Having spent the last three years helping people with debt and having been through bankruptcy myself I am completely aware of how debt can overtake your ethos. Many people assume that debt is a financial problem alone, often with little sympathy. This is not the case, debt is as much of a social problem as it a financial problem. The purpose of this article is to introduce you to some of the options that you have for dealing with debt.

Dealing with debt
You often hear that seeking advice is the most important factor in dealing with debt. That is completely true. Having someone explain your options for dealing with debt can often make a massive difference in coping with the uncertainty that debt brings. Seeking advice early is very important. You will have a greater number of options and you will be able to communicate with your creditors in the correct manner. The end result of early advice should be fewer consequences for you.

The sections below will explain some of the common ways of dealing with your unsecured debts.

Debt management plans
A debt management plan is an informal debt solution, which means that the arrangement of the plan is not written in statute law. A debt consultant will propose an affordable repayment plan to your creditors. Providing they agree this should allow you to start living within your budget again.

The downside with this type of solution is that your creditors are not obliged to freeze interest and charges. Further to this you will usually end up repaying more in the long run as you are paying back over a longer period of time.

IVA
An IVA, known as an individual voluntary arrangement, is a formal debt solution. A licensed insolvency practitioner will help you put a proposal to your creditors to repay a percentage of what you owe over a period of usually five years. You will have to pay nearly all of your disposable income for that five year period and you may have to re-mortgage your property, however, your debts will be written off at the end. In contrast to this, under a debt management plan your debts are not written off until you have repaid all that you owe.

Bankruptcy
Bankruptcy is another formal debt solution that allows you to write off nearly all your debts. Although bankruptcy is seen as the most consequential solution, often it can be a person’s best option.

During bankruptcy you assets will be dealt with and your affairs will be investigated – see my previous article, The Bankruptcy Investigation. If you have no assets to protect and no income to protect then bankruptcy may be your best option. Bankruptcy will usually last a maximum of 12 months during which time you will be debt free.

Others
Other solutions which may help you to become debt free include:

- A mixture of the above
- Full and final settlement
- Loan consolidation

Which is the best?
More than one solution may be suitable for you but your best option will depend on your personal circumstances and your personal objectives. Due to the seriousness of debt and the impact it can have on your life it is extremely important that you seek advice. By seeking advice early you will have more options available to you, be able to deal with your debt sooner and rid of the burden quicker.



This article was written by Mark Davis of Piggy Bankrupt. For more information visit his bankruptcy website .

Mark Davis