Individuals struggling with serious debts, including credit card debt, regularly turn to debt consolidation loans. However, this often causes further financial difficulties, especially if that person has a bad credit rating. It is possible to use a debt solution, such as an Individual Voluntary Arrangement or personal bankruptcy, to write off debt and become debt-free.
What is a Debt Solution?
A debt solution is a means of dealing with unsecured debts that are no longer affordable. It allows someone struggling with financial difficulties to either manage or write off debt. Utilising a debt solution, such as personal bankruptcy or an Individual Voluntary Arrangement, will cause a bad credit rating.
Overcome Serious Debts with an Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) is a legally binding agreement with creditors to deal with serious debts over £15,000. In order for an IVA to be agreed, it is necessary for 75% of creditors in terms of value to vote in it's favour. If not agreed, personal bankruptcy is the likely outcome.
IVAs are normally the best debt solution for dealing with serious debts experienced by home owners. Although it is normally necessary to get a remortgage for up to 80% of available equity in year 4, unlike personal bankruptcy, it allows an insolvent to keep their home.
Once 60 monthly payments have been made, the Individual Voluntary Arrangement will write off debt and allow someone to become debt-free. Provided that monthly repayments are maintained, creditor harassment is illegal.
Become Debt Free with Personal Bankruptcy
Personal bankruptcy is a way to write off debt and become debt-free in as a little as 12 months. Unlike an Individual Voluntary Arrangement, it isn't always necessary to make monthly repayments if they cannot be afforded. However, the entire personal bankruptcy process is vastly more intrusive than an Individual Voluntary Arrangement.
Whilst personal bankruptcy is an excellent debt solution for those who wish to become debt-free, it isn't suitable for home owners or people in careers such as finance. Due to the Enterprise Act 2002, it also isn't suitable for those that have lost money due to speculation. A number of individuals that have been involved in trading and gambling now face a Bankruptcy Restriction Order (BRO) of up to 15 years.
According to a Price Waterhouse Coopers credit confidence survey, one in six UK consumers don't believe that they will be able to keep up with repayments on existing credit agreements. The Insolvency Service said there were 29,444 individual insolvencies in England and Wales during the fourth quarter of 2008, representing an increase of 18.5% compared to 12 months earlier.
Individuals struggling with serious debts over £15,000 should consider pursuing a debt solution. Home owners are normally best suited by an Individual Voluntary Arrangement. Personal bankruptcy is a debt solution that helps tenants to become debt-free. Always consult a debt counsellor before proceeding as it is important that the right debt solution is chosen.
Those seeking to write off debt may be interested in finding out whether they have an illegal credit card or unenforceable loan agreement. Should a credit agreement be deemed legally unenforceable, the debt cannot be collected.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
Comments