always a good idea to consult with advisers, to help you find the right solution for you. Below, we run through a couple of debt solutions that may suit your individual circumstances.
IVAs (Individual Voluntary Arrangements): an IVA is a formal agreement between you and your unsecured lenders. An IVA offers you the chance to pay off what you owe at a rate you can afford. For your IVA to go ahead, 75% of voting creditors (by debt value) would need to agree to its proposed terms.
If you're a homeowner, you may be required to release some of the equity in your home during the 54th month of the agreement. And, because you're being made insolvent, an IVA will seriously affect your credit rating. This can affect the cost and availability of credit for six years from the day your agreement starts.
If you enter an IVA, the interest on your debts will usually be frozen, which means your debts won't grow anymore while you're repaying them. And once your IVA draws to a successful close, any outstanding unsecured debt will be written off.
Please note: if you cannot commit to making regular reduced payments towards your debts, an IVA won't be right for you. (Find more information on available debt solutions @ http://www.debtadvisorycentre.co.uk)
Debt Relief Orders: Debt Relief Orders were introduced as an alternative to bankruptcy. In order to qualify for one, you will need to have debts below £15,000 that you're unable to repay. Your assets (excluding your vehicle) must not be worth more than £300, and if you do own a car, it should not be worth more than £1,000.
If a Debt Relief Order is right for you, it will last for one year. During that time, your creditors will not be allowed to pursue you for any money that you owe them. At the end of that period, unless your circumstances have changed, you'll be freed from the debts included in the order.
Again, a Debt Relief Order is a form of insolvency and will have a serious impact on your credit rating.