As debt levels in the UK increase, that with rising interest rates has put more and more of us into very precarious positions. The Citizens Advice Bureau for the last few years has been reporting increase upon increase of people turning to them with their debt problems. A possible solution for many would be to go bankrupt but before you do there may be other options available to you.
So what are your options. Well the first could be to write to all the people you owe money too and explain that you are having difficulty in meeting the repayments. This informal or sometimes called ?family?
arrangement is when you and your creditors come to a mutually beneficial agreement which makes sure they at least receive something of the debt owed and you could possibly benefit from reduced monthly outgoings. The drawback to this arrangement is that it is not binding and at any time the people you owe money to could ask for full payments again at anytime they want.
Another option to clear your debts could be to sell your house if you are a homeowner. Any equity in the house can then be used to pay off outstanding debts. With rising mortgage costs and especially if you were on a quite high mortgage rate in the first place this could see you paying of your own debts and by renting or buying somewhere less expensive see you monthly commitments reduce giving you the breathing space to get your life back in order.
Another position many find themselves in is facing a administration order. These are terms of repayment set up by the court when somebody you owe money to has filed a county court judgement. The court does take a percentage of what you pay to cover its costs and if you do not meet the terms you could be in the same position as somebody who has gone bankrupt.
Another way to cope with the situation is to either re-mortgage or take out a secured loan. Re-mortgaging is generally cheaper than taking a secured loan but many will not be able to either borrow any more off their existing lender or may face excessive redemption figures if they did re-mortgage. Secured loans seem to be a little more flexible and easier to arrange. You must however exercise caution as while re-mortgaging and taking out a secured loan can reduce your monthly outgoings you could be spreading the debt further into the future and as a result increase the overall cost. Also if you do either of these options to refinance unsecured debts you are immediately putting your home at risk if you fail to keep up with the payments.
Finally an IVA (Individual Voluntary Arrangement) may help. Its very similar to the ?family? arrangement. The difference is that this arrangement is legally binding between you and your creditors. Most people arrange this through an Insolvency Practitioner. What they will initially do is apply to a court for an ?interim? order. This prevents those that you owe money too taking any further action or contacting you. The fractioned then puts together a proposal of how and how much you can pay back and asks for a meeting with the creditors. The creditors then chose if they want to accept the proposal. Only 75% of the creditors need to vote for an acceptance to make the IVA binding on all creditors. You then pay only the amounts laid down in the proposal. An IVA will cost you money and you need to ask the Practitioner about the costs before going through with it.
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