With recession biting really hard and no end in sight,  with unemployment on an ever upward tragectory,  is it suprising that for millions of people making ends meet  seems  not only difficult, but almost impossible.

Though the income may have reduced or completely stopped, expenses  seem to continuously spiral out of control. For some, this is the start of a vicious downward spiral. No matter how strict they are with their budgetting, their debt burden only seems to grow bigger and unsurmountable.  With all perceived options quickly running dry, some approch loan sharks for a quick fix solution. Only too late do they realise that these solutions infact create more problems than they solve – problems that could enslave them for a lifetime.

If you or someone you know is in this position, where their debt burden seems unsurmountable and ever growing, there may be a few options that may be worth considering.

PS: The below 3 options are listed here for the purpose of making you awareof these additional options that you may have. It is not a recommendation and you are advised to seek independent professional advice.


The 3 options are;

  1. Informal Agreement or ‘Debt Management Plan’
  2. Individual Voluntary Arrangements (IVA)
  3. Debt Relief Order or Filingf for Banckruptcy.


  1. Informal Agreement or ‘Debt Management Plan’ :  As the name suggests, this is an informal agreement between you and your creditor.  Provided both parties agree, a payment plan is put in place to reduce the monthly payments.



  1. This should not affect your credit rating as your name will not be entered into any Insolvency Register.
  2. This process affords you some time to sort out your finances and arrange the funds to either service the debts or to pay it off completely.



  1. These are unregulated arrangements and do not offer any protection against fraud.
  2. Compared to the other 2 options below, the informal agreement usually reduces the monthly payment by extending the duration of the credit term. This means that you may end up paying more over a longer duration.
  3. The plans that are usually put in place by the creditors never write off the debt completely.



  1. Individual Voluntary Arrangements (IVA):  Depending on your circumstances, IVAs may be a better option that the above mentioned Informal Agreement or Debt Management Plan.   IVAs are generally a 5 year arrangement with your creditors to pay what you can afford. Any debt that you have outstanding after this period is written off.  You can avail the IVA route provided the majority of your creditors (3 out of 4) agree. The others would have no choice but to agree to the terms of the repayment plan.



  1. There is a way of having your debts written off  at the end of the 5 year period.
  2. As a rule of thumb, for every £1 you owe, you will need to repay 40p.




  1. You may need to utilise any assests that you own – it could be your saving, investments and even your home.
  2. Your credit rating will be negatively impacted when you use an IVA as your name will appear on the Insolvency register.



  1. ‘Debt Relief Order’ or ‘Filing for Bankruptcy’:  Filing for bankruptcy is usually the last resort for many, when their debt situation is totally out of control.  There are some costs involved in terms of court fees, but once you are declared bankrupt, all your debts are effectively written off. The court will take the rightful possession of all your assets and use it to pay off your creditors.  Even so,



  1. All your debt will be written off
  2. You may be able to start all over again after 2 years.
  3. You will be allowed to retain a minimum living expense, your pension and use of a reasonably modest car.
  4. Your spouse or partner will be allowed to retain their share of the property if and when it is sold off.



  1. The courts take possession of all your assets
  2. For upto an year after being declared bancrupt, your creditors will be able to claim from any financial gain that you may have.
  3. For upto 2 years, you will not be able to be a director of any limited company
  4. Every time you apply for any credit, you may need to inform the lender that you were once declared bankrupt.