If you want to get out of debt, you’re bound to have a variety of debt solutions to consider, and it’s safe to say that you need to compare debt solutions to decide the best way out for you. When debts have you in a chokehold, it’s not always easy determining how to get out of debt or write off debt to gain back control of your finances. There’s no one size fits all solution to mounting debt, and advice on debts that suits one person may not be suitable for you. Everyone’s situation is different, and what might work for someone else could work out very differently for you, even if the cases seem similar.
When you compare debt solutions, it helps you decide what the best solution is for your situation. This guide will compare debt solutions and what they cover to help you make an informed decision. You’ll learn about different types of debt solutions, how they work, their pros and cons, costs, and application criteria below.
What They Cover
|ü Credit cards
ü Store Cards
ü Telephone Bills
ü Medical Expenses
ü Unsecured Personal Loans
ü Personal Lines Of Credit
ü Bank Overdrafts
|ü Less stress as it gets creditors off your back
ü Cancellation of all debt covered by the bankruptcy order
ü You get a fresh start after one year
ü You’re protected from creditors legal action
ü Additional penalties and costs are cancelled
|ü Your bankruptcy is published publicly
ü You can lose your home or car
ü Risk of unemployment in some industries
ü Bankruptcy remains on your credit record for up to six years
ü You get evicted by your landlord
ü Payday loans
ü Personal and catalogue loans
ü National insurance
ü Credit cards & store cards
ü Council tax
ü Unsecured debts
ü Utilities (gas, electric, water)
ü Family and friend debt
ü Hire purchase debt
ü Income tax
ü Joint debts
ü Tax credits
ü General bills
|ü Fixed monthly payments you can afford
ü You don’t lose your assets and property
ü Reduced monthly bills
ü You’ll get a fresh start in a set timeframe
ü Write off debt not cleared at the end of the IVA period
ü You can apply as an individual, couple, or business
ü Creditors can’t legally hassle you
|ü Details are published on the Individual Insolvency Register
ü It Will be part of your credit history for 6 years
ü Strict budgeting is required
ü You’d have to release your home equity
ü You face forced bankruptcy if you default
ü It may be challenging to get credit
ü You have to owe over £15,000 to apply
|ü Personal Lines of Credit
ü Bank overdrafts
ü Medical expenses
ü Personal loans (Unsecured)
ü Store cards/store accounts
ü Credit cards
ü Telephone bills
|ü Reduces your monthly expenses
ü You get fixed payments you can manage
ü Long repayment period (Chosen by you)
ü Effortless Approval
ü It gets creditors off your back
ü One simple debt instead of many
|ü You’ll be in debt for longer
ü May affect your credit score
ü Total debt may be more than the initial debt.
|ü Payday and personal loans (unsecured)
ü Bank overdraft facilities
ü Family and friends loans
ü Credit cards
ü Store account debt
|ü The provider negotiates and deals with creditors on your behalf
ü You can get a combined low-interest rate
ü You can cancel any time since it’s not legally binding
ü Higher chances of getting a good deal
ü Management fixed monthly repayments
|ü Some creditors may not freeze the interest and charges
ü Nothing stops creditors from pursuing you
ü It can negatively affect your credit if done poorly
ü Creditors can take legal action any time
ü Not all creditors will accept the plan
|ü Credit cards
ü Rental arrears
ü Conditional sale agreements
ü Income tax
ü Council tax
ü Benefits overpayments
ü Telephone bills
ü Hire purchase
ü Buy now pay later agreements
ü Bills for services like solicitors or vets
ü Family and friends debt
ü Debt incurred by the business
|ü Write off debt after 12 months
ü You’re protected from the legal actions of creditors
ü No court process
ü No repayments for 12 months
ü It’s a low-cost debt solution
ü You only pay for a DRO once
|ü Stays in credit record for six years
ü It can make it challenging to get credit
ü Goods from hire purchase debts have to be returned
ü It can negatively impact your tenancy
ü All power of attorneys you hold will end
ü You may lose your bank account
Debt Arrangement Scheme
|ü Council tax
ü Utility bills
ü Car hire purchases
ü Personal loans
ü Store cards
ü Household appliance finance
ü Credit cards
|ü You don’t have to sell your belongings
ü Protection from enforcement action
ü Debts and interest charges are suspended and cancelled
ü No restrictions on public office or specific jobs
ü You get to pay off your debt comfortably
|ü You may have to repay for a long time
ü Your credit rating will be affected
