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Switching debt solutions is sometimes possible, but only if your circumstances allow it. Read our blog to find out what the process involves and what you need to consider.
Here at Debt Advisory Centre, we have over 20 years’ experience helping people out of debt with debt solutions. During that time, we’ve been asked whether it’s possible to switch to another debt solution, once you’ve started one.
The answer to that question is… only in some cases. It is sometimes possible to switch, but whether or not it’s advisable can be more of a complicated issue, and depends on your personal circumstances and the reasons you have for wanting to change. Let’s look into this in a bit more detail.
We don’t expect you to switch
It’s important to note that we don’t expect any of our clients to want to change their solution. We will recommend the very best solution when you first make contact with us so, assuming that you took our recommendation, the solution you are on right now, is the best way for you to deal with your problem debts.
There are some cases where we might recommend a solution like an IVA, but you’re anticipating a change in your circumstances – a change in job for instance – and we wanted to see what difference that change made to your suitability for an IVA. In some of these cases we can advise that you start a Debt Management Plan (DMP), which can be used as a temporary solution, until the change has taken place and we can see what difference it makes to your suitability for an IVA. This way, we can help you in the short term because a DMP will stop your creditors taking any further legal action, whilst remembering that an IVA might still be the best solution for you in the long term. In general, people do decide to take the solution that we recommend, as there is normally a clear reason why it’s the right choice for them.
When we first spoke to you, we would have taken any predictable changes in circumstances into account, as much as is possible. This, hopefully, means we’re prepared for the future. However, life does sometimes throw unexpected things at us and we completely understand that your life and needs may change. So, in the rare case that you feel another solution might be better than the one you’re on, it’s fine for you to give us a call and we’ll look into this whether this is an option for you.
We’ll take you through your income and expenditure again
If you wanted to find out whether another solution was more appropriate, we’d make sure that all your details were up-to-date and that we knew exactly what was going on with your finances. The reason why we need to look at this information again is to have an up-to-date picture of your income and expenditure and your disposable income so that we can be sure that, if you were to switch, you could live comfortably and pay your bills at the same time.
When we go through your expenditure, we’ll ask for a break-down of your spending in some detail. So, we’ll want to know how much you think you spend on things like petrol/travel, insurances, pet costs, rent, food, house-keeping, gas and electric, clothing, hairdressing and hobbies. It’s really important that we’re as detailed as possible and include everything you could spend money on, so our estimation of your spending is accurate. It’s not a bad idea to have a think about what you spend, on average, on all these things so that you’ve got a good idea. Don’t worry if you don’t have time before you speak to us, our advisors will make sure we have the figures we need, and that your records are correct and up-to-date by the end of the call.
We’ll go through all your debts to check that the solution we recommend could realistically help you with all your commitments. We’ll go through the debts that we’re aware of on your current plan, and if there are any you think are missing from the list, you should let us know as soon as possible. This goes whether you’re wanting to change solution or not.
We’ll also need to check your income. So we’ll need to know what you earn and whether you’re claiming any benefits. We may have to go over other information, such as whether there are any health issues which stop you working or impair your ability to do so, or whether you get any help from family and friends.
If you want to have a conversation about changing solution, it may be a good idea to get some paperwork together, such as wage slips or benefits letters just to help you keep track throughout the call. The advisor, however, will have all the details that we are already aware of on record.
Finding out what’s best
Once the advisor has all that information, they will then know whether switching is the best advice for you in your particular circumstances. If a debt solution is still necessary for you, they will take you through the ones that you are eligible for and explain the differences. Importantly, they will recommend what they believe will be your best option and why they believe that. Depending on how complex your situation is, it may require a bit of time to reach a definite conclusion, and if this is the case, we’ll call you back at a time that’s convenient for you.
Sometimes the answer to the problem can be attempting to change how your current plan works, rather than switching to a completely different one. For instance, if you were having trouble maintaining your payments on an IVA, it may be better to see whether you could take a payment holiday, which you are sometimes allowed to do for up to six months during your IVA. If you’re in this position, make sure you have a look at how you may be able to vary payments on an IVA.
Which solution is best for you can sometimes just come down to one aspect of your life. For instance, you may want to switch to a Debt Relief Order (DRO) from a Debt Management Plan (DMP), because a DRO allows you to stop paying towards your debts. However, the criteria for this solution is strict and, you may not be qualify. For example, you could only switch from a DMP to a DRO if there had been a change in your income to the point that you now have less than £50 a month to put towards your debts.
To use another example, you might be thinking that bankruptcy would be better for you than an Individual Voluntary Arrangement (IVA), because it normally lasts one year as opposed to five. But, if you’re a homeowner, have you thought about what would happen to your home if you switched? With bankruptcy you would be expected to sell your home, if there’s any equity in it, and put that money towards your debts and there are very few exceptions to this. An IVA on the other hand, gives you the chance to keep your house and attempt to release equity six months before it ends. So for some home-owners who can’t pay all their debts back, it can be the right choice. Also if you were already a couple of years into your IVA and switched to bankruptcy, there’s a possibility that you’d have to pay into the bankruptcy for a further three years – the same amount of time you’d have left on an IVA in most cases.
In reality, there may be a couple of debt solutions that you’re eligible for, so finding the best one is about looking at the big picture, and all the different ways a particular debt solution will impact your life.
Ultimately, as long as you are eligible, it is your decision as to which solution you take – we are here to advise not instruct you. However, we will always explain fully which solution is best for you and why this might be. We want to be confident that you understand the implications of the decisions you make and that, even if a certain debt solution appeals to you, there may be another that is actually more beneficial. If you haven’t started a debt solution yet, but you think you may need to, get in touch using the options to the left. We’re here to help every step of the way towards your debt-free future.
by Christine WalshBack to blog home