What steps can be taken to avoid bankruptcy?

If you’re struggling with debt, you probably feel overwhelmed by financial pressures – and confused by all the contradictory information you find on the internet! You may be worried that your only option is filing for bankruptcy – but rest assured that there are many other options to help you get out of the red.

Many people believe the myth that if you owe money that you can’t repay, you will immediately have to declare bankruptcy. But the reality is that there are many other steps you can take before your situation gets to this stage.

While bankruptcy might be the most appropriate course of action to take in some situations, it is not to be considered a blanket solution for all debt problems. An independent financial adviser can offer useful bankruptcy advice, as well as alternative methods for dealing with your debts.

Other options to consider include setting up a personal debt management plan with your creditors or an individual voluntary arrangement (IVA), which is also known as a trust deed in Scotland.

IVAs are a good option to consider if you are struggling with credit card debt, as they are typically used if you owe a combined debt of more than £15,000 to at least three creditors. Under the terms of your IVA your debts are consolidated into a manageable plan requiring monthly repayments. After the IVA is successfully completed – usually over a five-year period – your remaining debts are written off.

Alternatively, debt management plans can be agreed on an individual basis and act as an informal arrangement between you and your creditors. This involves setting up a realistic analysis of your financial position – comparing your income with how much money you owe and how much you pay in monthly living expenses. Once this information has been compiled, you or your adviser can propose a suitable arrangement to your creditors.

If you still feel you may require bankruptcy help, get in touch with an independent financial adviser. This individual can offer advice based on your unique situation and can let you know if a debt management plan, an IVA or bankruptcy is the right solution for you.

Source: myfinances.co.uk