The short answer to write off unsecured debts is ‘yes,’ because there are certain debt solutions that include having some or all of your unsecured debts written off. These methods are commonly utilized by individuals who are unlikely to be able to pay their obligations in full within a reasonable amount of time.
For those who are struggling with unsecured debts, however, these debt options will not be ideal. The majority of these solutions have strict qualifying requirements; thus, depending on your personal and financial circumstances, you may or may not be eligible to utilize them.
Repaying all your debts in full is not always necessary, and there are several different sorts of debt relief. However, if you do choose to take advantage of one of these options, it’s important to understand the specific terms and conditions that may apply.
Anything to be aware of?
Take note that any type of debt solution that doesn’t involve repaying all debts fully is more likely to have a negative effect on your credit score, making it harder for you in the future to be approved for new lines of credit. Also, depending on the situation, your personal information may go public (e.g. Insolvency Register), and you might face limitations when trying to work in specific fields.
While the idea of writing off some or all of your debt might sound appealing, it may not be the best solution for you depending on your financial situation and future plans.
A quick summary
The following are the most typical UK debt solutions that could involve having some or all of your unsecured debts written off:
- Individual Voluntary Arrangement (IVA):This is a legal agreement between you and your creditors in which you agree to make one affordable monthly payment toward your unsecured debts over a set period of time (often 5 years). The remaining amount of your unsecured debt will be written off after you complete your arrangement. Find out more.
- Bankruptcy: If you are insolvent, meaning you cannot pay your debts, you may be able to declare bankruptcy. Bankruptcy usually lasts for one year and discharges most of your remaining debt; however, any extensive assets (including your home) will more than likely be sold in order to repay what is owed, and even after declaring bankruptcy you will encounter difficulties obtaining credit or working in specific professions.. Find out more.
- Debt Relief Order (DRO): This is a simplified version of bankruptcy that may be a suitable debt solution for you if your assets total less than £2,000, you have no more than £75 per month disposable income, and your debts total no more than £30,000. The debts mentioned in the DRO are settled (written off) after one year has passed since its declaration. Find out more.
Remember that each of the previously mentioned debt remedies has its own set of criteria for eligibility, and there are advantages and disadvantages with each. In addition to the above, there are also other debt solution options which ultimately involve repaying all your debts in full, including Debt Management Plans (DMP). The government has a page on debt solutions here
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