Debt Write Off – Trick or Treat?
We’ve all seen the adverts on TV that claim they can get your debts written off. Some people receive phone calls, others get letters or text messages from companies that claim they can write off debts – anything from 90% to 100% all due to new government legislation.
Just remember the old saying “if it looks too good to be true, it probably is”.
With an IVA you will usually agree to pay a fixed amount for 60 months, any equity in your property needs to be considered as you will need to look into re-mortgaging to release some of it. Modifications can be put forward and you could be required to make up to 72 monthly payments. Once you have successfully completed your IVA any unsecured debts, which are included in your IVA, will be written off.
With bankruptcy you risk losing any assets and could be required to pay an Income Payment Order for up to three years before being discharged from your debts. Depending on your circumstances, this can change.
Both are forms of insolvency and they should not be considered lightly as they can have serious consequences on your ability to obtain a mortgage, keep any assets or even obtain a bank account.
Comments 6
You don’t mention short settlements. When someone is in a debt management Plan, most creditors will write off 30%-50% of the debt if the customer can raise the balance as a lump sum. It can be done one debt at a time and repayment of the remaining debts will accelerate as each is settled.
Short settlements is an option, however I wouldn’t like to commit to what most creditors will do as it can vary from creditor to creditor and from case by case. Interesting point non the less.
I’ve been offered this so many times. I always tell them that my hubby and myself wouldn’t take it up (even if we could) because it would be unethical. We borrowed the money, we should pay it back.
One of them even called me a fool
Aileen. Presumably you can afford to pay it back? Even if it’s hard work.
I do applaud your outlook – but, for some, it’s impossible. The thing about both debt management plans and IVAs is they represent the debtor’s best efforts to repay as much as they can afford. They aren’t easy options. And people who sell them as such are wrong to do so. DMPs take ten years or more, IVAs usually five, sometimes six. And you repay using virtually all your income after basic costs have been allowed for.
It’s also unusual for someone who owes money they can’t repay to have got into that situation irresponsibly. In our experience, roughly eight out of ten people obtian credit confident they can repay and then face an unexpected financial shock, which means repayment, on the original terms, is beyond them.
Aileen, if it’s unethical to negotiate a short settlement, why do you not find it equally unethical to repay your debts at a reduced rate and with the interest frozen ? All debt solutions involve a concession being made by the creditor. If, in that context, the creditor prefers a short settlement to a drawn-out repayment programme delivering no interest isn’t it more ethical to do what they want if you can ?
I’m struggling to pay off my deb and will be paying until I’m about 72 (15 years), but I’ll carry on and at least try to pay back the amount I borrowed. If I take the ‘write off up to 90% option’ surely I’m just going to make it more expensive for everyone else. I don’t see myself as a single entity but part of a whole.
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