If you’re struggling to manage your debt repayments, there are organisations that can help.
But it’s usually best to use one that is recommended by the government and offers its services free of charge.
They can help you to prioritise your outgoings with a Debt Management Payment Plan.
Or they might suggest a Debt Relief Order (DRO) or an Individual Voluntary Arrangement (IVA).
The IVA and DRO options might not suit you because they can have significant downsides.
But if they are suited to your circumstances, they offer you the chance to have some of your debts written off, without having to apply for bankruptcy.
You might benefit from a Debt Management Plan. Most of these organisations can help put this together for you. That would help you to prioritise the most important expenses and make sure you treat all of your creditors fairly. They could also contact your creditors on your behalf, to check what is outstanding and share the payment plan. The payment plans can sometimes be managed by the Debt Advice Organisation (DAO). So you'd make one monthly payment to the DAO and they would distribute the debt payments for you. But more often you would be expected to make the payments to your creditors in line with the Debt Management Plan yourself.
You might be advised that an Individual Voluntary Arrangement (IVA) could help you, if you cannot afford your debt commitments. There is legislation that allows you to make a particular type of payment plan, run by a fee charging debt management firm. You would make monthly payments, usually over 5 years. Some of the payments would be kept by the debt management firm, as they are usually profit led organisations. Some will be distributed to your creditors. And if you keep to the terms of the IVA, any unsecured debts outstanding at the end of the plan will be written off. The IVA would need to be approved by most of your creditors and it would be recorded on your credit report for at least 6 years.
This isn't available for everyone, as there are some specific requirements for eligibility. But if the Debt Management Organisation recommends this for you, you can make an application and all of your unsecured debts could be written off. However, there is a fee to pay as part of the application.
This is the traditional option where someone is unable to repay their debts. But one of the above options is usually better for the borrower and the creditor.
IVA, DRO, BO: These options will always result in a detrimental record on your credit report, for at least 6 years. It will appear in the 'Court' section of your report, so it will usually be very detrimental to your ability to obtain finance and other contracts. DMP: Some creditors will report that you are in a Debt Management Plan, so this could also be detrimental to your credit report.