Essential Debt Consolidation Smartphone Apps

Debt counselors

Debt management companies can offer an excellent service for large amounts of out of control debt. If you are having difficulties keeping up with any repayments, then do seek advice from a debt counselor. They are professionals and know how the creditors work.

If you have your debt management plan accepted, a singular monthly payment is made to the debt management company, who in turn pay your respective creditors with monthly payments.

The monthly payments that the debt management company pays to the creditors, is negotiated on your behalf by the debt management counselor. Negotiations are all to do with the amount of debt you are in, amounts you can afford and the term you have left. Most creditors have different policies for handling situations like this. Depending on the creditor's terms and conditions and the counselor's negotiation skills, some credit agencies reduce and even freeze interest rates for the term of your loan, some companies extend the term interest-free with a lower monthly payment. It does depend on the creditors and their policies as to what deal you will receive.

A debt management program can take a long time to clear any outstanding debt. However, programs like this are often an excellent solution. Your debt is handled by professionals, this relieves the stress of debt and gives you peace of mind knowing you have professionals taking care of your debt.

There are a couple of things you need to be wary of. Some debt management companies require a monthly fee which can be quite costly. Others require a one-off start-up fee. It is best to look into the debt management company’s policies before committing to a debt management plan. Charity based companies are usually the best to offer a service for free. CCCS only uses the interest from your monthly payment to your creditors as payment.

Bankruptcy

When an individual is deemed bankrupt, it means the individual has become insolvent. Personal insolvencies in England and Wales are dealt with usually under the Insolvency Act 1986. When the court is satisfied that there is absolutely no hope of the debt being paid, a bankruptcy order is issued on the petition of the debtor (which is you) or one or more of your creditors who are owed 750 or more.

The official receiver investigates the financial affairs of the debtor for the period before bankruptcy and is appointed to act as the trustee from the date of the bankruptcy order until a trustee takes control.

Bankruptcy is by no means the best way of dealing with your debts. When an individual becomes bankrupt there are severe restrictions placed against a bankrupt person, for instance:

Acting as a director of a company, starting, managing or promoting a company without the consent of the court's

Continuing to run a business in a different name from that for which the bankruptcy was made without informing all associates doing business with you

Obtaining credit of 250 or more without disclosing to the creditor, your bankruptcy

Upon bankruptcy all banks will be informed of your insolvency, bank accounts will be closed, all future assets lost, and all hire purchase items will be returned. In effect, you will be left with nothing but the home you live in. However, you will be debt-free. Only as a last resort should you opt for bankruptcy. The ability to obtain a new bank account or any future credit will be considerably harder to achieve for a term of around 7 years.

Individual Voluntary Arrangements (IVA)

An Individual Voluntary Arrangement (IVA) is a legal process for UK residents with major debt problems. An IVA can be arranged with the help of professional insolvency practitioners.

An IVA can be effective at curing debt problems without many of the negative aspects that can be produced by bankruptcy. An IVA is an especially viable solution for those with equity to protect.

Depending on your circumstances, IVA’s can write off a high percentage of your debt. If you keep up the arranged monthly payments, you can be debt-free in as little as five years.

You the client agree to the details of an IVA with your creditors at a creditors' meeting. A 75% majority vote, in favor of an IVA is needed for an agreement.

With an IVA you can avoid any legal actions, freeze all interest charges, remove CCJ’s and design a program of manageable monthly payments based around what you can afford.

You also avoid the penalties associated with bankruptcy as mention earlier:

Acting as a director of a company, starting, managing or promoting a company without the consent of the court's

Continuing to run a business in a different name from that for which the bankruptcy was made without informing all associates doing business with you

Obtaining credit of 250 or more without disclosing to the creditor, your bankruptcy

However, IVAs are usually only suitable for those with unsecured debts of at least 20,000.

Although an IVA protects you from the stigma of bankruptcy, where all details are advertised publicly. If your application for IVA fails, you could still be made bankrupt. You will also be charged for the cost of the IVA; however, this would be added to the debts.