Options for people in debt in the UK

While the UK’s economy may be going from strength-to-strength there are still lots of people struggling with their debts and who need advice and help to resolve them.

The best advice is to contact their creditors, that is the people that a debtor owes money to, and make an arrangement to pay off the debt.

Depending on the amount of money the debtor has, such as savings, will dictate what options are available. For those who are in serious debt, the lack of cash and assets will be a problem.

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For people in debt who have not gone bankrupt, the first step is to set-up a debt management plan with their creditors which is in agreement to repay them at a set rate and this will be dealt with by a licensed debt management firm.

The key here is to work with a company that has been authorised by the Financial Conduct Authority (FCA).

Debt solutions for people struggling with debts

After giving the firm details about your current situation financially, this will include your income, outgoings and debts, they will then work out a monthly repayment plan.

The company will then contact your creditor, or creditors, and ask that they agree to the arrangement – be aware that the creditor does not have to agree to this.

If a company charges for this facility, ensure you understand what costs you will be liable for.

The next step for dealing with debts is an Administration Order which will happen should the debtor receive a county court judgement, also known as a CCJ, or a High Court judgement, known as a HCJ, and are for debts of less than £5,000.

If you have received a CCJ and you cannot pay it in full then an administration order is the way to resolve this situation.

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How to resolve a CCJ when in debt

It’s important that if a debtor follows this route then they must make a payment within a month to their local court and it’s the court that will then divide this payment between the creditors.

The third step for people in debt is to consider an individual voluntary arrangement, or an IVA, and this will be managed on their behalf by an insolvency practitioner.

An IVA will see a debtor agree to make regular payments to the insolvency practitioner and it is they who will divide the cash between the creditors.

The IVA is a legal agreement to pay all, or a part, of the debt to creditors and they must agree to the terms.

For those who are in serious debt in the UK there’s also the option of applying for a bankruptcy order, or a debt relief order, because they cannot repay their debts.

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Options for people in debt in Scotland

However, for people who live in Scotland and who are in serious debt there are other options available to them.

Scots can opt to use a Debt Arrangement Scheme for the arrangement of a debt repayment programme.

This scheme is similar to the English version and is based upon a debtor’s ability to pay using their disposable income.

The arrangement will last for a reasonable length of time which will see the creditors receiving repayments on a regular basis and while doing so, all of the fees and interest charges on the debt will be frozen.

For people in debt who have gone bankrupt their options include applying for a fast-track voluntary arrangement which will involve selling assets to repay debts and having the bankruptcy cancelled.

There are also a variety of helpful services, including debt counselling charities, who will offer free and confidential help and advice for people who are struggling with their debts in the UK.

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