Finding a Solution to Your Debt
Today it is becoming more and more common for people to find themselves in financial trouble
, with an ever-increasing amount of debt. There are many reasons for this, and it does not always mean the individual was irresponsible. Debt can be caused by loss of work, medical expenses, increased interest rates, higher costs of living and more. If you find yourself in this position, it can be hard to know what to do in order to get back on your feet again. In this article you will find different alternatives to bankruptcy, and what you can do today to start effectively managing your debt.
Informal Agreement
An informal agreement, or "family arrangement", is a personal agreement between you and your creditors. If you know you are not able to pay your debts, you can choose to write your individual creditors to see if you can work out a way to repay them without having to go through the courts. This type of agreement will also include a timetable for how to repay the debt. The only downside to this arrangement is that it is not legally binding, so the creditor may renege on its promises down the line and ask for the money in full.
Debt Relief Orders (DRO)
A DRO provides debt relief to certain individuals and is subject to a few restrictions. In order to qualify for a DRO, the individual must have a small surplus income, not own a home, have few assets and have less than 15,000 worth of debt. The order lasts for 12 months, during which time the creditors named on the DRO may not take action to reclaim any money owed. After that 12 month period, if the circumstances have not changed then you will be freed from the debts included on the DRO.
Administrative Orders
If a creditor has taken a court judgement against you, the court has the option of issuing an administrative order. This order will require you to make regular payments to the court to pay back your debts. For this to happen, your debts must not be more than 5,000 and you must have enough income to make weekly or monthly repayments. If you fail to make the payments, the order will be cancelled by the court and you will be subject to the restrictions of bankruptcy.
Individual Voluntary Arrangements (IVA)
An IVA is a formal version of the family arrangement. To obtain an IVA, you must first file a proposal for paying off some or all of your debts to your creditors. This is done with the help of an insolvency practitioner, and any agreement reached with the creditors will be binding on them. During the process you will agree upon a repayment plan to reduce your debt over time. To begin the process of obtaining an IVA, you will need to find an insolvency practitioner to help you through the process. These individuals are usually solicitors or accountants. Make sure you discuss their fees upfront so that you don't end up paying too much for their services.
Finding a Solution to Your Debt
By: TraceyMclaren
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