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If you are struggling to keep up with your payments and are worried about falling deeper and deeper in debt, you may be worried that declaring bankruptcy is the only way to get out of the red. This is one of the biggest myths surrounding debt - and when you are overwhelmed by financial pressures and bombarded with misleading information on the internet, it can be difficult to know where to turn to for reliable advice. Fortunately, an independent financial adviser can provide you with plenty of alternatives to bankruptcy you may wish to consider - including information on debt management plans or individual voluntary arrangements (IVAs). Debt management plans are a good option to think about if you owe less than £15,000 and only need to make repayments to one or two creditors. This involves creating a detailed analysis of your current financial situation - including the total amount you owe, your monthly income and your living expenses - and using this information to draft a proposed repayment plan. Your financial adviser can help you with this and assist you in proposing the plan to your creditors. If they agree, you'll then have a straightforward system to help you get out of the red. Alternatively, for debts owed to more than three creditors or totalling more than £15,000, you may wish to consider an IVA. This type of arrangement, known as a trust deed in Scotland, is a formal agreement drawn up by you and your creditors with the assistance of an adviser. Under the terms of your arrangement, you'll make regular payments over a fixed period of time - usually five years - after which your remaining debts are written off. Bankruptcy is often a last-resort option, as it is a legally-binding arrangement that will affect your future credit rating. To determine whether this is the best solution for you, you will need to speak to a financial adviser who can also inform you of the benefits and consequences of bankruptcy. Experts can help you analyse your personal situation and evaluate which debt management solution is best for you. Whether you opt for an informal debt management plan, a formal IVA or the more drastic measure of bankruptcy, you're certain to feel much better once your debts are under control.
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