Being in bad debt is an unfortunate position that many people find themselves in. With bad debt comes a feeling of hopelessness, worry and often despair. Many find themselves awake at night trying to figure out how to get out of debt, how they can meet repayments and how they can get back to some sort of financial freedom.
In short, the answer to whether you can write off debt is “yes”. But, it is a little more complicated than that. There are several routes to writing off your debt, and they will all depend upon your circumstances and your creditors.
How to Get Out of Debt WITHOUT a Debt Solution
In some (very rare) circumstances, you may be able to convince your creditors that the debt they are chasing is not worth their time. Of course, creditors are businesses, so they will exhaust all options to recoup the money owed to them before giving up and writing it off. But if you can prove that writing your debt off is in their best interest, they may agree. Typically, this only occurs with very small debts that are not worth the cost to the creditor to chase.
For example, if you do not own your home or have any assets, the creditor will have no real way of recovering the money owed. If you have a low income, are nearing retirement or have a long-term/terminal illness, they may realise that the cost of a collection agency and court costs will likely exceed the amount that they would receive from you and decide not to pursue it further. The National Debtline has a library of sample letters that will allow you to write to your creditors regarding your debts.
However, this can be a risky option because often a creditor will simply decide to stop chasing the debt as opposed to writing it off. This means that at any point, they have a right to begin pursuing repayment again and even begin further action. If your debt is joint with another individual, the creditor may agree to write off your portion but still pursue the other party for the debt in its entirety.
How to Get Out of Debt WITH a Debt Solution
There are several options for those who are struggling with debt and have little or no means of repayment. Which option is best for you depends upon your financial situation. Often, the best way to write off debt is with an insolvency solution. There are several insolvency debt solutions , dependant upon your location.
England, Wales and Northern Ireland:
What Is a Debt Relief Order and How Can It Help Me Write off Debt?
A Debt Relief Order (DRO) is a method of debt relief for those with relatively small debts, no assets and minimal disposable income each month. It is an alternative to bankruptcy and costs £90. You can include debts such as personal loans, credit cards, overdrafts and many more. A Debt Relief Order cannot write off debts such as student loans, court fees and fines, and child maintenance.
As with all insolvency solutions, it’s best to speak with an insolvency expert before beginning the process. You can call Debt Movement today, and one of our friendly team can help you find the best debt solution for you. To apply for a DRO, you must go through a licensed DRO adviser or an approved organisation. We understand debt, so our expert guides can talk you through the steps to help you decide whether a DRO is the right option for you.
Lasting for 12 months, a DRO can be revoked if your financial situation improves within this time, in which case you will have to repay the money owed. However, if the term is completed with no change to your financial situation, your debt will be written off.
What Is Bankruptcy and How Can It Help Me Write off Debt?
Bankruptcy is a legally binding debt solution for those whose debts cannot be repaid or resolved in any other way. If this is the case and your debts are more than £5,000, you can apply for bankruptcy via the government website. It is important though that you speak to a bankruptcy and insolvency expert before you apply, as bankruptcy is a relatively extreme solution that can put your assets at risk. There may be another insolvency solution that is right for you, request a free callback from Debt Movement to chat to one of our friendly and impartial guides to help you decide whether bankruptcy is the right option for you.
If bankruptcy is right for you, our team can help you understand the application process and what you will need to do. When you apply for bankruptcy and submit your forms, you will have to pay a fee of £130 as well as your bankruptcy deposit of £550. You will receive the details of everything you must do, your accounts will be frozen and you may have to make payments into your bankruptcy. Your trustee will inform you of any other action that needs to be taken, and which of your assets will need to be sold.
After 12 months, as long as you have fully cooperated with all requests from your trustee, you will be automatically discharged from your bankruptcy and all of your remaining debt will be written off. If you are making payments into your bankruptcy, they are likely to continue for three to four years . Your bankruptcy will remain on your credit report for six years, and if you are a homeowner, your home and assets may have been sold to release equity in order to pay back some or all of the owed money. For this reason, it is important that you consider all options and speak to a bankruptcy and insolvency expert before being declared bankrupt.
What Is an IVA and How Can It Help Me Write off Debt?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement that will allow you to pay off a percentage of your debt in affordable instalments calculated by your Insolvency Practitioner (IP). Once your IVA term is almost complete, if you are a homeowner and there is equity in your home, you may be asked to remortgage your property to release some equity and make a payment into your IVA.
Whilst in an IVA, your creditors will agree not to contact you, no further action will be taken to recover the debt, and all interest and charges will be frozen. Just one simple monthly payment into your IVA will be required.
Once you have completed your IVA term (usually five to six years), you will receive a certificate of completion and your debt will be written off. For many people suffering financially, an IVA can be a great way to write off their debts and get back in control of their finances.
Debt Movement have already helped over 35,000 people overcome their financial difficulties and get them on the road to being financially free. Our friendly and impartial guides will help you decide which plan is right for you. Just request a free callback and start your journey to financial freedom.