Should an individual incur a significant amount of debt, there are several solutions that are available in the UK although there are differences in some solutions depending on which country you live in. It is important to appreciate each one and the advantages that can be enjoyed. Therefore, let us look at some of the most popular in greater detail.
Debt Management Plans
The primary benefit of a debt management plan is that it will allow the borrower to pay back the money owed in monthly instalments. Thus, such payments are much easier to manage than any restitution required in a lump sum. Also, these plans allow all existing debts to be consolidated into one payment. This is ideal for those who have multiple outstanding debts, as it makes it easier to budget and manage.
Debt Arrangement Scheme
Otherwise known by the acronym DAS, a debt arrangement scheme is a Scottish solution that allows borrowers to pay back debt in an amenable period of time (similar to the aforementioned debt management plan in this respect, but formalised by way of a legally binding agreement). A debt payment programme is created with the aid of a qualified advisor and is a way of consolidating loans but through a scheme that stops the demands and any court action by creditors. Some of the main advantages of this plan are that once approved, any interest is frozen in place and perhaps most importantly, personal assets such as a vehicle or a home are protected.
An individual voluntary arrangement is a financial option that will enable debtors to avoid the possibility of bankruptcy. In essence, an IVA is a legally-binding agreement with creditors that a certain amount of money will be paid each and every month for an agreed period of time with the remainder of the unsecured debt being written off. Notwithstanding the fact that a flexible approach can be taken to help the debtor manage his or her monthly payments, the single most advantageous aspect of an IVA is that as opposed to a bankruptcy filing, the individual will still have direct control over his or her home. Note that in the case of bankruptcy, the assets of the debtor will be held by the Trustee (this can freeze equity and even commonplace household contents). A final merit of an IVA is that is it will have less of an impact upon credit ratings than would a bankruptcy filing.
Scottish Trust Deeds
A trust deed offers some of the main beneficial parameters as the other debt solutions such as a freeze of interest rates and negotiable monthly payments. Also, no creditors will be able to contact the individual after the trust deed comes into effect; any communication will take place through the appointed Trustee. Finally (and worth noting), it is common for any outstanding debt to be written off after forty eight months of timely payments.
The primary advantage of this solution is that once the period of bankruptcy ends, all debt is wiped clean. Time frames can vary; some being as little as one year to be free of a hefty debt. Filing for bankruptcy is especially relevant for those who rent as opposed to own a house or flat. As there is little in the way of significant assets for creditors to take, there is actually very little for the debtor to lose in the form of tangible equity. In such cases, bankruptcy can indeed be a viable option.
As we can see, each of the main debt solutions has its own set of merits. Determining which may be the best option will allow an individual to efficiently dispose of his or her debt.