Alternatives to Bankruptcy

The most common fear that people who are struggling with debt have is that of bankruptcy and the negative consequences that go with it, such as the social stigma, or losing one’s assets. What many people do not realise is that there are alternatives to bankruptcy that can halt the progress of spiralling debt before it gets to that stage.

Your first lot of options are informal arrangements. These can include consolidation loans to make your existing debts easier to manage, or hardship arrangements with your individual creditors. To enter into a hardship arrangement you must apply with each of your creditors and outline your financial situation to them.

Debt Agreements and Personal Insolvency Agreements are essentially legally binding payment arrangements. They consist of a proposal that is put to your creditors in which you will pay a certain amount every week/fortnight/month for a set number of years (usually between 3 to 5). Out of this money that you pay into the arrangement, your creditors will each receive a return that is proportionate to the amount that they are owed. In the majority of cases this is less than 100% and the interest on the debt is frozen. Once you have completed your end of the agreement any remaining debt is legally written off. And whereas with an informal arrangement you must get the approval of each of your creditors individually, once a Debt Agreement or a Personal Insolvency Agreement is accepted by the majority of your creditors, they all become legally bound by it.

here are some differences between the two agreements which you can read about here. Though to ensure you have all of the important information, it is best to speak to a professional debt advisor. Here at Debt Free we are fully trained and licensed to offer both Debt Agreements and Personal Insolvency Agreements, and can give you clear and concise advice on which arrangement would be best suited to your particular circumstances