Options for grabbing control of your debt

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Being in debt is not the end of the world. Although large amounts of debt can make you feel as if you are no longer in control of your finances, there are options available to you that will help you to take back the reins, consolidate your debt and allow you to be free of the anxiety that can come with debt.

There are several different types of debt management, and finding the one that is appropriate for you will depend largely on the quantity of your debts and your current financial situation. The first is the least drastic and easiest to undertake: a debt management plan.

One of the chief advantages of a debt management plan is that it does not require any legal action to be taken and so is a much faster process than the two main alternatives. It simply involves you contacting a company who will then negotiate on your behalf. Because they will have an established reputation and a history of representing clients that are able to pay, these companies carry more weight and authority with the people you owe money than you, as an individual, will be able to.

With a debt management plan, the company you go through will negotiate to get the best deals on interest rates and anything else that might affect the amount you have to pay. You then give your money to the company each month, and they take care of sending it to the creditors. This not only gives you an easy and simple way of paying your debt, but also removes the need for you to go through the stressful ordeal of contacting all the individual companies yourself.

The next option is one that does have legal ramifications and can end up appearing on future credit statements. However, it also legally binds your creditors, and may be the best choice depending on the amount of debt that you owe. This is an individual voluntary agreement (or IVA). With an IVA, you will set it an agreement with your creditors that spells out a timetable for you to pay the debt back. This forms a legally binding contract, and so a majority of your creditors have to sign up to the document, ensuring that it is fair for all involved. As long as enough creditors sign up that the ‘yes’ votes amount to 75% of your debt, then the other parties are legally held to the agreement as well.

With both of the above options, your debt is paid via simple monthly payments. The third option is very different, and that is declaring bankruptcy. When you declare bankruptcy, you enter a legal process that aims to settle your debts as well as you are able. Any assets you have may be sold to pay back the debt, and you will be unable to do many things for a lengthy period afterwards, including borrow money or even having a bank account with an agreed overdraft. However, once you are declared bankrupt and have gone through the necessary legal processes, your debt is considered settled.

Which method you opt for depends on your circumstances and financial situation. It may seem like a complex decision and process, but there are companies that will help you and, at the end of it, you will be able to rest easy with the peace of mind that comes from knowing your debts are under control.

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