Borrowing money can make financial sense, it can also worsen a financial situation
The latter is typically called ‘Bad Debt’. The term refers to money owed for things which don’t improve financial outcomes, such as credit cards or other consumer debt. ‘Bad Debt’ can affect credit scores, day-to-day finances and, in some cases, lead to Bankruptcy.
For those struggling with ‘Bad Debt’, the following government advice is designed to help individuals repay their creditors.
1. Speak to a debt advisor
Debt Advisors provide individualised advice. Explore the Money Advice Service’s information on free debt advisory services and debt management to find out more.
2. Repayment Plans
Through the following repayment plans, debt can be paid off in instalments.
- Debt Management Plan– This agreement is made with an individual’s creditors managed by a financial company. Debt repayments can be made in a few months, or the plan can be arranged with them directly if this is not possible. The plan can also be arranged through a licensed management company for a fee.
- Administration Order– This applies to individuals who have had a county court judgement (CCJ) or a High Court judgement (HCJ) made against them for debts under £5,000. One payment can be made per month to their local court. The court will then divide this money between their creditors. An administration order safeguards individuals against their creditors, preventing them from taking further action without the court’s permission.
- Individual Voluntary Arrangement– Managed by an insolvency practitioner, this arrangement is made with an individual’s creditors to pay some or all their debts. Under this arrangement, the individual makes regular payment to an insolvency practitioner who will divide this money amongst their creditors.
3. ‘Breathing Space’ scheme.
While making repayments, the ‘Breathing Space’ scheme provides individuals with temporary protection from their creditors. In England and Wales, whilst debt repayments still need to be made, temporary protection can be granted for up to 60 days.
Under the scheme, individuals are protected from enforcement action, interest or charges added to their debt by their creditors. Creditors are prevented from contacting them about debts included in their Breathing Space Scheme. Note, individuals need to apply through a debt advisor.
4. Debt Arrangement Scheme
In Scotland, the Debt Arrangement Scheme enables an individual to arrange a Debt Payment Programme. It provides them with space to fully repay the debt over an extended period. If the scheme is approved, all interest and charges are frozen, protecting the individual against legal action from their creditors.
5. Informal agreement with creditors
We also want to highlight the option available for individuals to reach an informal agreement with their creditors.
If you are worried about debt, bankruptcy or possible insolvency, contact Asset Solutions today on 0800 689 3861. Our experienced team members provide unrivalled assistance to individuals throughout the entire insolvency process and help to stop bankruptcy. We understand that anyone facing problem debt is likely to feel overwhelmed and intimidated. That’s why we’re here to support you throughout the process and help you achieve the best results possible for your situation. Contact us today for more information.
