Debt repayment options
If you're struggling with debts, they may seem impossible to manage. However, there are ways to get out of debt, no matter how bad the situation seems. There’s also plenty of free and independent advice available to help you manage your debt problem.
Facing up to your debt problem
Almost everyone owes money and bills are a fact of life. But sometimes you may find you're swamped with debts and can't see a way of paying them all.
The worst thing you can do is to ignore the problem - it won't just go away.
Making the most of your money
If you're in debt, work out a realistic personal budget so you know where your money's going and how much you can afford to pay your creditors (people you owe money to).
If you don't have enough to pay off your debts, look at ways of cutting your costs and increasing your income.
Learn more about dealing with debt problems and budgeting.
There are many ways to repay your debts
You can get free and independent debt advice online and face-to-face to help.
This includes advice on what restrictions and responsibilities you have to agree to and how different repayment options affect things like:
- your credit rating
- your home, for example, if it is still at risk of being sold to pay your debts
- what action your creditors can take to recover their money, for example, taking you to court to make you bankrupt
Informal arrangements
An informal arrangement is where you agree with your creditors to make regular payments towards your debts over a period.
Debt management companies
Debt management companies (DMCs) offer help if you're in debt. They usually only deal with non-priority debts.
They negotiate with your creditors on your behalf to reduce the payments you are making overall. You then make one payment to the DMC which distributes it to the creditors.
Most DMCs charge a fee, so you may have less money from your available income to pay your debts. However, organisations like StepChange Debt Charity offer free debt management plans.
Individual Voluntary Arrangements
Individual Voluntary Arrangements are formal agreements with your creditors to pay all or part of your debts over a period.
They must be set up by an authorised debt specialist and there are certain costs you need to pay.
Administration Orders
An Administration Order can help you deal with your debts if they are £5,000 or less and you can afford to make regular payments to your creditors.
You must apply for an administration order through your local county court and there are certain costs and conditions you need to meet.
Debt Relief Orders
A Debt Relief Order (DRO) provides relief from debt (depending on some exceptions).
A DRO lasts for 12 months, during which creditors named in it cannot take any action to recover their money without permission from the court.
At the end of the 12 months you will, provided your circumstances have not changed, be freed from all debts included in your DRO.
DROs do not involve the courts. They are made under a partnership between the Insolvency Service and skilled debt advisers, called approved intermediaries, who will help you apply to the Insolvency Service for a DRO.
Due to the restriction on the value of assets, the scheme is not suitable for homeowners. For more information about the process, visit the: Insolvency Service.
Bankruptcy
When you are made bankrupt, a person called a trustee is appointed to take control of your assets (belongings, home, spare income) and sell or use them to help pay your debts.
Your financial affairs will be investigated and you must agree to certain restrictions. For example, you can’t borrow more than £500 without telling the lender you are bankrupt.
Learn more about bankruptcy.
Fast-track Voluntary Arrangements
If you have been made bankrupt, a fast-track voluntary arrangement (FTVA) may be a way to cancel the bankruptcy and deal with your debts.
You must apply for an FTVA through an officer of the bankruptcy court called the Official Receiver and your creditors must agree to it. There are costs involved and conditions you need to meet. For example, you must have assets (property, shares) that are easy to sell.
Consolidating your debts
Consolidating debts is when you take out a single new loan to pay off several existing debts. You should get independent advice before taking out a loan and make sure it's the right way to deal with your debt problem.
Organisations offering help and advice
Advice NI offers free, confidential and impartial advice and information to help you manage your money and take back control of your finances.
StepChange Debt Charity also offers free and impartial help with debt problems.