The Money Advice Service is an impartial service set up by the Government to help people manage their money. To find out more about free debt advice, visit www.moneyadviceservice.org.uk/en/tools/debt-advice-locator

IVA

AVAILABLE IN ENGLAND, WALES OR NORTHERN IRELAND

✅ You may be able to write off unaffordable debt

✅ Repay the rest with a simple monthly payment plan

✅ No more nuisance calls or letters – payment demands are stopped

✅ Interest and charges are frozen

ADVANTAGES

✅ You will be debt free in 5 years

✅ Telephone calls and payment demands from creditors are stopped

✅ Interest and late payment charges frozen

✅ One single, monthly, affordable payment

✅ Fixed, legally binding agreement

✅ Protection from further court action

CONSIDERATIONS

No unsecured borrowing during the arrangement.

Less costly than bankruptcy

If you fail to maintain payments to your IVA, your creditors can add new interest and can pursue your bankruptcy

Your credit rating is affected

 

TRUST DEED

ONLY AVAILABLE IN SCOTLAND

A Trust Deed is a voluntary arrangement between you and your Trustee for the benefit of your creditors. You will agree on an affordable monthly contribution to repay part or all of your debt, usually over a period of 48 months.

✅ You may be able to write off up to 80% of your debt

✅ Interest and charges are frozen

✅ Consolidate your debts into one monthly affordable payment, usually over 48 months

✅ Stop letters and calls from creditors

ADVANTAGES

✅ Reduce your repayment to an affordable level, based on your income and expenditure.

✅ This will run for a fixed term, typically 48 payments

✅ A portion of your debts will be written off upon successful completion.

✅ No more threatening communication from creditors

✅ If you maintain monthly payments, this can be an alternative option to bankruptcy

CONSIDERATIONS

A Trust Deed may be recorded on your credit file

You should not obtain any new lines of credit while the Trust Deed is in place

If there is significant equity in your property, the term of your Trust Deed may be extended

Your creditors could object to your trust deed becoming ‘protected’ in the first few weeks, meaning they could still take further action against you

If you miss payments, you’re at risk of bankruptcy

 

DEBT ARRANGEMENT SCHEME

ONLY AVAILABLE IN SCOTLAND

✅ Stops creditors from taking legal action against you

✅ Your home is safe as long as you keep up with your mortgage or rent payments

✅ Monthly payments are based on what you can reasonably pay

ADVANTAGES

✅ A Government-supported scheme that allows residents to pay back their debts in full

✅ You pay a monthly payment, based on your income and expenditure

✅ Interest and charges are frozen. You will no longer negotiate with creditors

✅ Creditors will be unable to take legal action

CONSIDERATIONS

If you do not keep up with the payments the scheme will be cancelled

If you are only making a small monthly payment and have high debt level, it could take several years to clear your debts

All your debts are paid in full at the end of the agreed term

Your credit rating will be negatively impacted

 

DEBT MANAGEMENT PLAN

AVAILABLE UK-WIDE

A debt management plan is used when you can only afford to pay your creditors a small amount each month or you currently have debt problems but you will be able to make payments in a few months.

You will set up a plan with a company authorised by the Financial Conduct Authority (FCA)

ADVANTAGES

✅ The company negotiates with your creditors so you no longer need to

✅ A debt management plan demonstrates your willingness to tackle your debts

✅ Creditors may be willing to accept reduced payments from a third party

CONSIDERATIONS

Requires your creditors continued support, which can be withdrawn at anytime

Any creditor can still take legal action at any time, causing the plan to fail

A Debt Management Plan is not legally binding, so you don’t have legal protection

Lower, more affordable payments means that it takes longer to repay your debts

 

SEQUESTRATION

ONLY AVAILABLE IN SCOTLAND

You could be discharged from your debt within 12 months, as long as you co-operate fully with your Trustee

All unsecured debts are normally written off, although you may have to make contributions from your income for up to 48 months

ADVANTAGES

✅ Reasonably quick process

✅ Can often be discharged from insolvency in 12 months

✅ Debt forgiveness as all unpaid debts are written off

✅ Creditors can take no further action and the bankruptcy is legally binding on all creditors

✅ Payments from your income will be a maximum of 48 months

✅ If your income is low and assets minimal, you may qualify for a Minimal Asset Process (MAP) bankruptcy. This means you might not be required to pay anything into your bankruptcy other than the application fee and could be discharged within 6 months

CONSIDERATIONS

You could be barred from certain jobs such as Insolvency Practitioner or serving as a Company Director until you are discharged

Some creditors may ask about bankruptcy 6 years after it occurred

You could be made to sell your home or car to help pay off debts

It could damage your credit rating for up to 6 years

 

BANKRUPTCY

AVAILABLE IN ENGLAND, WALES OR NORTHERN IRELAND

A chance to start again and write off up to 100% of your debt

It’s usually quick – you can be discharged in 12 months and all your unpaid debts may be written off

Once your creditors know, they can’t continue to contact you over unpaid debt

ADVANTAGES

✅ You can be discharged from insolvency in 12 months

✅ Debt forgiveness as all unpaid debts are written off

✅ If your income is low and assets minimal, you may not be required to pay anything into your bankruptcy other than the application fee

CONSIDERATIONS

You will be barred from certain jobs such as Insolvency Practitioner or serving as a company director until you are discharged in 12 months

It damages your credit rating for up to 6 years

Your home, your car and other assets could be sold to pay off your debts

If you own a business, it might be closed down and all of your assets sold

LOANS

AVAILABLE UK-WIDE

An unsecured loan can be a method to ease the pressure on your finances by putting several more expensive debts into one payment, with lower payment levels. It’s most suited to relatively low levels of debt.

A secured loan is usually a loan of higher value which is secured by an asset, very often a home so that the lender has some security over the debt.

One fixed monthly repayment makes it easier to budget

It can be cheaper than a credit card – and you could borrow a higher amount to repay your other debts

The interest rate you pay is usually fixed (but not always)

ADVANTAGES

✅ You may be able to borrow more than with a credit card and the costs may be cheaper

✅ Your personal loan repayments may be fixed amounts

✅ That means you know your repayment amount is going to be the same every month, so it makes it easier to budget

✅ The interest rate you pay on a personal loan is also usually fixed (but not always)

CONSIDERATIONS

Personal loans have higher rates of interest than some other forms of borrowing, particularly if you want to borrow a smaller amount, such as £1,000. Because the interest rate may reduce the more you borrow, you may be tempted to take out a bigger loan than you need.

Older loans (taken out before 1st February 2011) normally have an early repayment charge if you want to pay off your loan. They can have higher rates of interest than some other types of borrowing, especially on a smaller amount such as £1,000.

Yearly repayment charges can apply if you want to clear your loan faster.