Consumers with an excessive amount of outstanding debt can be faced with challenges. When gone unpaid, it can threaten your overall financial health and impact your ability to pay other bills. Too many people are paying a large portion of their monthly income just to keep up with payments on their credit cards, loans, or other financial obligations.
When your monthly payments are more than you can afford, you risk defaulting on those debts which can result in damaged credit and legal action. Getting help with these payments can preserve your credit and keep your scores high. It can also allow you to manage all of your monthly bills and pay them on time.
Programmes that can assist with debts
The good news is that borrowers have several resources available to them. You essentially have a few options to either manage, refinance or dispose of your debt. Your financial health, income, obligations and credit will determine how feasible each option will be.
- Consolidation: Take advantage of your good credit and consistent income to consolidate your multiple high interest debts into a single payment with a lower interest rate. This will allow you to save a significant amount of money over time.
- Negotiate a Repayment Agreement: If you are unable to meet the current terms of your debt agreements, you may attempt to negotiate special terms directly with your lenders. Creditors are not required to provide favourable terms, but may opt to do so if it reduces the chances of a default.
- Debt Management Plan (DMP): A third party company could negotiate improved repayment terms on your behalf. Some not-for profit companies also provide this service. A break in interest rates plus lower monthly payments might be enough to help you regain control.
- Administrative Order: If a county court judgment is currently unaffordable and you owe less than £5,000, then this may be a solution. Borrowers may decide to apply for an Administrative Order to allow you more time to repay the lender or bank.
- Composition Order: This is related to the option noted above. Pursuant to an Administrative Order, the court may grant a reduction in the total judgment award to your plaintiff. This can reduce the overall dollar amount that you must repay.
- Individual Voluntary Agreement: An insolvency practitioner can help you set up a legal debt repayment solution on your behalf. For those that are found eligible for this service, it is known as an IVA, or Individual Voluntary Agreement. If approved by the court, your lenders must honour the plan.
- Debt Relief Orders: England and Wales residents may be granted a DRO by the Insolvency Service as an alternative to bankruptcy.
- Debt Arrangement Scheme: Scottish debtors may freeze interest rates if approved for a Debt Arrangement Scheme (DAS).
- Bad Debt Write Off: If you have no income or assets and are essentially judgment-proof, you can request that your creditors cut their losses and cease all collection activities. A local Citizens Advice Bureau counsellor may help you do this.
- Bankruptcy: When the other options are not favourable, you can clean the slate with a bankruptcy filing. While there are negative aspects to this, among them a reduction in credit scores, you may still retain some assets while ridding yourself of oppressive debts.
- Repair Credit Score: There are 3 Credit Reporting Agencies in the UK, also called CRA. Review your scores and if they are not high enough, take action. Find how to build credit scores.
Churches are also becoming more involved in helping families. A number of them operate debt centres in partnership with Christians Against Poverty (CAP). All of the advice provided to a client is free. The coaches that are assigned to an individual will help them develop a plan to reduce the amount of bills that are in arrears, enroll clients into money management courses, and work with the family so they can pay future expenses using cash from their job. Find churches that offer debt assistance.
Charities including the Salvation Army are now starting to operate centres. The programmes they offer will not have any fees or commissions. A holistic approach is taken by the agency. The NVQ Level 3 certified counsellors offer help with budgeting, negotiate payment plans or interest rate reductions, and offer other forms of help for debt arrears. Learn about all of the services offered by the not-for-profit and where the Salvation Army Debt centres are located.
You can find out about the pros and cons of various solutions so that you know what you might be able to expect. The Bill Help Clearinghouse is a service to provide information about the multiple ways that ordinary citizens may get help with debt payments. As noted above, there are different payment plans, programmes and organisations that can help.
It is our desire to enhance your understanding of the different options for dealing with debt so that you are able to act in a responsible manner. Many people do need some assistance and advice in order to manage and recover from their indebtedness. Get help with your making payments, lowering interest rates, and getting back on track. There are methods to use to regain control of your finances!
Consumers also have access to agencies that focus on their country, region, or city. The organisations may offer specific services to help individuals in those areas deal with their debts.