Debt Solutions

Debt Consolidation Loans

Debt consolidation loans are the simplest solution to understand. You simply take out one larger loan to pay off several smaller ones. With a debt consolidation loan your objective would be to:

• Lower repayments
• Lower the amount of interest paid
• Have a single more manageable payment to make each month

Debt Management Plans

Debt management plans involve ascertaining what you can afford to pay each month, and if that falls short of your monthly debt commitments trying to negotiate with your creditors to achieve one or more of the following:

• Reduced monthly repayments
• Interest reduction
• Freeze interest

It is possible to negotiate a debt management plan yourself, but as it can be a complicated process, and one which requires knowledge and negotiating skills many people choose to use a debt management company to set up the debt management plan (DMP) on their behalf.

Where a debt management company is employed, they would normally consolidate the debt for you as part of the agreement. A single monthly payment would then be made to the debt management company who would subsequently distribute payments to your creditors.

IVA Debt Consolidation

An IVA is a form of insolvency. Like a debt management plan, your ability to pay would be assessed. Then your creditors would be approached to try and reach agreement with them. Under an IVA it may be possible to:

• Write off debt
• Freeze interest
• Agree an affordable repayment plan
• Consolidate debt into a single monthly payment
• Clear all debts within 5 years (possibly less)
• Prevent your creditors from persuing you for more money / sending you letters. (An IVA is a legally binding agreement)
• There is no court involvement and the process can be kept private

An IVA must be administered by a professional insolvency practitioner.

Scottish Trust Deeds

If you live in Scotland then an IVA will not be available to you. Instead an alternative form of debt solution is used known as a “Trust Deed”. This is very similar to an IVA and can enable you to:

• Write off a portion of your debt
• Stop creditors persuing you (it is legally binding like an IVA)
• Make one affordable payment per month
• There is no court process involved and the process can be kept private

Again, as with an IVA a Trust Deed must be administered by an insolvency practitioner.

Bankruptcy

Bankruptcy is generally to be avoided unless you have few or no assets and are not likely to be affected by some of the restrictions bankruptcy proceedings will place on you.