ü It may be challenging to get credit, and you’re limited on the amount
ü You still have to repay your debt in full
ü Your landlord can still evict you
|ü Credit cards
ü Store cards
ü Personal loans
ü Catalogue debts
ü Income tax arrears
|ü You won’t have to deal with creditors
ü Protection from enforcement actions
ü You don’t have to show that you’re insolvent
ü No risks to employment
ü You’re not barred from borrowing money
ü Write off debt after four years
|ü You have to make regular payments for at least four years
ü It remains on your credit history for six years
ü You may have to sell your assets
ü You can’t be a director in a company
ü You may be barred from running your business
ü Any new money or property can be claimed by the trustee
ü There’s a risk of forced bankruptcy
|ü Credit cards
ü Personal loans
ü Store accounts
ü Council tax
|ü Write off debt after the bankruptcy period
ü You don’t have to deal with creditors
ü You’re protected from enforcement actions
ü No payments unless you can afford them
|ü You may have to make repayments for up to 4 years
ü It stays on your credit record for six years
ü Your assets can be sold
ü Your employment opportunities are limited
ü You may lose your business
ü You must cooperate with the trustee
Debt solutions are not created equal, which is why it’s essential to compare debt solutions and choose carefully. This requires an understanding of the available debt solutions and what’s involved in each. The following section gives you an in-depth look at the different solutions available at Reform Debt Solutions in the United Kingdom.
One of your options for sorting out a debt problem is bankruptcy. Bankruptcy involves a legal proceeding for people or businesses unable to repay their outstanding debts. It can give you freedom from some of your debts while also allowing creditors to obtain some measure of repayment.
You can get to pay low instalment amounts until you’re finally free of the debt. Creditors can also receive at least a portion of the debt, depending on whether any assets can be liquidated. After the bankruptcy ends, you get a fresh start and won’t have to repay the debts covered.
The bankruptcy process commonly begins when you apply for bankruptcy as a debtor. However, if you owe someone else, like a creditor, at least £5,000 and you can’t pay back, then they can request a court to make you bankrupt. The best action to take in such a scenario is to work with debt management solutions professionals. They can give you expert advice to ensure you get a good deal and eliminate the need to face creditors personally.
Bankruptcy isn’t the right option for everyone. Before you apply, you need to determine whether it’s the right option for you. After you compare debt solutions and decided bankruptcy is the right option for you, you’ll need to pay a total fee of £680 for the bankruptcy application. The fee is non-refundable and can be paid in cash at a bank or in instalments online using a debit or credit card.
After submitting your application, you can get a bankruptcy order within 28 days. Remember, immediately your bankruptcy order is made, your bank and society accounts will be frozen. Your property and money will come under the control of the official receiver after several days. Therefore, it’s wise to withdraw enough money from your account to manage essential expenses and emergencies before submitting the application.
The official receiver will contact you within 2 weeks after the bankruptcy order has been made and call you for an interview to discuss the bankruptcy over the telephone. They may then distribute your property and money between your creditors or appoint a trustee who will do this. Your name will be added to the Individual Insolvency Register, which can be accessed by anyone.
|Less stress as it gets creditors off your back||Your bankruptcy is published publicly|
|Cancellation of all debt covered by the bankruptcy order||You can lose your home or car|
|You get a fresh start after one year||Risk of unemployment in some industries|
|You’re protected from creditors legal action||Bankruptcy remains on your credit record for up to six years|
|Additional penalties and costs are cancelled||You get evicted by your landlord|
|Bankruptcy Provider||Cost||Minimum Debt||Decision Time|
|The Insolvency Service||£680||None||28 days|
When you apply for bankruptcy on your own, you’ll have to pay £680, which covers:
You have the option to pay in instalments. However, you’ll have to complete the total amount before submitting your application. You can only pay in instalments as many times as you need if you pay online with a minimum payment of £5.
