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A helpful guide to options that might be available to tackle your debts without having to go bankrupt.
If you're searching around for a way to settle your debts but are worried about the fees or consequences of bankruptcy, you might be wondering what your options are.
The first thing you need to know is that bankruptcy isn't the only way out of debt - there are other ways which may help you to become debt-free.
So if you don't feel that bankruptcy is for you - don't worry.
Have a read through some of the options that may be open to you, without having to become bankrupt.
Individual Voluntary Arrangement (IVA)
If there's no way you can settle your debts in a reasonable amount of time, you may be able to take out an IVA.
This is a legal agreement between you and your lenders and can only be taken out on unsecured debts (things like credit cards and personal loans).
You would commit to making a monthly payment you can afford, normally for five years, and it would mean:
- Interest will be frozen
- Your monthly payments would be lowered
When you complete your arrangement, the rest of your outstanding unsecured debt is then written off.
Like bankruptcy, an IVA will affect your credit rating for six years, and if you're a homeowner you may have to release equity from your home towards the end of your arrangement.
To discuss whether an IVA is your best option, call one of our advisers on 0800 195 2714 or use our debt solution finder.
Debt Relief Order (DRO)
This is normally an option for people who want to go bankrupt, but can't afford the fees.
It costs £90 to apply for a Debt Relief Order and within a year it could wipe out your unsecured debt. Once agreed it will protect you from legal action from your lenders.
A DRO is normally only offered as an option if you have a low income and few assets. There is a set of criteria you need to meet before you can apply.
- Have less than £50 disposable income once you have covered your essential bills each month
- Not be a homeowner
- Have unsecured debts of £15,000 or less and assets of under £300
A Debt Relief Order is obtained through the Insolvency Service and because it is an alternative to bankruptcy, it's important to bear in mind that it will have a similar impact on your credit rating.
It will affect your credit rating for six years, but at least your debts will have been cleared in that time.
by Christine WalshBack to blog home