There’s a lot of alternatives for coping with challenges of personal debt but in the UK or especially in England, Wales and Northern Ireland, the top seven choices probably account for in excess of 98% of solutions. The law in Scotland is to some extent different to the rest of the United Kingdom so it is ruled out from consideration for the purposes of this short article.

In no particular order, the seven options might be described as follows:

Firstly, you can seek to reach a negotiated agreement between you and your creditors to repay some or all of your debts. This is sometimes called a self administered debt management plan where you do all the negotiations with your creditors without the assistance of a third party.

Secondly, you may seek to reorganize or wipe out your debts through getting a loan from a lender. This is often known as debt consolidation where you pay off all or most of your debts from the money borrowed in a single new loan. So now you typically have just one debt to service.

Thirdly, you can engage the services of a debt management company to negotiate with your creditors on your behalf and to manage your payments to them. This is usually called a Debt Management Plan or a DMP.

Fourthly, provided your debts total no more than 5,000 and are owed to at least two creditors and provided that you have a court judgment entered against you by one of those creditors that you cannot pay in full, you can ask the court to make a County Court Administration Order, known as a CCAO. Under such an order you make weekly, monthly or quarterly payments to the court, which shares the funds among your creditors in proportion to the amounts you owe them.

Fifthly, providing you are insolvent and currently have regular income or assets or both of those, you could engage the expertise of an insolvency practitioner to put together, negotiate and administer an arrangement for you to voluntarily repay your creditors some or in some cases all of the funds you owe them. This kind of agreement is referred to as an Individual Voluntary Arrangement or an IVA.

Sixthly, assuming you have a minimal surplus income i.e. no more than 50 of disposable money per month, assets of no more than 300 and debts not in excess of 15,000 in total, you could, without going to court, on payment of a fee of 90, seek for a Debt Relief Order (DRO) to be made and if granted, your liabilities will be cleared in twelve months, without having to make any more payments.

Last of all, if none of the six solutions above are suitable for your situation, then the seventh course of action in this shortlist could possibly interest you. This of course is bankruptcy, which can be started by yourself or indeed by any one of your lenders to whom you owe not less than 750. Your assets are sold and you may also have to make payments from your excess earnings for as much as three years, to help clear the money you owe.

Each one of these choices has some worth but they differ considerably from each other. The best choice for you personally will be determined by your own personal preference, your existing and future circumstances and those of your family. The sum you owe, your earnings and your assets will likewise have a crucial bearing on which remedies are accessible to you. To enable you to choose, you might want to check out the website of The Insolvency Service where you can find a publication entitled ‚In Debt – Dealing with your Creditors‘. This gives a detailed summary of the pros and cons of each solution and it compares and contrasts the various options with one another. Furthermore, it provides you with contact information for various government funded advice agencies where you may receive free advice.

If you feel you require a debt solution such as an IVA or debt management plan, contact us. We provide information on IVA and Debt solutions.