Can A Debt Relief Reduce My Debt?

If you’re barely coping up with your debt payments, reducing the amount you pay each month can make it affordable. Debt relief is a way or reducing of writing off the total amount you owe from your creditors.

There are two methods to secure a debt relief namely:

  • Discretionary Arrangements – is a means where creditors may accept the offer in some circumstances
  • Formal Insolvency – a debt solution that concerns insolvency measures to reduce or write off debts.

Discretionary Debt Relief

In some circumstances, your creditors may agree to write off your entire debt or mostly a part of it due to the following conditions:

  • You are incapable or unable to pay off the debt in anyways

This can occur when your income can barely satisfy your essential living costs, priority bills, other obligations, and you don’t have any assets that you can sell to cover debt payments. In this manner, your creditors may find it unworthy to chase you in recovering the debt since you cannot pay it from your income or either any assets that you possess to compensate the debt.

  • Your situation or condition implies a detrimental effect when debts are perused

If your creditors find out that you are critically vulnerable, they may write off your total debt upon knowing that it can drastically influence your physical and mental health. This usually happens when a debtor is suffering from terminal disease or illness.

  • You’re able to pay a lump sum towards your debt

Sometimes, your creditors will allow you to pay a part of your debt when you can offer a lump sum payment. This is referred to as a full and final settlement. When this happens, you’ll pay lesser than what you owe through a lump sum. Your creditors will then agree in writing off the remainder of your debt.

Moreover, discretionary arrangements is not an assurance since that your creditors are not legally obliged to accept your offer. This means, your creditors can either accept or reject your offer based on their discretion. In fact, they could consider further action if they want to compel you in paying your debt.

On the contrary, having them agreed to write off your total debt or part of it, will have an impact on your credit file. This will make it hard for you to obtain new credits or loan in the future.

Insolvency Debt Relief

Throughout the UK, many ways can guarantee debt relief, these are through the different types of insolvency.

The types of insolvency available for people in England, Wales, and Northern Ireland

For people in Scotland, the types of insolvencies are:

These insolvency solutions will write off your entire debts or part of it. Once any of these are in place, your creditors are obliged to comply on the terms stipulated. This means, your creditor won’t have the liberty to do what they can to purse debt payments directly. They’ll have to act according to what these insolvency solutions dictate.

Additionally, you have to make arrangements for payments at a fixed period which will depend on your circumstances. Though these debt relief guarantees to write off your debt or part of it, you must understand both its pros and cons.

Each of the debt solutions bears an impact on your credit record. It can also lead to losing your assets or valuable possession like your home or car. Besides, it might affect your career or can possibly jeopardize your job.

We Can Help with Debt Relief

We can give you more details on the different debt relief alternatives and insolvencies. You can use our debt advice tool for free or call us on  0800 193 1024. 

We have a team of experts that can help you with whatever your circumstances are. Dealing with your debt is something that can’t be fixed overnight, you need debt help and advice to get through the tough times. Act now and let us show you how we can help.

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