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As best as you can, you should try to find the room in your finances to make payments towards your debts to reduce them and fully discharge them. However, that’s not always possible. Sometimes, debt spirals to a point you simply can’t pay it off and you need to know what your options are when that happens. Here are some of the options available, and their pros and cons.
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If you have some income and room to pay off your debts, but not enough to catch up with your existing debts, then you might be able to restructure them to make them more manageable. After doing everything you can to cut costs, including cutting down subscription packages and weekly groceries, debt consolidation might help. This involves moving all debts to one creditor, who can also cap or lower interest on certain high-interest loans. It must be done with care, however, to ensure you can pay the new arrangement.
Individual Voluntary Arrangement
Also known as an IVA, individual voluntary arrangements are handled with the help of an insolvency practitioner, and can help you avoid the credit damage that’s involved with bankruptcy. Basically, the process involves finding the total value of all of your assets with an IVA calculator and using them to come to an arrangement with your creditors. It freezes interest and other fees, stopping them from pursuing further action while ensuring them that they will eventually recoup the costs of the loan. Your creditors have to agree to the arrangement, however.
Debt Management Plans
There are other options available as well if you can’t manage an IVA. Debt management plans might seem similar, but there are some differences. For instance, IVAs often result in portions of the debt being written off, while a DMP sees you repaying all of the debt. DMPs are more informal, as well, while IVAs are backed up by a third-party and are legally enforceable. However, if you don’t have the assets to help you arrange an IVA with your creditor, then a debt management plan may be the most reliable option that’s currently available to you.
Debt Relief Order
If you are a low-income individual and you don’t have any assets that can help you deal with your debt, then there may be solutions that can see you having significant portions of your debt discharged. Check out the DRO benefits and risks to see if it’s right for you. It can help you avoid bankruptcy, but it’s only available for lower amounts of debt and is not available to all parts of the country. It’s also not applicable to homeowners, as they are considered to have the assets to manage a different financial arrangement, instead.
If you can’t pay off your debts as they stand, then you are going to have to deal with some cost to having them dealt with. However, it’s better to do this sooner, rather than when said debts have time to grow even more insurmountable.Follow me on social media for more!
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