According to a new report from Insolvency Service more than 35,600 people became insolvent in the first three months of the year 2010, which is equivalent to 566 people a day. Although the economy is showing signs of recovery, individual personal finances continue to be out of gear and what is more disturbing is the fact that the number of people facing a debt-lag will be showing an upward trend in the coming months.
Given the situation, it becomes all the more imperative for people to seek debt advice at the earliest. Falling into debt is easy and if you are not careful, you'll soon find yourself in a vicious circle that you'll find difficult to break. So what are the options available to break through this circle? Seek debt advice from debt management companies and their experts will suggest the following options: Reach an agreement with your creditors, enter an IVA (Individual Voluntary Arrangement), consider a debt management plan, take a debt consolidation loan or if the condition is really extreme, declare bankruptcy. Of these options, here in this article, we will consider the first, which is to reach an agreement with your creditors.
This is undoubtedly the most preferred method which usually involves the debtor explaining to the creditors the situation in a letter and mentioning a timeframe for the payment of the debt.
The obvious benefit of this is that the problem will be resolved amicably and would save you additional expenses of seeking legal advice. However, you must keep in mind that any such agreement that you reach with your creditors is not legally binding so they can easily disregard it at a later date and demand the full payment of debt.
Then again, there may be a situation when one of your creditors has already obtained a county judgment against you. The court may then decide to make an administrative order. Once the order comes into effect, you would need to make regular payments to the court which would then go towards the total sum that you owe to your creditors.
Also keep in mind that there are restrictions to this. First, your total debt should not exceed £5,000 and you must have enough regular income to make weekly or monthly repayments. You would not have to pay a fee for this order but the court would deduct a small percentage towards its costs from the money you pay.
It may happen that during this period your financial situation may change and you fail in making regular payments. If this happens, the order can be cancelled altogether, which means that your creditors can take legal action against you.
However, to understand if reaching an agreement with your creditors is the best debt solution for example an IVA Individual Voluntary Arrangement or a DMP (Debt Management Plan), you can seek debt advice from reputed debt management companies in the UK. These companies offer debt advice for free. The financial experts will study your individual circumstances and suggest whether this is the best option for you.