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Dealing with your debt

By: Sunny Rigoni

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According to recent figures, personal debt in the UK now amounts to a massive ?799 billion. If you're struggling with unfeasible levels of debt then you have a number of repayment options - the route you choose to take will depend on your personal circumstances and situation.

For many debtors, a debt management plan may be a good place to start. A plan like this can be implemented through a specialist company for a fee, and involves arranging with your creditors to pay your debts in monthly installments. The main advantage is that interest charges on your debt could be frozen. Not everybody qualifies for this type of plan, but it's worth talking to a reputable debt management company about your eligibility.

An alternative option for those in straightened financial circumstances is to take out a consolidation loan. This allows you to combine all your current debts into one, and can mean that you benefit from a lower interest rate. The disadvantage is that you could face a longer repayment time, so make sure you do your research before committing.

Of course, these options do rely on your ability to repay your debts in the future. For those whose financial circumstances are more constrained, there are a number of other options.

Those who are on a low income and have less than ?15,000 in qualifying debts may be able to take out a Debt Relief Order. This works by allowing you a year of respite, during which your creditors will be unable to take action against you. It's a good alternative for those temporarily experiencing unemployment.

Alternatively, anybody with less than ?5,000 in qualifying debts can apply for an Administration Order. Under this arrangement, the debtor makes a monthly payment to the court, who will then pay off any creditors. No action can be taken against the debtor while the order in the place, but the downside is that he or she must give over ten per cent of their payments as a handling fee to the court.

If you can't commit to a monthly payment then another alternative could be an Individual Voluntary Arrangement (IVA). If you enter into an IVA then you will be required to pay off an agreed percentage of your total debt over a period of five years. The repayments will be based on an assessment of your financial circumstances, and the advantage is that after this time your debt is generally classified as settled.

Finally, those with unviable levels of debt may have to consider bankruptcy. The advantage of declaring yourself insolvent is that it allows you to make a fresh start, but you will lose your home and other assets and could be discriminated against by creditors in the future. For most debtors, this should be a last resort.

Article Source: http://depositarticles.com/

Sunny Rigoni has lately been looking into services to help with debt management and has taken bankruptcy advice from Baines and Ernst.

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