Finding the correct debt solution is about understanding your personal and financial situation. You can start by asking yourself a few simple questions:
- How quickly do I want to be debt free?
- How much income do you have after tax every month?
- What is your expenditure every month and is it sensible?
- Are you struggling to meet your contractual payments as they fall due every month?
- How much can you afford to pay towards your debt every month?
- Do you want to repay all of your unsecured debt?
- Do you own a property? If yes, is there equity in the property?
- Do you need to freeze interest and charges?
- Does your partner also have unsecured debt?
- Do you want to avoid the stigma of bankruptcy?
Having a firm understanding of what you expect, enables you to approach debt solutions with knowledge and we all know that knowledge equals power.
You may have two or three debt solution options, which is why it’s important to ask yourself the questions I posed above first. Each debt solution has benefits to entering it, but you can’t ignore the negatives.
A debt solution provider should never tell you what solution to enter and you should never feel pressured into a debt solution, it should be your choice. The debt advice charity would simply explain the options, the process and the pros and cons so you’re fully informed. From there, you have the choice.
It can seem like a big step and it’s definitely scary, but at least you’re making a decision, whereas before you were in “limbo”, unsure of what would happen long term.
The debt solutions available to you in the UK will depend on whether you are based in England, Wales, Northern Ireland or Scotland.
In Scotland the legal system is different to the rest of the UK so the debt solutions are different too. In Scotland you can enter into a debt arrangement scheme, trust deed or sequestration, whereas in the rest of the UK the debt solutions are a debt management scheme, IVA or bankruptcy.
There is a difference with debt solutions between a formal and informal debt solution. An informal debt solution doesn’t necessarily guarantee to freeze your interest and charges, but it will allow you the flexibility to cancel your arrangement with the creditors at any stage and you can manage the debt again yourself. An informal debt solution would be a debt management plan.
Formal debt solutions, like bankruptcy, IVA and trust deeds will guarantee to freeze your interest and charges if the creditors agree to your proposal, but it will mean you are tied into the insolvency solution.
When you realise you have a debt problem it’s understandable to go and look into the potential debt solutions which exist. It can be a minefield. Where do you start?
You should read up on the available debt solutions for where you live in the UK. Afterwards, you will have a fair understanding of the debt solutions which you could apply for.
Seek professional debt help
Always seek professional debt advice from a registered debt advice charity. Your local Citizens Advice Bureau can provide face to face help.