When it comes to debt advice, what a lot of it is about is ways that you can avoid going bankrupt. After all that is really the worst option available, and should only be considered if nothing else is going to be able to help. Other forms of debt management will be considered here.
Something which is often appropriate when it comes to dealing with a debt problem instead of bankruptcy is to take out an IVA. These are formal arrangement that you enter in to with your creditors and allows you a number of advantages in dealing with your debt in a more manageable way.
One of the most important aspects of an IVA is that you only have to pay what you can actually afford. Although to qualify for one you need to have at least 200 a month in disposable income. That is, income that you can put towards paying off your debt.
The best thing to do if you are considering an IVA is get in touch with a company that offers free debt advice. They will be able to set up the arrangement for you. A part of it is going to include having someone distribute the money to your creditors each month so you only have to make one monthly payment.
It might be that not all of your creditors are willing to accept a reduced payment each month. With an IVA though, as long as you can get 75% of your creditors to agree then all of them will be bound by it. So that’s another benefit of using this form of debt management.
One of the best things about an IVA is that you are not going to have to repay all of your debt. After 5 years of making the agreed upon repayments, the rest of the debt that you owe is going to be written off. Although if you do have any equity in your home then it is usually necessary to release some of that in order to make a final lump sum payment to repay as much as possible.
Debt Management Plan
One of the down points about an IVA though is that you have to be declared insolvent in order to make use of it. This can have a number of negative consequences, including the fact that it is going to be difficult to get credit for quite a long time. If you want to avoid that then a debt management plan might be more appropriate.
With a debt management plan the intention is to reduce the amount that you have to pay each month to something which is actually manageable. Also, you just have to make a single monthly payment again, through a company that offers debt advice usually. This makes repaying your debt both simple and affordable.
However, being an informal arrangement, it does mean that your creditors are under no obligation to agree to accept less each month. However they usually will because that is all they are going to be guaranteed if they go for legal action instead. With a debt management plan, the debt advisers negotiating on your behalf are usually able to get your interest rates and charges either frozen or reduced.
Reasons to Avoid Bankruptcy
Those are just two options that you can consider instead of bankruptcy, although they do require that you have some level of income so that you can continue to make payments. If you don’t have any income then it might be that bankruptcy will be the best option.
In terms of the reasons that you should try to avoid bankruptcy if you can, there are lots of them. Something that is a road block for some people is simply the expense, it costs over 700! If you do get it then your assets can be sold in order to pay off as much of it as possible, and some job positions will not be available to you. If you don’t have any income though, at least your unsecured debt is going to be written off for good.
Should you be in need of some Advice on debt, or instead you just want to know more about it, go to http://www.debtadvice.net, which is where author Harvey Anderson enjoys writing regularly.