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Debt Solution FAQs: Answers to Common Questions and Concerns

Introduction: At SortMyCash, in partnership with Debt Guardians, we understand that navigating the world of debt solutions can be confusing and overwhelming. To help you better understand your options and address common concerns, we’ve compiled a list of frequently asked questions related to debt solutions. This valuable resource will provide quick answers and clarification on specific topics.

  1. What are the main types of debt solutions available in the UK?

There are several debt solutions available in the UK, including:

  • Individual Voluntary Arrangements (IVAs)
  • Debt Management Plans (DMPs)
  • Debt Relief Orders (DROs)
  • Bankruptcy
  • Consolidation Loans

Each solution has its advantages and drawbacks, depending on your specific financial situation. Consult a Debt Guardians expert adviser to discuss which option may be best for you.

  1. How do I know if I qualify for an IVA?

To qualify for an IVA, you typically need to have:

  • Unsecured debts of at least £6,000
  • A regular income with the ability to make monthly payments (usually a minimum of £100)
  • Debts owed to two or more creditors

  1. Will an IVA affect my credit rating?

Yes, an IVA will have a negative impact on your credit rating for six years from the start date. This may make it more difficult to obtain credit during this time. However, for many people struggling with unaffordable debt, the benefits of an IVA often outweigh the impact on their credit rating.

  1. What is a Debt Management Plan (DMP)?

A Debt Management Plan (DMP) is an informal agreement between you and your creditors to repay your debts over an extended period. Unlike an IVA, a DMP is not legally binding and can be more flexible in terms of payment adjustments.

  1. How does a Debt Relief Order (DRO) work?

A Debt Relief Order (DRO) is a debt solution designed for individuals with low income and few assets. If you qualify for a DRO, your debts will be frozen for 12 months, and if your financial situation doesn’t improve during that time, your debts may be written off.

  1. What is the difference between bankruptcy and an IVA?

Bankruptcy is a legal process that involves the complete write-off of your unsecured debts, while an IVA is a formal agreement to repay a portion of your debts over a set period (usually 5-6 years). Bankruptcy has more severe consequences for your credit rating and may affect your employment or ability to hold certain professional roles.

  1. Can I consolidate my debts with a loan?

Debt consolidation loans can be a viable option for some individuals. They involve taking out a new loan to pay off multiple existing debts, resulting in a single monthly payment with potentially lower interest. However, it’s crucial to carefully consider the terms and interest rate of a consolidation loan, as it may not always be the best solution.

8. Can creditors still contact me if I’m on a debt solution plan?

Once you enter a formal debt solution such as an IVA or DRO, your creditors should stop contacting you directly. Instead, they will communicate with your Insolvency Practitioner or Debt Guardians adviser. However, with informal debt solutions like DMPs, creditors may still contact you, though they’re often more willing to cooperate once they know you’re working on a plan.

  1. How long does it take to set up a debt solution?

The time it takes to set up a debt solution varies depending on the type of solution and your specific circumstances. Informal solutions like DMPs can be set up relatively quickly, while formal solutions like IVAs may take longer due to the involvement of an Insolvency Practitioner and creditor negotiations.

  1. Can I change my debt solution if my circumstances change?

Yes, if your financial situation changes, it’s possible to switch to a different debt solution or make adjustments to your existing plan. It’s essential to discuss any changes with a Debt Guardians expert adviser to determine the best course of action.

At SortMyCash, we’re committed to helping you find the right debt solution for your unique situation. In partnership with Debt Guardians, we offer professional advice and support throughout your journey to financial freedom. If you have more questions or need further assistance, fill in our simple online form to speak with a friendly, expert adviser today.

  1. How do I know which debt solution is right for me?

The best debt solution for you depends on your individual circumstances, such as your income, assets, and the amount of debt you owe. A professional adviser from Debt Guardians can help you evaluate your options and guide you towards the most suitable solution for your needs.

  1. What happens if I can’t make my debt solution payments?

If you’re struggling to make payments towards your debt solution, it’s important to contact your adviser at Debt Guardians as soon as possible. They will work with you to explore options for adjusting your payment plan or finding alternative solutions that better suit your current financial situation.

  1. Are there fees associated with debt solutions?

There may be fees associated with certain debt solutions, such as IVAs or DROs. These fees cover the costs of administering the solution and are usually included in your monthly payments. Before entering any debt solution, a Debt Guardians adviser will explain any associated fees, so you’re fully informed about the costs involved.

  1. Can I still use credit while on a debt solution plan?

Using credit while on a debt solution plan is generally discouraged, as it can hinder your progress towards becoming debt-free. However, the restrictions on credit use depend on the specific debt solution you’re enrolled in. Your adviser at Debt Guardians can provide more information on credit use and how it may impact your debt solution.

15. Will a debt solution affect my credit rating?

Yes, most debt solutions will have an impact on your credit rating. For example, an IVA or DRO will remain on your credit report for six years from the date it commences. This may make it more difficult to obtain credit in the future. However, it’s important to remember that struggling with unmanageable debt can also negatively affect your credit rating, and seeking help through a debt solution can be a necessary step towards rebuilding your financial health.

  1. What happens when my debt solution is completed?

Upon completion of your debt solution, any remaining unsecured debts included in the plan may be discharged, meaning you are no longer responsible for repaying them. However, the specifics depend on the type of debt solution you have chosen. It’s important to discuss the details of your plan with your Debt Guardians adviser to fully understand the outcome upon completion.

  1. Can I apply for a debt solution if I’m self-employed?

Yes, self-employed individuals can apply for debt solutions, though the options available may differ from those for employed individuals. Your Debt Guardians adviser will help you explore the most suitable debt solutions based on your unique financial situation and the nature of your self-employment.

  1. Can I include all types of debt in a debt solution?

Most debt solutions are designed to address unsecured debts, such as credit card debts, personal loans, and overdrafts. Secured debts, like mortgages and car loans, are generally not included in debt solutions. However, some debt solutions may help you manage your secured debts by freeing up more income to cover those payments. It’s essential to discuss your specific debts with a Debt Guardians adviser to determine which debt solution is best suited for your needs and which debts can be included.

  1. Can my partner and I apply for a joint debt solution?

While some debt solutions may allow joint applications, it’s important to consider your individual circumstances and the types of debts you share. A Debt Guardians adviser can help you determine whether a joint debt solution is appropriate and guide you through the process.

  1. How can I maintain financial stability after completing a debt solution?

Maintaining financial stability after completing a debt solution requires careful planning and budgeting. It’s important to establish healthy financial habits, such as building an emergency fund, managing your expenses, and saving for future goals. Additionally, seeking ongoing support and advice from Debt Guardians can help you stay on track and ensure a successful financial future.

We hope these FAQs have provided valuable insights into debt solutions and their implications. If you have any further questions or would like personalised advice, don’t hesitate to fill in our simple online form and get in touch with an expert adviser from Debt Guardians. Let SortMyCash and Debt Guardians help you regain control of your finances and work towards a debt-free future.

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