Is debt management better than insolvency?

When you`re looking for a debt solution, you`ll need to find the one that best suits your circumstances. Each one has advantages and disadvantages, and although some may look `better` than others at first glance, they all suit people in different circumstances - so it really comes down to what`s most appropriate for you.

A debt management plan is designed to help you repay your unsecured debts in full, but at a pace you can manage.

The various forms of insolvency can actually write off the debt that you can`t afford to repay - but they do come with other disadvantages.

When would debt management be a better option?

A debt management plan is not a formal arrangement - it involves talking to your unsecured lenders, asking them to accept reduced payments to make your unsecured debts affordable again. Your lenders don`t have to agree to this, but they may do so if they can see it`s the only realistic way for you to pay back everything you owe. They may well agree to freeze interest on your debt, but if they don`t, repaying it more slowly will mean it costs you more in the long run.

You`ll only be eligible for a debt management plan if you can`t afford your current debt repayments, but could still afford to pay everything back by making smaller payments over a longer period of time.

When would insolvency be a better option?

You can only become insolvent (e.g. through bankruptcy or an Individual Voluntary Arrangement, also known as an IVA) if you can`t afford to repay your debts in full.

So whereas a debt management plan is suitable for people who can afford to repay their debts in full over time, the various forms of insolvency are suitable for people who can`t - however, they may require you to release equity from your home (if you`re a homeowner) or even force the sale of your home.

It can be hard to tell which debt solutions might be suitable for you - which is one reason getting advice from an expert is so important. To speak to one of our advisers, fill in our simple call-back form and we`ll get back to you at a time that suits you.

Tags: debt, debt management, plan, debt management plan, insolvency, IVA

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