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Options for getting out of debt

What Is A Debt Relief Order
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Being in debt can feel like you’re stuck in a deep hole with no means of climbing out. Burying you head in the sand will only make the situation worse, so if you are feeling overwhelmed by financial worry read on to discover some of the options that may be available to you. There are people and organisations out there who can help you find a solution. Take a positive step to regaining control of your financial world and reach out today. It may be scary, but the relief of taking charge of your own destiny will be more than worth it.

Understand the Problem

Before you can decide the best way to approach your debts you need to have a realistic understanding of your situation. Make a list of how much you owe and to whom. Then decide which of these debts need to be given the highest priority. Finally, work out how much your essential outgoings are each month and what, if any, you have left over to use as debt control cash. If this process is confusing for you ask for help. The Citizen’s Advice Bureau is a good place to start. The main thing affecting your options moving forward is whether or not you have any money left each month to start tackling your debts with.

If you Have Money Left Over Each Month

Deal with your urgent debts first – these will include mortgage, rent, council tax and any loans secured on your property.

Then consider your remaining debts:

1. Negotiate with your Creditors – most lenders prefer that you open a dialogue with them instead of ignoring the debts. If you discuss how much you may be able to pay back directly with them, it can often be possible to find a repayment solution that suits you both

2. Agree a Debt Management Plan – this is an informal agreement between you and your creditors that lays out a timeline for debt repayments. It generally only applies to non-urgent types of debt, so it may not be suitable if you are already struggling to address these higher priority issues

3. Administration Order – this applies to ALL kinds of debt (including urgent debts). It is a formal agreement to repay your debts over an agreed period. To qualify, your debt cannot exceed £5000 in total and you must have at least one CCJ against your name

4, Individual Voluntary Arrangement – similar to an Administration order, this is also a formal agreement to repay debts over time. To qualify, your debts will be more than £10,000 in total and you must have a minimum of £100 to spare each month after your essentials are paid. This arrangement does not cover all types of debt, you may be required to use any savings you have, or remortgage your home as part of the process

5. Consolidation Loan – this is where you take a fresh loan out to repay all your other debts and then repay the new single loan over an agreed time period. This option is worth considering if your credit rating is reasonable and you are confident that you will be able to meet the monthly repayments.

Options for getting out of debt

If you Have NO Money Left Over Each Month

In these circumstances your options are naturally more limited, but there may still be a suitable solution for you in the following list:

1. Negotiating with your Creditors – it may feel like a long shot but depending on the nature and value of your debt and your individual circumstances, you may be able to negotiate a deal with your creditors that works. Perhaps the debt could be frozen for a while, paid off in part by a lump sum that zeros the debt, or even written off altogether. It’s always worth asking

2. Debt Relief Order – this is s formal arrangement, under which your debts are written off after one year. To qualify your debts must collectively amount to no more than £15,000, you must not be a homeowner, or have valuables worth more than £300, a car worth more than £1000 and your spare monthly cash beyond essential outgoings should be less than £50

3. Bankruptcy – under this formal agreement most debts can be written off, also usually within a year. This applies to people whose debts have reached a level where they will never be likely to pay them off. The downside of bankruptcy is that you could lose your home, job or business in the process. It also makes it difficult for you to secure finance again for several years. And there is a £700 up-front fee to find to effect the process. But if your debts are truly monumental, this could be the way out and route to financial freedom you’ve been looking for.

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About Cally Worden

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About Cally Worden

Seasoned freelance writer Cally Worden lives with her family and dog in a quiet corner of rural France. A love of the outdoors, and a fascination with her children's ability to view life with fresh eyes provide the inspiration for much of her work. Cally writes regularly for various websites and UK print publications on subjects as diverse as parenting, travel, lifestyle, and business, and anything that makes her smile.

Website: Cally Worden

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