Options for unaffordable debts
Date posted: January 21, 2014 by Paddy Byrne
The anxiety that comes with not being able to manage your debt payments can make life seriously stressful. It can seem like the more things get out of control the fewer options you have left. However, there may be more choices left than you think, and acting promptly and with the right advice is hugely valuable.
Negotiate with your creditors
One of the first things you can try is renegotiating your creditors. You can contact your creditors at any time and ask them to reduce your monthly payments for example (often this will involve an increase in the length of the agreement – make sure you understand the terms of any new deals before agreeing to them). Naturally there is no guarantee that your creditors will agree to your request, and dealing with them can often increase your stress levels even further.
Debt management can be extremely helpful in these situations. Having someone who knows about debt look at your situation and advise you on what route you should take can help get things under control. Debt management professionals can also mediate with your creditors, negotiating on your behalf.
Use equity from Assets
Depending on the situation, if you have any assets you may want to consider selling them, or releasing equity from your home if applicable. You can use the funds to settle your debts either in full or in part. It’s worth thinking carefully about these decisions and being sure that you won’t regret them.
Consolidation loans are given a lot of press, but should only be entered into in certain cases. You should always be wary of replacing one debt with another, and try to make sure any consolidation loan is actually going to improve your finances in the long as well as short term.
In certain situations you may want to consider options such as an Individual Voluntary Arrangement. In this case you will need to consult with an Insolvency Practitioner. They will advise you about whether an IVA is applicable to you, and whether they do in fact think it is a good option for you.
IVAs are mainly used in circumstances where the alternative is likely to be bankruptcy. They act as an effective way to avoid bankruptcy for many people who can no longer meet their debt obligations. When IVAs are successful they allow people to settle their debts and work towards being in control of their finances again.
Using an IVA you pay back at least some of what you owe, and at the end of the term the debt is considered settled, in most cases meaning that part of the borrowing is effectively written off. The impact on your credit status of an IVA is far preferable to bankruptcy, and you can therefore look forward to a better financial future.
IVAs are not a quick fix for unmanageable debts, but rather offer a realistic way for you to address the debt problems that you have, and settle them rather than trying to forget about them.