After your bankruptcy order has been made, any assets, property, and extra income you have become your ‘bankruptcy estate.’ A trustee from the Government will be appointed to oversee your bankruptcy estate. Costs you could be charged include:
The trustee will pay these costs from your estate and share the rest of the money left with your creditors. Remember, you only have to pay these fees if you have enough assets or money in your bankruptcy estate.
If you have any income like maintenance or wages that aren’t from benefits, you can be asked to make an income payments agreement (IPA). This only applies if you’re bankrupt and have over £20 of disposable income after you’ve paid your daily expenses and all bills in your household. With the bankruptcy order in place, you no longer have to pay most or all of your debts, meaning you may have more income than you need for daily living expenses. One aim of bankruptcy is for creditors to receive at least a part of the payment owed if possible.
If you don’t agree to the IPA and have over £20 of disposable income, the courts can be asked to make an income payments order (IPO) by your bankruptcy trustee. A portion of wages or salary would then be paid to the trustee. The official receiver will always consider what you think is necessary or reasonable spending for you and your family or circumstances.
Your bankruptcy application can be rejected if you don’t meet specific criteria. Criteria for suitability include:
There’s no minimum amount of debt you need to be eligible to apply. Visit our dedicated bankruptcy page here to learn more about bankruptcy.
You should also consider debt consolidation as you compare debt solutions. It involves bringing all your debts together if you have many different credit commitments you’re struggling to repay. Multiple debts are combined into a single loan, enabling you to make a single payment to a single creditor instead of paying several creditors every month. Debt consolidation offers you more favourable payment terms, including extended repayment periods, lower monthly payments, and lower interest rates.
In debt consolidation, you borrow enough money to repay all your current credit commitments and owe money to only one lender. You can get an unsecured or secured debt consolidation loan. The amount you borrow can be guaranteed against an asset, usually your home. All your debts are summed up before you acquire the loan to raise funds, and the insolvency provider can even talk to creditors to ask for debt reductions.
Once a final figure is obtained, an application is made for a debt consolidation loan. This will usually include the total value of the current outstanding debt plus the debt consolidation fees. After approval, the loan is paid out to your debt solution provider, who then makes payments to all your creditors. You’ll then only have to pay off one debt each month in a set schedule. This makes it easier to budget and significantly reduces the amount of interest you would have paid to multiple creditors.
Ensure you only work with trustworthy brokers who do their best to get the best deal for you. At Reform Debt Solutions, we’ll help you get only the most reputable brokers in the UK.
|Reduces your monthly expenses||You’ll be in debt for longer|
|You get fixed payments you can manage||May affect your credit score|
|Long repayment period (Chosen by you)||Total debt may be more than the initial debt.|
|Gets creditors off your back|
|One simple debt instead of many|
|Lender||Loan Amount||APR||Loan Term|
|Aspire Money||£500 – £25,000||30%||1-5 years|
|Freedom Finance||£1,000 – £25,000||6.8% (variable)||2-7 years|
|Accepty||£1,000 – £25,000||18.4%||1-5 years|
Secured and unsecured debt consolidation loans have different costs and consequences for defaulting. A secured debt consolidation loan works just like taking out a mortgage is sometimes referred to as a debt consolidation mortgage. If you miss payments or can’t pay back:
With an unsecured debt consolidation loan, you won’t have to give any asset as collateral for the loan. The interest rates can vary based on your credit history, and they may be higher if you have a poor credit history. Although your home may not be affected if you fail to make repayments, your credit history will.
For you to be eligible for a debt consolidation loan, the following criteria must be met:
To learn more about debts consolidation or to consolidate your debt, visit our dedicated page here.
An Individual voluntary arrangement should also be considered as you compare debt solutions. IVA debt help is a formal and legally binding agreement between you and your creditors to repay debts over some time. It’s a form of insolvency that is flexible to suit your needs based on your income, expenses, and situation. It can assist you if you find yourself over-indebted. It’s approved by the courts, meaning your creditors have to follow the set terms.
If you seek IVA debt help, it needs to be set up by a qualified person known as an insolvency practitioner who will deal with your creditors throughout the life of the IVA. A professional and knowledgeable approach is required in an individual voluntary arrangement because considerable negotiation with your creditors is necessary.
