If you’re struggling to deal with your debts, reducing the amount you owe make a big difference. Steps you can take to reduce or write off your total debt are sometimes known as ‘debt relief’.
There are two main ways to get debt relief - discretionary arrangements, which a creditor may agree to in some circ*mstances, and formal insolvency solutions.
Discretionary debt relief
Your creditors may agree to write offpart of your debt – or in some cases all of it – in the following circ*mstances:
- There’s no way you can realistically pay them anything
If you have no assets and no money left after your priority bills and living costs, and this is not going to change, a creditor may decide it’s not worthwhile chasing you for money you don’t have.
- Your situation means it’s not appropriate to keep pursuing the debt
Creditors may agree to write off a debt if continuing to collect it would have a detrimental effect on your mental or physical health. An example of this is if you have a terminal illness, as it may not be fair to keep asking for payments.
- You can pay them a lump sum
Sometimes creditors will agree to accept a percentage of the outstanding debt in one lump sum and then write off the remainder. This is often known as a full and final settlement.
None of these options are guaranteed and your creditors could still refuse. They might also want further information from you before making a decision.
If they agree to write off part or all of a debt this may have an effect on yourcredit fileand your ability to get future credit if your circ*mstances change.
Insolvency debt relief
There are several types of insolvency which offer guaranteed debt relief.
England, Wales and Northern Ireland
Scotland
- Sequestration, or Scottish bankruptcy
- Protected trust deed
- Minimal assets process (MAP) bankruptcy
Each of these insolvency solutions will write off part, or all of your debts. Once the solution is set up most creditors are bound by it so they can’t continue to pursue you directly. In some cases, you’ll need to make agreed payments for a fixed time, but these will be based on your ability to pay.
However, there are benefits and risks with all insolvency debt solutions, and they may not be suitable for your situation. All insolvency solutions have a serious impact on your credit file, you may lose any valuable assets, and in some cases your home or job could be at risk.
This means it’s important to get impartial and expert debt advice before considering insolvency. There may be better options available for you.
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How we can help you get debt relief
If you want to find out more about discretionary debt relief or insolvency, contact us.
We’ll help you prepare a budget and work out what options there are to deal with your debts. If that means insolvency or negotiating with creditors to write off debts is the best solution, we can help.
Use our online debt advice tool.
