Ways to Write Off Debt In The UK

It happens to the best of us: unexpected expenses come up, we put them on credit or take out loans, and suddenly find ourselves in over our heads with debt. It can even happen with recurring payments like a mortgage or regular bills. You may have gone for a period of time without work, or perhaps your salary was reduced, or you fell ill for an extended period. Whatever the circumstances, there are options in place in the UK to help you more quickly pay off your debts.

Debt Relief Order

A debt relief order is meant for those with low income and few or no assets. Once you and your creditor have agreed to a DRO, you stop making payments on the debt for a year. If your income does not increase to a suitable level for making repayments within that year, the debt is completely written off. Typically, creditors will agree to this only if they believe you will never be able to repay your debt anyway.

Individual Voluntary Arrangement

An individual voluntary arrangement freezes your debts, meaning no more interest is added on to them, and then allows you to make payments on them over an agreed upon period of time. If you still owe money after the agreed upon time period, the balance is written off. In order to qualify for an IVA, you need to prove that you have regular income, and that it will last for several years. This method of debt resolution is set up by someone known as an insolvency practitioner. They can help you put together a proposal for an individual voluntary arrangement and bring it to your creditors. Keep in mind that this type of agreement is legally binding, so you cannot back out of it once you and your creditor have agreed to the terms.

Debt Management Plan

If most of your debt is on credit cards, personal loans, store cards, or overdrafts, a debt management plan, or DMP, can help you pay off your debts as you can afford it. A DMP provider helps you to negotiate the terms for your DMP with your creditors, and then takes a monthly payment from you, which they relay to your creditors. A DMP cannot be used for debts accrued on TV license costs, council tax, court fines, utility bills, child support payments, mortgage payments, or rent payments.

Bankruptcy

Many people fear bankruptcy, and there are some very good reasons for it. While your bankruptcy is in progress, you will not be able to apply for credit without disclosing your bankruptcy, and after your bankruptcy, which remains on your credit rating, credit can be hard to obtain or very expensive. It also costs money to apply for bankruptcy, but the fee can be paid in installments if you cannot afford the lump sum. You may lose many or all of your assets during the bankruptcy process. It is best to discuss bankruptcy with a financial advisor before applying for it online.