How Free Debt Help Has Created Debt Relief Options
You can get free and impartial debt advice by visiting Money Advice Service, an independent service set up by government. For information about dealing with your creditors in England and Wales published by The Insolvency Service please click here (link to money advice service)
- Important. An FAA cannot write off any debt, but may be able to freeze interest and charges. An IVA (Individual Voluntary Arrangement) may write off up 85% of your unsecured debts, however it is a form of insolvency. If you think an IVA may be suitable for you then one of our Debt Clever advisors may be able to prepare and package one for you and arrange to pass your proposed IVA to a licensed Insolvency Practitioner, although we may retain fees for this service. For more information please click here (link to https://www.debtclever.co.uk/IVA/)
A Guide to Debt Settlement
If you are behind on bills, you may benefit from Debt Plan settlement. Settling debt may help you avoid bankruptcy and pay less than the balance due on some accounts. The key is to negotiate a settlement with bill collectors. If you don’t feel comfortable doing it yourself, you can hire a company.
How Debt Settlement Works
You will have to offer to pay lump sum. Most Debt Plan companies will not offer you a payment plan, if they haven’t been able to collect from you. The upside of the lump sum is that you likely will pay less than the total amount owed. You may even be able to pay a small fraction, even as little as 20 or 30 percent of the original debt. The company will want the lump sum payment within a few days, so when you set out to settle your debts work with one company at a time.
The lump sum method works only on unsecured debts or loans, ones that have no collateral. You will not be able to negotiate the loan for your home or car. If these loans aren’t paid, your collateral will be repossessed by the bank or lender.One downside of debt settlement is that your credit score will be negatively impacted and the credit report will list the debt as “settled.” However, settled debts listed on your credit report are better than a list of outstanding unpaid debt. For most, it is a better choice than bankruptcy.
Pros of Debt Settlement
Debt management plans in uk can allow you to eliminate your debt more quickly than paying off the full amounts as your finances allow. Negotiating debt payment is proactive, compared to doing nothing and letting the penalties and interest add up. Being able to pay at least some of your debt will give you a sense of pride, especially if you are upset about getting behind on your bills because of a change in financial circumstances.
Cons of Debt Settlement
As mentioned above, settlement will affect your credit score negatively, because the debts are not paid in full. Because settlement addresses only one debt at time, the collection calls from other companies will continue as you are struggling to save money for the next negotiation. Settlement is a slow process, especially when compared to a bankruptcy. Finally, the government taxes the amount of debt forgiven, so you will need to research how these settlements will affect your taxes.
Negotiating Debt Settlement Yourself
Begin the debt settlement negotiation by listing all the balances you owe and determine what you currently owe for each one. Next, save at least 50 percent of one debt’s balance. Then call the lender and begin with an offer smaller than your savings leaving yourself some room to negotiate. Once you have reached an agreement on a balance that will have the company consider the bill paid in full, ask them to send you a letter outlining the agreement. When you get the letter, make a copy of the check before sending it out. File the check and letter away to be kept indefinitely. These will be your evidence if the company ever tries to collect more money on this debt. When you have paid off one balance, repeat the process with the next company.