Write Off Debt and Other Financial Dreams …
Bad Debt Consolidation by splinder
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The term, ‘write off debt’ is used to refer to an arrangement between a debtor and his creditors wherein the creditors dismiss some percentage of the debt. This aids the debtor to get rid of the burden of debts easily. The situation of writing off debts occurs when the debtor in unable to pay the specified amount due to circumstances that are beyond control or due to financial strain. The amount of debt that is written off is registered by the creditor (whether individual or company) as lost income. Credit card companies generally hand over their accounts to collection agencies after observing a period 6 months of non-payment.[br]
Writing off debts may sound like an easy option but it must be considered as the last resort because it can adversely affect one’s credit report. If debt problems are going beyond your control, it is best to attempt Individual Voluntary Agreements or adhere to debt management plans in order to write off debt.
Write Off Debt: Debt Solutions
The following are the two strategies to write off debt:
Individual Voluntary Arrangement – An IVA is an agreement between the debtor and his creditors to write off debt. After entering this agreement if a creditor harasses the debtor for repayment, he may be sued by the court. There have been cases in which the debtor has received a write off up to 75% of the debt amount due to entering the IVA. However, the agreement requires a re-mortgage for 80% of the available equity to be taken out at the end of 4 years, based on affordability.
An IVA has several advantages over bankruptcy:
- An insolvent can maintain their professional occupation.
- The debtor receives no negative publicity.
- Individuals will not be subject to a Bankruptcy Restriction Order.[br]
Debt Management Plan – This debt solution allows a debtor to categorize all unsecured debts under one roof. This plan does not include:
- Mortgages
- secured loans
- taxes payable to the exchequer
- Child Support Agency payments
This plan helps to prevent creditor harassment. The monthly payments are as little as £100 and the management fees generally are 15% of the cumulative contributions.
Since a debtor can make adjustments to the plan in case the financial difficulties subside, a debt management plan is regarded as more flexible than an IVA.