Commercial Feature

We all know times are tough. Figures recently released record a rise in unemployment to 2.5million, and with swingeing cuts in the public sector and private companies also looking to make savings on their wages bills, a decreasing number of us are fortunate enough to be in jobs that we can be sure are really secure. The result of all this – coupled with a higher cost of borrowing – can be a worrying level of debt. And even the most prudent among us can find that servicing such debt becomes unsustainable if circumstances such as redundancy should cause an unexpected fall in regular income.

So if your unsecured debts seem to be growing unmanageable, you’re not alone. You can find some useful guides and information on debt here. Among approaches that might be worth considering are the IVAs (Individual Voluntary Arrangements), Debt Management Plans and bankruptcy. All will have an impact on your credit rating, and have their each has its own advantages and disadvantages, which should be carefully considered.

A Debt Management Plan involves negotiating lower repayments on towards your unsecured debts, often through a trained advisor. It can help to get your affairs back in order – though as it will probably involve a lengthier repayment period, in the long term you may end up paying more.

An IVA usually lasts for five years, during which you will pay an agreed monthly sum. At the end of the five-year period, as long as you stick to your side of the agreement, you will be debt-free – any outstanding unsecured debt will be written off. But it’s important to note that your creditors are not obliged to agree to an IVA, and that they may demand that you release any equity in your property.

Bankruptcy is usually seen as the most drastic step, and will have a serious impact on your credit rating. Suitability will depend on your circumstances, but you should bear in mind that you may have to sell your assets and release the proceeds to repay your debts. Your bankruptcy will also be advertised in the press. You should, though, be able to see a definite end to your debt – what remains after the bankruptcy will be written off – so this can be a way to make a fresh start.

So if you’re in debt, there could be a range of options that might help you; but whichever path you choose, consider the pros and cons carefully before you take those first steps.