7 Ways to Erase Debt
Debt is a problem and it can be solved. There is no need to feel humiliated or down. You have 7 alternatives to erase debts in UK:
Here are snippets of those 7 ways to erase your debts. For more information on respective procedures, please visit the pages.
| 7 Ways to erase debt | Eligibility | Pay Back Time | Advantages | Disadvantages |
|---|---|---|---|---|
| Debt Consolidation is a method by which you take out one loan to pay off other debts. Detailed Article | Loan amount is less than £15000 | 3 years to 25 years | All debts are merged into one single loan and paid back on a monthly basis. It may reduces the rate of interest. | Be careful about collaterals |
| Debt Management Plan or DMP is a repayment agreement between the creditor and the debtor. Detailed Article | Loan amount is more than £8000 and have a minimum of 2 creditors | Continues till all debts are cleared | It helps to manage debt without affecting regular life | It is a long process and covers only unsecured debts. Creditors may not agree to the DMP |
| IVA is a formal arrangement to repay the debts by reduced monthly payments within a specific time. Detailed Article | Loan amount is more than £15,000 | Generally lasts for 5 years to 6 years. | Make monthly repayments based on your financial status | Your home and assets may be at stake and credit report may be affected. |
| Trust Deed is a voluntary agreement where a trustee sells debtor’s assets to pay off debts. Detailed Article | Only applies to Scotland | 3 years | Single repayment on a monthly basis. Once the creditors accept the deed, no more interests will be charged. | Severe consequences if you fail to abide by the regulations. It is recorded in the Register of Insolvencies. |
| Bankruptcy is the last resort to clear all debts. Detailed Article | Can be declared by debtor or creditors if you owe them £750 or more | 1 year | Get debt free within a year | Bankruptcy is published in the local press and the London Gazette. You may loose your assets. All bank accounts and credit cards will be closed. |
| Administration Order is a court order that covers all your debt arrears. Detailed Article | Total debt must be less than £5,000 and at least 2 creditors. | Continues till all debts are cleared | Creditors cannot charge any more interest on the debts. Creditors or bailiffs cannot harass | It does not include priority debts. Creditors who are not listed can send charges. It remains on your credit file for 6 years. |
| DRO or Debt Relief Order helps people with minimum means and assets to erase debts. Detailed Article | Liabilities of less than £15,000 and gross assets of not more than £300 or disposable income of less than £50/ month | 1 year | DRO is cost-effective and helps people with limited assets and income. | If you do not abide by the rules of DRO, you may be subjected to harsh civil and criminal penalties. |
