Bankruptcy is something that you really need to think carefully about — even in a bad economy where you feel the need to make drastic changes. The reason why you should consider bankruptcy very cautiously is that it truly does have long term effects that extend beyond where we are often thinking of. It’s all about making sure that you can weigh your options and do what’s going to be right for you and your family. Bankruptcy tends to have heavy consequences, including being very difficult to get credit of any kind. Also, since it shows up on your credit report, you may be ineligible for certain jobs. Employers can indeed use your credit report information to make decisions connected to your employment.
You can go with an Individual Voluntary Arrangement (IVA), which is really a good alternative to bankruptcy. You usually have to have a significant amount of debt in order to qualify for this option — 12,000 GBP or higher. However, if you do qualify for it, it’s a good plan. You will make a monthly payment for five years that cannot go up for any reason. As long as you pay on time for the five year period, the rest of your debt is written off by your credits. It’s going to give you the clean slate you need to start your life over again.
There is also the debt management plan, which is designed to give you the power to restructure your debts. It doesn’t have any instant liquidation option like with the IVA after a fixed period of time, but it does let you lower the interest on many bills. It goes without saying that interest is something that tends to make it harder for people to pay off their debts. But if you can remove that hurdle, you will have much clearer path to get things done. Why not make sure that you get it handled today? You’ll be glad that you did!
What about Administration Orders? These don’t get talked about as much, but they are indeed an alternative. It’s designed for unsecured debts and even smaller debts like council tax arrears. The debts will be rolled into one single reduced payment that you must make to the court each month. The court will turn around and distribute the payment to the creditors on a pro rata basis. If you have a County Court Judgment against you and debts under 5000 GBP, this is a good option for you.
There is also the Debt Relief Order, which is an alternative to bankruptcy when you’re on a very low income and you really don’t have the money for a full Court bankruptcy procedure. You have to have less than 15000 in debts, but savings of no more than 300 GBP. It is truly aimed at a very specific segment of the UK.
If you can re-mortgage your home or you have significant savings, you may be able to do a full and final settlement of all of your debts. This is a good bankruptcy alternative because it wipes the slate clean and forgives a good portion of your debt. This isn’t an alternative that you want to pursue when you don’t have assets. But if you’re already established and just need relief, this may be an option for you.
NO matter which option you choose, you definitely want to make sure that you focus on getting your head straight about debt. You want to make sure that you are changing your spending habits so you don’t end up in this position again. Getting out of debt is just the beginning — what you do afterward will determine how much you get out of life. Many people pursue bankruptcy and even bankruptcy alternatives, only to get back into debt again.
It’s going to be up to you to decide what road you go down — but this guide is just designed to give you a general listing of all of your options!