How To Write Off Debt?
Option 1: Bankruptcy
For a one-off fee of £680, you can declare yourself bankrupt.
Once you’re declared as bankrupt, an official receiver will assume control of your estate and your debt will be written off. This can help remove some of the financial pressures you’re facing, and is in many ways a ‘fresh start’.
Unfortunately, this will make it difficult to take out credit. Your home and some possessions may also have to be sold, and a notice of your bankruptcy will be made public.
Option 2: Debt Relief Order
A Debt Relief Order (DRO) is essentially a simpler version of bankruptcy. It’s designed for people who wish to write off debt but have a low income and relatively few assets to their name.
As such, to qualify for a DRO there are strict limits:
- assets that total no more than £1000 (this is £300 in Northern Ireland)
- a car that is worth no more than £1000
- less than £50 in disposable income, per month
- total debts that amount to £20,000 or less (this is £15,000 in Northern Ireland)
If you meet all of these criteria, a DRO can be declared and after one year, the debts that were originally listed in the DRO will be written off.
DROs can be a highly effective option for certain people. But what if you are able to make some repayments on your debts and also wish to protect your current assets?
While not possible with the first two options, this is something you can achieve with an Individual Voluntary Agreement (IVA). Here’s what you need to know…
Option 3: Individual Voluntary Agreement (IVA)
If you have over £5000 worth of unsecured debt (such as loan, credit cards, overdrafts, etc), you can consolidate all of these into one low monthly payment, which is based on what you can realistically afford. All while protecting your assets.
For many people, this is the most desirable option, and so is where we focus for the rest of this guide.
Is an IVA an Official Government Debt Help Scheme?We’re often asked if an IVA is a legitimate debt solution, or part of an official government debt scheme? The answer – yes! An IVA is a part of a government scheme to clear debt. It’s a formal alternative that is used to avoid bankruptcy and can result in your debts being written off. In fact, IVAs are becoming more and more popular in the UK, and for good reason. As well as protecting your assets, they’re also 100% confidential. But to make sure that you’re making the correct choice in exploring an IVA, we strongly suggest that you consult professional advice for information tailored specifically to your circumstances.
So How Does an IVA Work to Write Off Debt?An iva is presented to the creditors of the debtor via an Insolvency Practitioner, as a formal repayment proposal. Insolvency Practitioners are regulated by the Insolvency Practitioners Association (IPA). This iva is a contractual arrangement with creditors and can be flexible in the same way that an individual’s circumstances may be. As such, the base of an iva can be capital, third party payments, income, or any combination of these. You might be wondering what that actually means for you. We know that sometimes debt guidance can get a little heavy on the technical jargon. Fear not, we’re all about keeping things simple so you can fully understand your financial options. So here’s an outline of what you can expect if you choose to pursue an iva to write off debt:
The IVA Process
- your advisor will run through your income and expenditure
- your advisor will work out allowances for your general daily spending and money to cover your bills
- you agree to contribute your remaining money to the iva – this must be a minimum of £80 per month, for a period of 60 months
- your iva proposal is discussed at a creditors’ meeting and a vote is taken on its approval
- if at least 75% (in value) of the creditors vote to agree, the government will formalise the agreement and you will enter into an iva
- when the agreed terms are completed, the rest of your debt will be totally written off
- you officially become debt-free!
What About My Credit Rating?Debt it is completely removed from the record, from the date it was written off. On your credit history, it will show as paid/paid in full. If you have missed any payments on this debt, they will show on your credit file for six years.
Criteria, Advantages & Disadvantages of an IVA
Pros of an IVA:
- you can become completely debt-free
- get your debt written off
- your creditors will not be allowed to contact you
- one low payment
- protect your house and car
- no stigma of bankruptcy
- keep your pension
- all of your interest will stop
- no more charges
- no setup costs
Cons of an IVA:
- not everybody is eligible
- you will be asked to make a monthly payment
- you may have to release equity in your house
How to Choose an IVA Company to Write Off Debt
- charges no upfront fees
- scores highly on independent review sites
- offers low monthly payment rates
- is well established in the industry
- has a strong online presence
Why Speak With Us About Debt Write Off?
Many people struggling with debt say that it causes them significant distress and that they don’t know how to deal with their financial issues. In fact, 50% of people in debt have a mental health problem.
That’s why we’re here.
We can help you to make the best decisions for your personal circumstances and assist you in achieving debt write off as soon as possible.
How Can I Get Started With a Debt Write Off Plan?
Financial Advisor at IVA Advice
Frequently Asked Questions
Q. Can a debt be written off?
Debts can be written off formally through an Individual Voluntary Arrangement (IVA). This applies to people who have £5000 or more of unsecured debts: such as loans, credit cards, overdrafts, payday loans etc.
Q. Can I go to jail for debt?
It is unlikely that you will end up in jail for not paying your bills on time. It is more likely that your creditors will instruct bailiffs or debt collectors to try to reclaim the money.
Q. Can the Government write off my debt?
Debts can only be written off formally through either bankruptcy or insolvency.
Q. What happens if you write off debt?
When you write off debt it is completely removed from the record from the date it was written off. On your credit history, it will show as paid/paid in full. If you have missed any payments on this debt, they will also show on your credit file.