Top Debt Solutions for 2009
It’s important that you take care of your finances and address any debts you may have to ensure that you’re in the best financial shape. Here we take a look at five things that could help you through the recession.
Debt management plan
A debt management plan is an informal agreement between you and your lenders as to how you intend to repay your debts. It’s technically possible to arrange this on your own, but many choose to do it through a professional debt management company, who can negotiate with creditors and manage all transactions on your behalf.
If you do arrange the plan through a debt management company, you will usually make regular monthly payments to the company, who will distribute the money between your creditors accordingly.
IVA (Individual Voluntary Arrangement)
An IVA is a legally-binding agreement between you and your creditors, allowing you to avoid bankruptcy by agreeing to pay off a percentage of your debts over a set period of time, and write off the rest.
Before you enter an IVA, an Insolvency Practitioner will work with you to put together a proposal and send it to your creditors. For an IVA to go ahead, creditors accounting for at least 75% of your total debt must approve the proposal.
Once the IVA begins, you will make regular monthly payments to your Insolvency Practitioner, who will distribute the money between your creditors. This usually lasts for five years, and on successful completion your remaining unsecured debts will be considered written off.
If you’re a homeowner, you may be expected to release some of the equity in your home in the 54th month (half way through the final year) of your IVA.