Many people who are struggling with debt in the UK are unaware of the fact that a debt write off is a real concept. Debtors don’t aim to keep you in debt for extended periods of time, particularly debts that you have no realistic solution to.
This is why debt management solutions and debt write offs exist, because it’s better for all parties if debts are settled. Knowing whether or not you qualify for a debt write off and knowing about various debt management solutions can help you decide what to do.
In this article, we explore the criteria for debt write offs and debt management solutions.
Debt Relief Order (DRO)
This debt solution is designed for people who don’t own their own home, owe less than £30,000 and haven’t had a DRO in the last six years. Since 2009, people in England and Wales have been using this debt solution as an alternative to bankruptcy.
This option is almost always preferable to bankruptcy, as it’s cheaper, easier and quicker. Following a DRO, creditors cannot try and recover money from you without a court’s permission. After approximately a year, you’ll probably be relieved from your debts, meaning you don’t have to pay.
Here’s the criteria for applying for a DRO:
- Your debts don’t exceed £30,000
- You have less than £75 spare income each month
- You’ve been a resident of England or Wales in the last 3 years
- You have less than £2,000 in assets
- You haven’t had a DRO in the last 6 years
- You aren’t currently involved in bankruptcy or insolvency proceedings
Click here to apply for DRO on the government website.
Bankruptcy is a viable debt solution, but one that most people want to avoid. This is typically a last resort for people struggling with debt, as it can hugely impact your financial situation and your credit score.
After applying for a bankruptcy order an adjudicator will evaluate your situation and decide whether or not you should be made bankrupt.
Filing for bankruptcy costs £680 at the time of writing. There are various restrictions placed on you when you become bankrupt, most of which stay in place for 12 months and then they are typically removed and remaining debt is written off.
You can learn more about these restrictions and the process of applying for bankruptcy here.
Individual Voluntary Arrangement (IVA)
IVAs are one of the best options for heavily indebted people, as they can result in 90% of your debts being written off in some instances. IVAs enable you to consolidate all of your debts in one place and pay a single, manageable amount towards the balance once a month. These arrangements can last 5 or 6 years, and at the end of the agreement the outstanding debt is written off.
As long as you have at least £80 spare each month to contribute to your debts, and meet a few other criteria, you should be able to apply for IVA. Learn more about this debt solution here.