Being in debt can feel emotionally overwhelming. The stress of debt can lead to anxiety, depression, insomnia, and even suicidal thoughts. Debt can also affect your ability to focus, make decisions, and solve problems. What's more, the constant financial insecurity can take a toll on your self-esteem. In fact, research has shown that debt can have lasting negative effects on your mental health. If you're struggling to keep up with your payments, it's important to reach out for help.
There are a number of organisations that offer free or low-cost counselling services. These organisations can help you develop a plan to get out of debt and improve your financial wellbeing. There are also several helpful books and websites about managing debt. Don't try to handle everything on your own. Get help from professionals and take care of yourself emotionally and mentally as well as financially.
Popular debt solutions for personal debt
When it comes to debt, there are a lot of myths and misunderstandings out there. "You can just declare bankruptcy and start over." "Your credit score will never recover." "There's no way out!" But the truth is, there are plenty of options to help you get out of debt. The most important thing to do is reach out to a professional debt advisor.
They can help you create a customised plan based on your unique circumstances. Sometimes, all it takes is a small change in your budget to make a big difference. Other times, you may need to consider consolidation or even restructuring your debts. But no matter what, there is always a way out of debt. So if you're feeling overwhelmed, don't hesitate to seek professional help. It could be the first step on your journey to financial freedom.
Individual voluntary agreements
Individual voluntary agreements (IVAs) are a formal debt solution that can be used to write off some of your debts. An IVA is a legally binding agreement between you and your creditors and is often suggested when you seek debt advice and meet certain criteria. It will last for a set period of time – usually five or six years. At the end of this period, any outstanding debt is written off. An IVA is a serious debt solution and should only be considered if you're struggling to repay your debts in full. However, there are many benefits to entering into an IVA, including:
- A single monthly payment: One of the main benefits of an IVA is that it gives you the opportunity to make a single monthly payment towards your debts, rather than having to manage multiple payments. This can make budgeting much easier and help you to get on top of your finances.
- Reduced interest charges: Interest and other charges on your debts will usually be frozen when you enter into an IVA. This means that you'll only have to pay back what you actually owe, rather than owing more each month due to accumulating interest charges.
- Protection from creditors: Once you've entered into an IVA, your creditors are legally bound by the terms of the agreement and cannot reach out to you for higher repayments
Bankruptcy
Bankruptcy is a legal process that provides debt relief for individuals, businesses, and other entities. There are several benefits of bankruptcy, including the following:
- Bankruptcy can discharge certain types of debt, meaning the debtor is no longer obligated to repay the debt.
- Bankruptcy can provide a fresh start for the debtor by allowing them to reorganise their finances and repay their debts over time.
- Bankruptcy can stop creditors from taking collection actions against the debtor, such as wage garnishment or repossession.
- Bankruptcy can give the debtor protection from lawsuits filed by creditors.
While bankruptcy is not right for everyone, it can be a helpful tool for those who are struggling to repay their debts. If you are considering filing for bankruptcy, you should speak with an experienced bankruptcy advisor to discuss whether it is the right option for you. The sooner you do this the better, because it may mean you can avoid the more serious effects of bankruptcy by forming an administration order or another less formal arrangement with your creditors.
Resources:
- Apply for IVA - Caramella
- What Is an IVA - Odoo