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Tackling your debts

Do you owe enough for a debt solution?

Posted 16 July 2016

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Find out which debt solutions have a minimum amount you need to owe.

If you’re struggling with debt, you might be looking at the different debt solutions. If you’re not sure which one would be best for you, speak to a debt expert. They’ll take you through the pros and cons of each debt solution and help you decide which is right for your situation.

But if you only owe a fairly low amount, will you qualify for all of the different debt solutions? Do you owe enough to go bankrupt, for example? Let’s take a look at the minimum level of debt for each solution and what your options are if you’re struggling.

Thresholds for different debt solutions

Before you find out whether you qualify for each debt solution, make sure you know what the options are. Our blog on the different types of debt solutions will tell you what approaches you can take to solve problem debt.

Some solutions are only for people who are insolvent – this means they can’t pay back their debts in a reasonable time and/or they have debts that total more than their assets. These are bankruptcy, IVAs and Debt Relief Orders, as well as sequestration, Trust Deeds and Minimal Asset Process if you live in Scotland. These solutions will write off part or all of what you owe if you can’t afford to repay everything you owe, even if lenders froze interest and charges.

But if your lenders think you can repay your debts over a few years, you might be more suited to a solution like a Debt Management Plan or a Debt Arrangement Scheme if you live in Scotland.

Not all insolvency solutions have set thresholds – for example, the amount of debt you’ll need to have for an IVA will depend on your individual situation and your creditors.

But some solutions do have debt thresholds. You’ll need a minimum of £750 to declare yourself bankrupt and if a creditor wants to force you into bankruptcy, you must owe at least £5,000. You won’t qualify for a Debt Relief Order if you owe more than £20,000. And in Scotland with a Trust Deed, you must owe at least £5,000 and you’ll need to owe at least £1,500 to enter sequestration.

Speak to a debt advisor if you’re considering any debt solution – they can tell you about the thresholds and any other eligibility criteria. If you’re under the threshold for insolvency solutions, this is probably because you would be able to afford to repay your debts in a reasonable time on a less formal solution. We could also help you with this and we’d look at your circumstances to help work out what’s right for you.

Find-my-solution

 

What are your options?

Of course, if you don’t owe enough to enter into an IVA, for example, that doesn’t mean you should borrow more to get accepted. And if your lenders think you can afford to repay your debts if you made smaller monthly payments, you shouldn’t get in difficulty so you can go bankrupt.

If you’re struggling to make your repayments to lenders or service providers you should get in touch with them and make them aware of the situation. They might be able to put a plan in place to ease the financial strain on you, like lowering your payments for a while, giving you a payment holiday or freezing interest and charges. In these cases it might not be necessary to start a debt solution at all.  

As we mentioned, the best way to work out which is the right solution for you is to speak to a debt expert. They’ll be able to look at your circumstances, see how much you owe and take you through which solutions – if any – are the best options for you.

You can get in touch with our debt advisors at Debt Advisory Centre using any of the options on the left of the page if you want advice about the next steps you can take to get debt free. You can also get free and impartial advice from the Money Advice Service.

 

by Emily Bancroft

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.