Money Stand

Three Steps Away from Bankruptcy

December 12, 2009

Bankruptcy should only ever be seen as a last resort. The consequences are serious, affecting the person’s ability to retain their home or earn a living through their own business, for up to 15 years. The increased pressure from being in such a dire long-term situation puts pressure on the person emotionally, effecting personal well-being and relationships. Possible alternate avenues to clear debt include:

Option 1

Review current finances and consolidate debt; take into consideration incoming and outgoing finances and prioritise payments. There are payments that you must not miss at any cost and these include your mortgage and household utilities. Cut out non-essential outgoings and lower loan or credit card payments by consolidating debt into lower monthly payments.

Option 2

Use a debt management company to devise a debt management plan and act as a middleman between yourself and your creditors. Debt management companies will review what you must pay, for instance household builds, and split the remaining money between the creditors. Beware: not all creditors will be willing to go down this route and County Court Judgements (CCJs) may ensue.

Option 3

Many of us will have already seen the glossy television ads promising to wipe away 75% of our debt. Individual Voluntary Arrangements or IVAs is a formal arrangement between the debtor and creditor, arranged by an Insolvency Practitioner (IP). Unlike bankruptcy the IVA should protect your home during the term of the arrangement. However, IVAs are complicated solutions and should be investigated in detail before being pursued.

Filed under: Bankruptcy, IVA