Bad Debts
Advice on how to deal with unsecured bad debts
If you're in debt and you are finding it hard to cope, it's important to deal with the problem straight away - the longer you ignore your bad debts, the worse the situation becomes. Facing a debt crisis can feel like the end of the world but one call to Money Advice Direct will begin the process of clearing bad debts once and for all. The right debt advice you can find solutions to rediscover financial stability.
Bad debts on the increase as a direct effect of the credit crunch.
Money Advice Direct has had an extra 20,000 calls during August and September this year - 25% more than in the same months last year from the public enquiring about their bad debts. These call volumes are expected to increase as the public worried by the unstable financial climate and the latest fears of recession, it says.
Bad Debts relating to credit, store and charge cards still remain the largest category of debt. There has also been a sharp rise in the number of cases where people are struggling to pay their mortgage, council tax and utility bills.
People are still struggling to pay off personal credit debt, such as credit and store cards, but we are seeing more people being squeezed and finding it hard to pay their day to day household bills.
Recognising Bad Debts
People who are in debt often make the mistake of ignoring the size of the problem, hoping it will just go away. Unfortunately, debt has a habit of hanging around and getting worse, so it's important to recognise the warning signs at an early stage.
If you're always short on cash, or you're constantly close to your overdraft limit on your bank account, then you should think about taking some action straight away.
Ask yourself where you'd find the money if you had to make a big payment at short notice or in an emergency. If the answer is simply extending your overdraft, then you could be in danger of getting into serious debt.
Doing something about bad debts
The earlier you start to tackle the problem, the easier it will be. If your financial situation is in danger of becoming serious, do something about it now.
The worst thing you can do if you're having money problems is to just ignore the situation. It's often the case that people assume they'll be able to pay off their debt in the future when they start earning more money.
But anything could happen. Interest charges and late payment fees could mean that you're faced with a debt that's a lot more than you expected - sometimes double the amount you originally owed.
If you are worried that you may be getting into debt, call the debt advice team on 0800 074 6918 where you will be given you confidential and non-judgemental advice on all bad debts.
Ways to solve bad debts in the UK
There may a number of debt solutions that could help them clear debts, and in general, the sooner advice is sought, the more options there will be such as:-
IVA – For bad debts over £20,000
An IVA is a legally-binding agreement between an individual and their creditors, in which they repay only what they can afford over a period of (normally) five years. Once the IVA is successfully completed, the remaining debt is written off. Lasting for a specified time period, an IVA can be a particularly suitable debt solution for people wanting to avoid bankruptcy
Debt Management Plan – For bad debts over £2000
A debt management plan simplifies monthly debt issues finances and reduces a persons monthly outgoings by spreading out debt repayments over a longer period of time although, in general, the longer the repayment terms, the more they are likely to pay in interest.
Bankruptcy – For bad debts over £750
Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. A first time bankrupt with debts will generally receive their discharge one year after the date of the bankruptcy order (there is the possibility that in some cases the bankruptcy discharge period will be less than one year).
Although bankruptcy has a bad stigma and is publicly advertised, it should always be considered when dealing with individual insolvency cases.
Please note that if your are ever faced with the prospect of bankruptcy you should look at alternatives as soon as possible such as the Individual Voluntary Arrangement procedure (IVA).
Debt Consolidation – for bad debts of any amount
Debt consolidation is the process of consolidating all existing debts into a single loan. The process should give you lower monthly repayments. The success of debt consolidation depends on the amount of debt and monthly income levels. Debt consolidation may not be helpful if you have debts over £15,000 and are struggling to make repayments. That’s because taking on more financial responsibility is likely to make things worse, particularly if the loan is secured on a property.
All you have to do is give us a call on FREEPHONE 0800 074 6918 and of our expert Debt Advisors will be able to provide you with ethical and easy to understand debt advice on your options. This way you’ll know what debt solutions are available to you and pick one that is right for you. Our phone lines are open 24 hours a day, all year round.
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IVA's
The IVA Guide
Money Advice Direct has put together an IVA Guide based on the enquiries and questions that we receive at our helpline offices.
In the guide we cover such subjects as IVA Approval, early settlment of your IVA, missed IVA payments, IVA failure, additional debt claims and much more.
[click here for IVA Guide]
What is an IVA?
The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health. Visit Money Advice Direct's Guide to Individual Voluntary Arrangements (IVAs).
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DANGER
Due to the tremendous demand for debt consolidation services the United Kingdom is now overloaded with debt management companies that contain misleading information. [more...]