Your insolvency practitioner will contact the creditors, create the proposed agreements and forward them to all creditors. Liaisons will also be their responsibility until agreements are reached and even afterward. Insolvency practitioners also ensure that both ends of the deal are upheld throughout the IVAs lifetime, usually between 1 and 6 years.
You’ll work out a repayment plan with the insolvency practitioner if you decide to get an IVA. This can include a lump sum or monthly payment, or a combination of both. It’s usually based on an amount you can reasonably afford, and the creditors have to agree to it. Repayments are made directly to the insolvency practitioners, who will distribute the money among your creditors and keep some for the fees. If the repayments aren’t enough to cover the debt in full by the end of the IVA period, you won’t have to repay the rest.
|Fixed monthly payments you can afford||Details are published on the Individual Insolvency Register|
|You don’t lose your assets and property||It Will be part of your credit history for 6 years|
|Reduced monthly bills||Strict budgeting is required|
|You’ll get a fresh start in a set timeframe||You’d have to release your home equity|
|Write off debt not cleared at the end of the IVA period||You face forced bankruptcy if you default|
|You can apply as an individual, couple, or business||It may be challenging to get credit|
|Creditors can’t legally hassle you||You have to owe over £15,000 to apply|
|Insolvency Practitioner||Fees||Minimum Debt Amount||Duration|
|Accountant or Lawyer||£5,000 (varies)||£15,000||1 to 6 years|
An insolvency practitioner is the only one who can set up the IVA, and you’ll need to pay for the service. The fees can be high depending on the work involved, and there are no legal or professional guidelines on what you can be charged. However, most insolvency practitioners will charge you £5,000 on average. Some can ask you to pay in full before setting up the IVA, while others can make the fees part of the IVA to be deducted from your monthly repayments.
The insolvency practitioner can charge you for the different roles they cover, including:
To apply for an IVA, you have to meet the following criteria:
To learn more about how IVAs can help you visit our dedicated IVA page here.
A debt management plan is another option as you compare debt solutions. It involves an agreement between you and your creditors. You repay in one set monthly payment like in a debt consolidation instead of making various payments to creditors. Your existing debts are bundled for an affordable monthly repayment that is divided among your creditors.
Your debt management plan will be managed by a debt management provider who will deal with your creditors for you. They’ll work on your behalf to work out what you can afford to pay, undertake payment negotiations with creditors and distribute the payments to your creditors each month.
You need to ensure your debt is only written off after you’ve fully repaid all your debts. At Reform Debt Solutions, we’ll connect you with reputable debt management plan providers. They’ll assess your debts and consider your situation, including your current income, assets, and debt to income ratio, to determine if it’s right for you. They’ll then set up a suitable plan for you and set to work negotiating with your creditors.
Once the creditors agree with the plan, it will be forwarded to you for consideration and approval. Ensure you check the details and terms carefully to confirm that the plan puts you in a better financial position. The amount you repay each month will be influenced by the willingness of the creditors to negotiate and how fast you want to be free of debt. The duration of a debt management plan is usually between 3 and 5 years.
|The provider negotiates and deals with creditors on your behalf||Some creditors may not freeze the interest and charges|
|You can get a combined low-interest rate||Nothing stops creditors from pursuing you|
|You can cancel any time since it’s not legally binding||It can negatively affect your credit if done poorly|
|Higher chances of getting a good deal||Creditors can take legal action any time|
|Management fixed monthly repayments||Not all creditors will accept the plan|
|Creditors||Total Loan Amount||Monthly Repayment Before DMP||Monthly Repayment After DMP|
|Credit Card and Store Card||£4,000||£1,070||£300|
Most debt management plan providers charge a fee to cover the costs of their professional services. These include setting up meetings with creditors, negotiating terms and payment agreements, and working out suitable deals. The costs can also include set-up fees, deposits, or on-going fees. You should ensure you’re happy with all charges before you agree. Working with Reform Debt Solutions ensures you get the best deal possible.
You can apply for a debt management plan if you meet the following criteria:
As you compare debt solutions, you should also consider a debt relief order (DRO). A DRO is a personal debt solution within the United Kingdom’s statutory framework. It’s available to individuals who meet the specified criteria. A DRO can give you easy access to low-cost debt relief if you have no means to pay creditors and low levels of unmanageable debt.
