Each year thousands of individuals fall behind on repayments for loans, credit cards, store cards and home shopping catalogues. For some of the lucky individuals the situation causing them hardship and to fall behind on their repayments disappears and they are able to catch up on what they owe. However for many more individuals being able to catch up on their repayment arrears is impossible and debts keep mounting. If you have debts or are struggling to maintain your current repayments then you should begin looking into the many debt management options that are open to you.



What debt management options are there?

There are several choices you could make to help you to break free of debt or that you could consider if you are struggling to keep your head above water. You could consider a debt management plan with a specialist company. You might consider taking out a consolidation loan or you could look into the benefits of taking an IVA. All management plans come with their good and bad points and to some extent the type of debts you have and how much you are in debt would govern which type of debt management option you might consider to be the best. Talking over your situation with a financial advisor and getting advice from them could help you to reach the best solution for your needs.

Debt management plan – A simple and effective solution to break free of debt

Making a debt management plan is perhaps one of the simplest and most effective solutions to becoming debt free. Many specialist companies offer a debt management service; however there are usually criteria which have to be met in order to qualify for a debt management plan. For instance you would have to have debts over so much and these debts would have to be owed to at least 3 different creditors.

An assessment of your income and outgoings would be made by your advisor and this will lead to establishing how much money you have to pay your creditors each month. The advisor would then talk with your creditors and ask them if they would be willing to receive reduced payments. If agreed you would then pay the agreed amount of money to the advisor each month for the term agreed and they would spread this amount between your creditors. The plan would continue until you have paid off your debts or your circumstances change.

An IVA – Individual voluntary arrangement

This is an agreement made between the debtor and their creditors and is usually taken out over 5 years under the eye of an insolvency practitioner. When the IVA has reached its term any debts that are still outstanding would simply be dissolved and you would owe nothing.

However you would have to take into account that your assets such as your home and car would be at risk and you could be expected to sell them and the money be put towards the debts you owe. An IVA would also be recorded on your credit file and it would remain there for the duration of the IVA. It could also affect your chances of obtaining credit in the future greatly for a long time, even after the IVA has ceased.