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When many people realise there is a debt problem they're going to have spent months or even years panicking, using credit to pay other credit, ignoring telephone calls and never opening their mail. This isn't a sustainable method to live their life so eventually they decide they've had enough and something must be done.
Once the decision is come to resolve a debt problem there are a variety of people you might turn to, however the majority are too embarrassed to inform family and friends regarding their debt problem. Instead they may opt to tell another company concerning the problems they are facing.
Telling the right company about a debt problem
There are millions of companies offering debt advice and support however many within the to make money industry are only thinking about the profit they can make. Similarly there are to make money company who do worry about helping you too.
The safest option when you realise you have a debt issue is to speak with a not for profit debt advice charity. The owners of charities aren't able to take an income or make any money out of the way the charity is ran, which means the decision makers are making decisions based on what is best for the customer, not their very own pocket.
What solutions are available when confronted with a debt problem?
There are a number of solutions available and a debt advice charity will look to ensure you can be found all available debt solutions so you can make an informed decision. The solutions readily available for people in debt include;
Debt Management Plan
A debt plan is an informal agreement you make together with your creditors. You accept repay all of the money you borrowed by over a longer time than originally agreed. The debt management plan will have a negative effect on your credit rating because you aren't keeping up with your contractual arrangements. However, because you are agreeing to repay your financial troubles in a scheduled way your creditors may decide to freeze interest and expenses to help you do this quicker.
A debt plan having a for profit company will have charges and fees that you simply must pay. A charity debt management plan won't ask you for directly. The quality of service having a to make money debt plan or having a charity is unknown nevertheless it continues to be suggested that since you are spending money on something with a to make money company that the service is better. This has not been proven and the decision is yours. You'll be free of debt quicker having a charity than a to make money company because there are no direct fees.
Trust Deed (Scotland only)
In Scotland you could enter a Protected Trust Deed for those who have a minimum of 10,000 of personal debt, a minimum of 2 different creditors and can repay at least 10% of the money you borrowed over a 3 year period. The trust deed is a form of insolvency where one can no longer manage to meet your contractual payments each month.
The Trust Deed enables you to put a proposal for your creditors, which if accepted, will enable you to pay you monthly disposable income into one company (the insolvency practitioner) who will distribute the money for your creditors on a pro rata basis. If you complete the trust deed satisfactorily then you will be debt free at the end of the solution with interest and expenses being frozen and any remaining debt after the term of the Trust Deed being wiped off. Inside a Trust Deed any equity inside your assets is going to be considered and may be included.
IVA (England, Wales and Northern Ireland only)
For those who have a severe debt problem and are not able to meet your contractual obligations every month then an IVA might be suitable. The person Voluntary Arrangement (IVA) is really a well used debt solution in England, Wales and Northern Ireland (c. 40,000 + people enter an IVA each year) and may enable individuals to repay the things they can afford over a 5 year period.
The criteria to go in an IVA is to have at least 15,000 of personal debt owed to at least 3 different companies and be able to repay a minimum of 25% of the money borrowed on the 5 year period. After your debt solution any interest and charges will be cleared and the remaining money owed is going to be wiped off. The IVA has a negative impact on your credit rating because you aren't repaying all of the money you borrowed. A default will be placed on your file that will remain there for 6 years.
Bankruptcy
Another debt solution is the Bankruptcy. This debt option would be for those who have probably the most severe debt problems where no other solution will realistically resolve your debt problem. Bankruptcy can affect a persons capability to continue within their employment - accountants and other professionals are not able to be produced bankrupt. Also, if you are a director of the limited company then you definitely must relinquish it when being made bankrupt. The insolvency practitioner is a bankruptcy will appear to achieve just as much money for that creditors as is practical and this may mean selling any property, cars, shares or any other assets.
Your financial troubles situation may not be severe enough to warrant the solutions above and as a result general money advice might be enough.
