Debt: Debt help goes mainstream

Brits borrowed 62p for every pound we saved in the last quarter of 2009. The issue of problem debts has become so large that debt help products that help consumers to reduce debt levels by negotiating debt write downs with their creditors are fast becoming a mainstream financial product.

If you have more than £15,000 in debt and you are struggling to repay, you may need to consider using an Individual Voluntary Arrangement (IVA) to sort your problems out, and get your creditors off your back.

Pros: It is a formal, legally binding agreement with your creditors to help you repay debts. You will often be able to pay back less than you actually owe. It is handled by an insolvency practitioner, who will negotiate with your creditors. It is not the same as bankruptcy. Lenders, if they have not already done so, will be unlikely to push for County Court Judgements against you once it is in place, as it is a legal agreement, so there is little point. This can save your credit rating, as CCJs will appear for six years. An IVA, once cleared, will put your credit rating back to ‘normal’, so there is no lasting effect.

Cons: You have to keep up with agreed repayments otherwise you could face bankruptcy. Some lenders may not agree to the IVA, and at least 75% of them have to. It will take up to five years to clear debts through an IVA.

Any exclusions: You have to have debts of more than £15,000 to qualify.

Alternatives: You can try to speak to your creditors yourself, but you may get less sympathy or help than they would extend to a professional helping you. You could declare yourself bankrupt for debts of as little as £750, but this has severe ramifications for your financial future.

Further reference: Speak to a debt adviser Related: Latest debt news