With a debt relief order, your interest and debt repayments get frozen for 12 months. In this period, your situation is continually assessed. After the 12-month moratorium, if your financial situation hasn’t changed, the debts included in your DRO order are written off or discharged. You get a fresh start and no longer have to repay the included debts!
In case your circumstances change in 12 months, the DRO order can be cancelled or revoked. Such changes can include getting a pay rise, a better job, windfall, or property with a value of over £2,000. This means you’d have to start repaying your creditors. Additionally, if you obtained any of your debts through fraud, you’d have to start repaying them when the debt relief order period ends.
You have to apply for a debt relief order through an authorized debt advisor, and we can help you find one! During the DRO period, you’ll be restricted from acting as a director of any company or creating, managing, and promoting a company without court permission. You’ll also not be able to write cheques or borrow over £500 without disclosing your DRO status.
|Write off debt after 12 months||Stays in credit record for 6 years|
|You’re protected from the legal actions of creditors||It can make it challenging to get credit|
|No court process||Goods from hire purchase debts have to be returned|
|No repayments for 12 months||It can negatively impact your tenancy|
|It’s a low-cost debt solution||All power of attorneys you hold will end|
|You only pay for a DRO once||You may lose your bank account|
|DRO Provider||Cost||Maximum Debt||Decision Time|
|Insolvency Service||£90||£30,000||10 Working Days|
A debt relief order adviser cannot charge you for their time. However, you have to pay a non-refundable fee of £90 to the Insolvency Service to make an application. You must pay this amount in cash at a Payzone Outlet or Post Office. It can be paid in instalments or as a lump sum. You must ensure you’re eligible before you apply because you won’t get the money back even after rejection.
To apply for a debt relief order, ensure you meet the following criteria:
A debt arrangement scheme is a scheme you should consider as you compare debt solutions in Scotland. It was set up by the Scottish Government. It can help you pay back your debts in a manageable way without the threat of legal actions from people you owe money to, like creditors.
With a debt arrangement scheme, you can set up a debt payment programme (DPP) where you only make one regular payment which is then divided and sent to your creditors. A DPP can only be set up by an approved money adviser who will give you advice and make the application for you. You can apply for a DAS with any debt amount as an individual, with your civil partner, spouse, or cohabiting partner if you’re both liable for the debt.
A debt arrangement scheme allows you to repay your debts at an affordable rate, ensuring you’re left with enough money for living costs and household expenses. Your debts fees, charges, and interest are suspended during the DPP. It’s also legally binding, meaning your creditors can’t contact you or take any legal action against you. Once your DPP is over, your debt is repaid in total, and the outstanding charges, fees, or interest rates are cancelled or written off.
|You don’t have to sell your belongings||You may have to repay for a long time|
|Protection from enforcement action||Your credit rating will be affected|
|Debts and interest charges are suspended and cancelled||It may be challenging to get credit, and you’re limited on the amount|
|No restrictions on public office or specific jobs||You still have to repay your debt in full|
|You get to pay off your debt comfortably||Your landlord can still evict you|
|Money Adviser||Cost||Maximum Debt||Duration|
|Step Change||Free||None||Any reasonable amount of time|
Setting up a debt payment program under DAS is free of charge. Money advisers are not allowed to charge you anything for helping you to apply. You also don’t have to pay any administration fees for running the DPP. However, creditors are obligated to pay the fee. This is set in law at 22% of your payment.
The following criteria have to be met for you to apply for a DAS:
A trust deed is another debt solution you can consider as you compare debt solutions in Scotland. It involves a voluntary agreement between you and the people you owe money to. You agree to repay in regular amounts for a fixed timeframe. After the period, the rest of your debts are written off!
Under a trust deed, all your assets and belongings are passed over to a trustee who will look after your financial affairs. The goal of the trustee is to repay as much of the debt you owe as possible. This can mean selling off some of your assets to raise funds that can be used to repay creditors.
