What are my Debt Management Options?
Debt management options are offered by debt servicing agencies to help clear your liabilities. There are instances when you fall into a debt trap because of taking multiple loans simultaneously. Numerous debt management concerns work out feasible solutions to overcome all debt liabilities you might be having.
There are a number of options available for handling your debts with each option having its own characteristics. These debt help management options are to be studied carefully and thereafter the most practical approach selected.
Individual Voluntary Arrangement – IVA is a formal legal understanding whereby both the debtor and creditor gain. This government approved process is ideal for clearing your liabilities over a period extending to 5 years with 75% of your debt amount written of which however is subject to government approval. Introduced as a section of 1986 Insolvency Act, the IVA enables you to recover from your debts.
Under IVA you need to pay an affordable instalment every month over tenure of 5 years. After signing an IVA you are protected against any court action and all your creditors are taken care by the IVA providing agency. Unlike bankruptcy, in an IVA your name is not notified in dailies.
Debt Management Plan – This is an informal agreement between you and your creditors wherein you need to make one payment instead of multiple payments. Debt management plan is the most popular among all liability pay-off options available. Under this plan you need to pay only one instalment to your debt servicing agent instead of making payments to multiple creditors. This monthly amount is affordable and is never a burden to you. The instalment is so calculated such that you may pay up for your essential monthly bills like electricity and gas as well.
Debt management plan usually covers unsecured payments like credit card outstanding, overdrafts, and store cards.
Re-mortgage and Secured loans - If you are a property owner, a secured loan or re-mortgage of your property is the best way to pay off debts. A secured loan is however preferable to a re-mortgage. A re-mortgage will entail you to pay a higher rate of interest as compared to that of a secured loan. For a secured loan legal transfers are not mandatory and funds are released easily.
Trust Deed – A trust deed is a legal agreement between debtor and creditor under regulation of 1985 Bankruptcy Act. A trust deed is a legal procedure involving a trustee, an independent party neither representing the lender nor the borrower. In a trust deed there is a borrower, a lender or beneficiary, and a trustee that holds the title of this agreement. In a trust deed, details of loan amount, commencement and maturity dates of the loan, description of property being used as a mortgage for this loan, the parties, late fees, and legal procedures and so on are given.