Other Solutions

• Debt Management
• Consolidation Loans & Refinancing
• Bankruptcy

Debt management involves companies negotiating with your creditors on your behalf, usually for a fee that you have to pay. The aim of a debt management company is to try to persuade creditors to agree to lower your repayments.

There are a number of potential drawbacks with using debt management companies: -

• You have no protection from your creditors who, under a debt management plan, will always retain the right to demand full payment of the debt and interest at any time, even if they agree to your proposal
• You will still have to pay off all your debts, often for longer periods thanks to rolled-up interest. This means you simply end up owing more and more
• With an informal debt management arrangement it is difficult to get your creditors to agree to write off your debt

In the event of X-debt identifying debt management as the most appropriate solution to your problems, we will help you make sure your debts don't grow or get rolled up. We won’t charge you fees and your creditors will cover the costs of setting up the plan.

One route out of debt involves releasing equity in the home. Refinancing refers to consolidating debts by taking out a larger loan (usually over a longer repayment term and at a lower interest rate) to pay off smaller unsecured debts, such as credit cards, HP, loans etc.

Usually, a secured loan or remortgage is recommended where debt is relatively small and you have sufficient equity in your home. This equity can then be used to pay off all or part of your debt. If you remortgage and this leads to a lower monthly payment, you may also find the remaining debt is easier to budget for.

If your unsecured debts are more than £15,000, consolidation may not be advisable – because taking on more financial responsibility is likely to worsen your situation, particularly if the loan is secured on a property. An IVA may be the best choice in this case.

The X-debt best advice model will tell you whether or not consolidation is a good choice in your situation. If it is genuinely the best debt solution, X-debt will search the market on your behalf and at no cost to you and find a loan that meets your needs.

Bankruptcy is a last resort in cases of serious debt, and can be brought on by any creditor owed more than £750, or can be entered into by making a bankruptcy order yourself. Except for certain exemptions, bankruptcy involves your assets, including your home, being sold and the proceeds used to cover all or part of your debt.

The aim of bankruptcy is to completely wind up your financial affairs in order to realise the value in your assets, pay off as much of your debt as possible, and essentially ‘start again’.

Bankruptcy brings with it certain restrictions. Your situation is advertised in local newspapers, bank accounts and credit cards will be closed, in certain professions there is a risk of losing your job, and you will not be able to run a business or hold public office during the bankruptcy.

Providing you have not been made bankrupt before, your bankruptcy will end (you will be ‘discharged’) after 12 months, after which you will be free from debt and no further action can be brought by your creditors, although you may still have to make payments from your income for a further 3 years.

X-debt’s best advice model will give you a fair assessment of the options open to you. There may be a better debt solution than bankruptcy – see how an IVA can help if you or your partner owe more than £15,000 and either of you are in regular employment.