How To Get Out Of Debt: 10 Options To Consider

Embarking on a journey to eliminate debt can feel overwhelming. But with the right strategy and support, it’s entirely possible to regain financial freedom. Here are the top 10 ways to get out of debt in the UK, designed to empower you to take control of your finances. 

Free Debt Advice: Your First Step

Before diving into the various ways to get out of debt, seeking free debt advice is crucial. Knowledgeable debt advisers can provide guidance tailored to your personal situation, helping you make informed decisions that best serve your financial needs.

Did you know? Three-quarters of individuals who receive debt advice report feeling more in control of their finances afterward.

Free, quality debt advice can be found through various online resources, such as the MoneyHelper’s debt advice locator tool.

Debt Management Plan (DMP): Consolidate Your Payments

A Debt Management Plan (DMP) is a viable option if you’re dealing with non-priority debts like credit cards, overdrafts, or personal loans. This plan allows you to make one affordable monthly payment to a DMP provider, who will distribute the payment amongst your creditors to help you get out of debt.

Debt Relief Order (DRO): A Pause on Your Debts

A Debt Relief Order (DRO) could be an option if you’re on a low income with few assets. It freezes your debt for a year; the debt may be written off entirely if your circumstances don’t change.

Individual Voluntary Arrangement (IVA): Pay What You Can Afford

An Individual Voluntary Arrangement (IVA) is a formal debt solution that allows you to pay back what you can afford over a set period, typically five to six years. It’s a legally binding agreement, so be mindful of the penalties for cancelling.

Bankruptcy: A Last Resort

Bankruptcy is a severe form of debt relief that involves writing off debts that are permitted to be included in a bankruptcy order. However, if you have any assets, they could be used to pay off your debts.

Administration Order: For Small Judgement Debts

If you’ve had a county court judgement (CCJ) or a High Court judgement (HCJ) against you for debts under £5,000, you can set up an Administration Order. This order allows you to make one monthly payment to your local court, which will then distribute this amongst your creditors.

Debt Arrangement Scheme (DAS): A Scottish Solution

In Scotland, a Debt Payment Programme from the Debt Arrangement Scheme is a means to pay off debts in a manageable way. This government-run scheme allows you to pay off your debts through regular payments to a payment distributor, who then pays your creditors.

Offer in Full or Final Settlement: A One Time Offer

If you have a lump sum covering part of your debts, you could propose an offer in full or a final settlement to your creditors. They might agree to accept a part payment and write off the rest.

Writing Off Your Debts: In Extreme Circumstances

In exceptional cases where you have no income, savings, or assets and are unlikely to improve financially in the future, you can write off your debts. However, this should only be considered under the guidance of a free debt adviser.

Breathing Space: Time to Find a Solution

The ‘Breathing Space’ scheme provides temporary protection from creditors whilst you seek debt advice and explore your options. This scheme gives you the room to prioritise your financial well-being.

While getting out of debt can feel daunting, remember that you’re not alone. With the right plan in place and professional guidance, you can work towards becoming debt-free.

“Getting out of debt is not a sprint; it’s a marathon. But with determination and the right resources, you can cross the finish line.”

Remember to share this article with anyone who might benefit from it; together, we can tackle the burden of debt head-on.

This post is for informational purposes only and should not be taken as financial advice. Always consult with a financial advisor before making any significant financial decisions.