'Setting the scene'
If you are suffering severe financial problems, and have more than £5,000 of unsecured debt, and your debts are not
statute barred, in theory you could have several options for relieving creditor pressure. Your own and your family's circumstances and your approach to your problems will determine which is the best course you take.
Each option involves making compromises, you will never achieve all that you want to, so it is important that you have a firm idea of what your 'must-haves', 'would-likes' and 'unimportant' wishes are and set your priorities accordingly. You will need to be quite brutal and entirely honest with youirself and your family in doing this.
The options that you have are:
You will see that I have not included the 'debt consolidation' or 'remortgage' options in the above table - these two options are for those with moderate, rather than the severe debt problems this site is written for.
The more to the left the option, the more control you have, and the less formal, the process. The more to the right the option, the more formal the process, with the options at the very right involving an Insolvency Practitioner controlling the process under a route subject to the Insolvency Act 1986. There is often a trade off between the formality of the process and the amount of debt 'forgiven'. In general, the more formal the process, the more debt is 'forgiven'.
You have to decide whether you want to follow a formal or informal solution. If, as many do, you have left it late in the day to do something major about your debt problems, you may now only have the formal options available. And within those formal options you could be limited even further by your individual circumstances.
Having debt problems is very wearing on you and your family. Every aspect of your life is affected, there is no escape even in your sleep. With ever rising debt levels in the UK, debt is one of the biggest problems that society faces today. Debt is the root cause for a number of society's ills including poor health, relationship break-up, and mental health difficulties. Yet despite the fact that so many hundreds of thousands of people are suffering debt problems, it is often difficult to get sound, all encompassing, advice. Exploring all the options for dealing with debt is a wide and complicated topic, involving a complex mixture of law and practical implications, where a balance needs to be struck between 'cost' and 'benefit'. The advice you are given can be conflicting: much of it is given by advisers with a vested interest in pointing you one way or another, other advisers simply know only some, not all, of the solutions. And you are at an important stage in your life, with much at stake, you have to make the right decision in order to avoid wasting time, effort and money, digging yourself and your family in to an even bigger hole.
Life is far too short to live with the grey cloud of debt hanging over you. I am certainly not advocating a policy of debt avoidance, but there is a strong argument for you to take a route set by your head, not your heart: a route that is based on a cold, commercial, assessment of your options rather than an emotional response to what you believe society and your creditors may like to see or how our forefathers used to live. Attitudes to taking on debt have changed massively over the last 20 years. Attitudes to dealing with the inability to repay that debt have changed more slowly. But they are changing and it will only take a minor recession to cause an immediate, massive and irreversible mind shift. Just look at the USA, where it is not unusual for someone to go bankrupt twice before then going on to make millions - and we always seem to follow USA trends!
The vast majority of people with financial difficulties do want to pay their debts, they feel a strong moral obligation to do so. This is quite understandable. In reality, people who won't as opposed to can't pay are very much in the minority, yet are quoted as being good reason for having a regime that some would have us believe is tough on debtors. Yet at the end of the scale in terms of options lies bankruptcy, and the government has purposely made bankruptcy easy to get into, quick to get out of again, cheap, and certain. The impact of bankruptcy is far less than it used to be, making the 'ultimate step' more acceptable to the debtor and his family. But there are other options, which should all be fully explored before the 'ultimate step' is taken.
On this website, I will explore all of your options, both formal (including IVA and bankruptcy) and informal (including full and final settlement, DMPs) in an attempt to help you with your decision making process. As that process will inevitably involve some hard decisions, I have tried to make my points in as simple to understand way as I can, avoiding jargon. Some may argue that I have over-simplified some things, especially as people are living increasingly complex lives, but I feel that a robust understanding of the general principles is essential even if your affairs are highly complex, in order to build strong foundations on which you can then build your decisions.
Whichever route you choose, you have to fully understand it, and have explored all the alternatives, if only to discard themn because of your personal circumstances. If you do not understand any rote fully, including the upside and downsides, don't do it now, spend more time researching, you have much to lose if you take the wrong route.
Click on the links to the left to start your journey.................
This page was last modified on Sunday, June 01, 2008