Can Debt Be Written Off?

Advice On Getting Debts Written Off

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The Facts About Getting Debt Written Off

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About Getting Debt Written Off

This page is primarily aimed at UK residents, but I will also mention the options open to US residents. When debts mount up to the point at which they become totally unmanageable, it can become clear that there is no way you are ever going to repay the full amount that you owe. Most people reaching this serious stage realise that one of the options open to them is to declare bankruptcy and in effect start again. This is a serious step with lasting consequences, so it is worth considering the other options that are also designed to deal with very serious debt situations.

When the relationship between the size of your debt and your income reaches a certain stage, you can see that either you do not have enough money to make the payments due, or if the payments were brought down to what you could afford, it would take forever to clear the debts. This is the point at which something has to give and the best way to approach it is to look at ways to get as much of your debt written off as you can, making it more possible to repay the rest.

Mechanisms To Get Debts Written Off In The UK

The UK is fortunate in having a system introduced by the government in 1986 which allows people who are in serious debt to make payments towards their debts for fixed period of time and after that the rest of their debts are written off. This system is called an individual voluntary arrangement, or an IVA.

In certain circumstances an IVA can result in having as much as 70% of your debt written off. How it would work for each person depends on their own particular circumstances, including how much money they owe, how much income they have, etc. It is probably more usual to expect about half of your debts to be written off, but with serious debts this can represent many thousands of pounds.

Unlike a debt management plan, an IVA is a formal and legally binding agreement, so you can not just get out of it if you change your mind or come into a bit of money. The term of the IVA is usually five years, so you are agreeing to pay as much as you can towards your debts over that period. An affordable monthly payment will be agreed, but if your circumstances changed and you became better off, it would be expected that the situation would be reviewed and you could be asked to pay more.

One advantage over a debt management plan is that unwilling creditors can sometimes be compelled to join the scheme, even if they do not want to. As long as you have the agreement of the creditors for at least 75% of your debt, any remaining creditors have to join the IVA too.

An IVA will only be offered to you if your situation is serious enough. You must have unsecured debts of at least £15,000 to several different creditors. Unsecured debts are those which are not secured against some asset. Your mortgage for example is a secured type of loan as your house can be taken back if you do not keep up with payments. Mortgage arrears, therefore, cannot be included in an IVA.

You can find out more about individual voluntary arrangements on the main IVA page of this website, which also includes a list of some of the most reputable IVA Suppliers.

It is worth just clarifying the difference between an IVA and a debt management plan, which is the most widely used way to tackle debt in the UK and the US. With an IVA your creditors will almost certainly not be repaid the full amount they are owed, whereas with a debt management plan the aim is to find ways to pay back the debts in full, just in a more affordable way.

How To Get Debt Written Off In The US

While IVAs do not exist in the US, there is a well established system for getting large parts of your debts written off. The process of debt settlement is a widespread business with hundreds of specialist companies all over the US offering this service. Sometimes the same companies offer both debt management and debt settlement, but smaller companies often deal in either one or the other.

This is not a legally binding set structure like an IVA, so the results are not guaranteed. Having said that, some of the bigger companies will guarantee results and will only take a proportion of what they save you as their payment, which is why it is worth taking some care about choosing the right debt settlement company.

The way the process works is that you stop paying your creditors and put money aside each month into a separate fund, which is saved up ready to be used to make settlement payments to your creditors. Meanwhile, expert negotiators from the settlement company will attempt to reach agreements with your creditors to settle your debts for considerably less than the full amount. You can typically expect to get about half your debt written off, depending on your circumstances.

If you are considering debt settlement, you should take care to approach only reputable companies, and apply to a few before deciding which to go with. You can apply to as many as you like and take advantage of their free advice without committing yourself to anything.

You can find a list of some of the most reputable debt settlement companies (US Only) on the main Debt Settlement page of this site.

Get Debt Written Off Yourself

The other alternative (wherever you live) is to try to negotiate debt settlements with your creditors yourself. If your circumstances are appropriate, there is no reason why you should not be able to negotiate agreements with your creditors to settle your debts for less than the full amount, but your results are unlikely to be very spectacular without some form of help and advice.

You can find out more about this on the main page on How To Negotiate Debt on this site, which includes some recommended further reading for detailed step by step guidance.

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