The majority of people we speak to will often have heard about one or two of the available debt solutions. Yet, there are a variety of different debt solutions which a person could be applicable for and consider. Each debt solution is designed to help resolve outstanding unsecured debts and regain control of personal finances.
For some people, bankruptcy is the only debt solution they are aware of so they believe they may need to enter this solution. However, in many instances bankruptcy isn't suitable and a full review should be completed before debt advice can be provide. Some people are surprised to hear that they actually have two or three different debt solutions which they could enter. So, at Debt Support Trust, we explain what these solutions are along with the positives and negatives of each route.
The consequences of wrongly entering any debt solution can be severe, especially when it's an insolvency solution, such as bankruptcy. While bankruptcy can be the best debt advice to dealing with a debt problem, it will also have a number of other effects on a persons life.
Consequences of Bankruptcy
There are a number of routes to enter bankruptcy and across the UK the process and costs will vary, but they all have the same consequences once it begins.
- Income Payment Order: When entering bankruptcy you will be asked to provide a statement of affairs. If it's determined by the bankruptcy administrator that you have disposable income to pay towards your debt then you'll need to pay this for 3 years.
- Assets: Any savings and realisable equity from assets could be sold to release their value, which will be paid towards the debt.
There are other negatives of bankruptcy which would apply, such as a negative credit file. Some employment contracts restrict a person from being made bankrupt and retaining their job, so it's worth checking in advance.
However, for some people the best advice is bankruptcy. The reason is often because they have little or no assets, low levels of income or solely state benefit income and an inability to repay the outstanding debts within a reasonable period of time.
Choosing Your Debt-Free Route
There are other solutions to resolve problematic debts and the correct solution will depend on your personal and financial circumstances. Debt plans like token payments, trust deeds, debt management plans and IVAs are solutions which you may be applicable for.
In a conversation with a Debt Support Trust debt advisor and a person contacting the helpline, the caller believed her only option was bankruptcy, however it was soon clear this would not be the best option for her.
She worked full time, had a property which had accumulated a substantial equity and a disposable income of over £200 per month. While the debt was £35,000, bankruptcy would have meant she would likely lose her property and be asked to repay at least some of the debt from her disposable income.
We considered all available debt solutions and explained what would happen in each debt solution. The caller wanted to retain her house and still pay back her debt. We helped to set up an affordable payment plan and get the debts back under control.
Which Debt Solution?
Before entering any debt solution it's important to speak with a not for profit organisation to give you the best possible debt advice.
They should explain each debt solution you are suitable for along with the benefits and consequences of entering it.
If you are unsure how the solution is run, the associated costs or the impact it could have on you, then seek a second opinion. You can call Debt Support Trust on 0800 085 0226 for debt advice and information about dealing with your debt.