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Tackling your debts

Looking for the answer to your debt problems?

Posted 09 July 2012

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The Debt Advisory Centre offers a number of debt solutions to help people with debt problems. Read more here.

There isn't one simple answer to debt problems, because they come in all shapes and sizes. Thankfully, debt solutions come in different shapes and sizes too.

Depending on how much you debt you have, your income and your assets, there is usually something practical you can do about your unsecured debts - and something that the Debt Advisory Centre could do to help you plan a realistic path out of debt.

Here's a brief summary of three of the most common debt solutions in England, Wales and Northern Ireland, all of which can be provided by the Debt Advisory Centre.


Debt management

•  Lowers your repayments to an affordable amount

•  Allows you to repay unsecured debts in full over an extended period

•  Can freeze interest and charges if lenders agree.

Some things to be aware of with debt management are... It damages your credit record for up to six years. It extends the amount of time you're in debt and can cost more overall if lenders don't freeze interest or charges, although we would negotiate with them on your behalf, showing them why it would make sense to do that.

Read about debt management and how it works here.


IVA (Individual Voluntary Arrangement)

•   Lowers repayments to an affordable amount

•   An alternative to bankruptcy

•   Writes off what you can't afford upon successful completion.

Some things to be aware of with an IVA are... Homeowners are usually asked to release equity in the final year of an IVA. Bankruptcy could force the sale of property and other assets, but an IVA could help people to remain in their own home by releasing equity. Just be aware that releasing equity could be difficult and/or expensive, due to the IVA's impact on your credit rating - and if you can't remortgage, your IVA might be extended by 12 months instead. An IVA damages your credit score for six years. Enough of your lenders would need to agree to an IVA before it can go ahead, but we would negotiate with them on your behalf, trying to show them why an IVA would be the best approach to take. Finally, if someone's IVA fails, they might be made bankrupt.

Find out more about an IVA (Individual Voluntary Arrangement) and how it works here.


Bankruptcy

•  Write off what you can't afford to repay

•  A chance to get back in control of your finances

•  Stop lenders chasing you for repayment.

Bankruptcy can be the best solution if you're 'drowning' in debt and can't realistically hope to pay it all back. But it does carry some consequences, like the impact it can have on your future chances of getting a mortgage or other credit - or holding certain jobs. You're also expected to repay as much as you can realistically afford and may have to sell assets to do this. Homeowners might prefer an IVA over bankruptcy, which could involve selling your home. Click here for advice on whether to choose an IVA or bankruptcy.


Scottish debt solutions

The Debt Advisory Centre also helps people who live in Scotland, where the rules about tackling debt can be quite different. Read more about our Scottish debt solutions here. If you live in Scotland, you might qualify for one of the Scottish debt solutions that are only available north of the border.

by Sarah Symons

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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.