|
|||
| The independent answer to your debt problems | login join | ||
When people do find that they're experiencing debt problems, one of their main concerns is how they might possibly avoid bankruptcy.
The important thing to remember is that bankruptcy isn't the only option when you find yourself in difficulties - in fact, there are several other options you should look into long before you contemplate filing for bankruptcy!
Two useful options are IVA's - or Individual Voluntary Arrangements, and DMP's - or Debt Management plans. They are slightly different from each other, but once completed, offer the benefit of a 'clean slate' and the option to start your personal finances afresh.
An IVA is a special scheme to help you get past debt, and prevent bankruptcy - whilst avoiding you fielding any more difficult calls from creditors. It's a suitable option for people whose debts are in excess of £17,000. Creditors actually prefer them to voluntary bankruptcies, as they receive higher returns, and they can rest assured that they'll see an agreed percentage of the debt returned over a pre-agreed period.
Both IVA's and DRP's are also less costly than bankruptcy, and avoid the social stigma and sale of assets such as your home. Furthermore it's worth remembering that some employers will not offer work to people with bankruptcy records.
A Debt Management Plan on the other hand means that you agree to deposit agreed sums of money each month with a credit management/advice organisation. These deposits are then used to make payments to your creditors, in accordance with the terms of a payments schedule that you will have agreed to with your advisor. The DMP's may well have the condition that you agree not to use or apply for any type of credit whilst you are working on your repayment programme.
The DMP's success lies with you committing to your regular payments and will likely take around 2 years or more to complete. Your debt management advisor will be able to provide you with a predicted estimate of how long the plan will take to be completed, assuming that you stick to the terms. The benefit of a Debt Management Plan is that it can cut out a lot of the stress that otherwise occurs when dealing with persistent creditors and unpaid bills. However - it doesn't absolve you from those bills - and you still have a responsibility to pay any bills/creditors who aren't included in your plan. Neither does a debt repayment plan cancel out your bad credit history - in fact, information about your financial history will remain on your credit report for a maximum of 7 years.
Of course, there are other options too to consider before an IVA or Debt Management Plan - for example, finding ways to increase your income, seeking advice at an early stage - before debts become too unmanageable, or considering financial products via a specialist provider, such as a debt consolidation loan. Generally the best course of action is to tackle the problem as early as you can - so when those bills begin to spiral, or you start to worry about meeting your payment commitments, speak to a debt advisor or financial advice organisation and get some expert guidance about the right services and products for your particular situation.