If most of your creditors are okay with the terms of the trust deed, it can become protected. This binds all the creditors and prevents them from taking any action against you to recover the debts. A trust deed is suitable for you if you have debts of over £5,000 and not enough cash flow to make repayments.
|You won’t have to deal with creditors||You have to make regular payments for at least four years|
|Protection from enforcement actions||It remains on your credit history for six years|
|You don’t have to show that you’re insolvent||You may have to sell your assets|
|No risks to employment||You can’t be a director in a company|
|You’re not barred from borrowing money||You may be barred from running your business|
|Write off debt after four years||Any new money or property can be claimed by the trustee|
|There’s a risk of forced bankruptcy|
|Trust Deed Provider||Condition||Minimum Debt||Duration|
|Insolvency Practitioner||At least 2 different debts||£5,000||4 years|
Insolvency practitioners will be the trustees for your trust deed, and they’ll charge you a fee to set up and run the trust deed. You should expect to be assigned a minimal, single, fixed, upfront fee plus a percentage of the assets gathered while running the trust deed. Insolvency practitioners are not allowed to charge you an hourly rate.
To be allowed to apply for a trust deed, you need to ensure that:
To learn more about trust deeds and how they can help you, visit our dedicated trust deed page here.
The final debt solution you should consider as you compare debt solutions in Scotland is sequestration. Sequestration refers to bankruptcy in Scotland. It’s a formal process where a court or the Accountant in Bankruptcy (AiB) declares you bankrupt because you can’t repay your debts.
You can apply for bankruptcy in Scotland if you’re unable to repay your debts. A trustee will be appointed to control all your finances, including your assets and belongings. If you owe your creditors at least £10,000, they can also apply to make you bankrupt, even against your will. The aim of the trustee is to pay as much money as possible to your creditors.
Sequestration is suitable if you have no money at all to repay creditors or have so little that it would take years for you to repay. The trustee will assess your expenditure and income to determine if you have any surplus income. If you do, you’ll be expected to make payments towards your debt, but you won’t have to pay anything if you don’t.
The equity of your house may be sold by the trustee, and if you’re self-employed, your business can be taken over, sold, or closed. At the end of the bankruptcy, most of your debts will be wiped, and you won’t have to pay them back.
|Write off debt after the bankruptcy period||You may have to make repayments for up to 4 years|
|You don’t have to deal with creditors||Stays on your credit record for 6 years|
|You’re protected from enforcement actions||Your assets can be sold|
|No payments unless you can afford them||Your employment opportunities are limited|
|You may lose your business|
|You must cooperate with the trustee|
|Accountant in Bankruptcy||£150 for a standard bankruptcy
£50 for the Minimal Assets Process
|6 – 12 months|
You’ll not have to pay a fee to be made bankrupt if you receive some benefits like tax credits, Support Allowance, Employment, or Universal Credit. However, if you don’t get such benefits, you’ll have to pay £150 for a standard bankruptcy or £50 for the Minimal Assets Process. The amount goes to the Accountant in Bankruptcy.
To be allowed to apply for sequestration, you need to fulfill the following criteria:
You can get in touch with us at Reform Debt Solutions for any questions you may have about IVA help. We can also connect you with the most appropriate adviser for a consultation.
No. At Reform Debt Solutions, you will not pay anything for debt advice. Feel free to contact us anytime for any inquiries you may have. We can help you find the most suitable solution for your needs at no extra cost.
Yes. You can find solutions for all kinds of debt at Reform Debt Solutions! You’ll get the opportunity to compare debt solutions of different varieties. These include individual voluntary arrangements, debt consolidations, relief orders, bankruptcy, debt management plans, trust deeds, and sequestrations.
A Minimal Assets Process (MAP) is a shorter form of bankruptcy you can apply for if you have no income, little assets, and debts of between £1,500 and £25,000.
Usually, you’ll be able to keep your car if it’s worth less than £3,000 and you need it for some reason like disability.
Under the standard type of bankruptcy, you’ll usually be discharged from being bankrupt after 12 months.
Yes. Purposefully omitting a debt is a criminal offence, and you can be prosecuted. Even if you forgot, you must inform the official receiver as soon as you realize the mistake.
The best solution will depend on the type of debts you have, the amount you can comfortably pay towards the obligations, and the total amount of debt.
Yes. All your assets have to be included for the trust deed to be protected. However, some essential items and your current income can be excluded.
Typically, you’ll be discharged from a trust deed after four years.