Is there such a thing as a debt write-off?
People struggling with debt may be thinking that there is no way out of their current situation, but there are actually multiple options for such people. Creditors want you to pay your debts, and it’s not their intention to keep you perpetually paying off interest payments and never making a dent on the actual debt.
This is simply your creditors way of making the best of a bad situation. You too, can make the best of this situation by exploring your debt solution options, and that is to be the topic of this article.
What is a debt write-off?
Debt write off does exist, and it can be enacted when you and your creditor reach an agreement whereby you pay off the majority of your debts and they write off the rest. Your debts can also be written off by other means, such as applying for bankruptcy or a debt relief order. Here are some of the debt solution options available to people in the UK:
This is a last resort for most people, as bankruptcy applications are costly, around £680, and the effects of the bankruptcy can also be costly. If you want to apply for bankruptcy, you can find more information here.
The process involves an adjudicator, who is a kind of insolvency expert, assessing your financial situation and deciding whether you can and should be made bankrupt. If you are accepted for bankruptcy, any debts and restrictions placed on you are typically lifted after 12 months, at which point any outstanding debts are written off.
It’s also possible to annul your bankruptcy and be discharged from it early. You can find more information on that here.
DRO (Debt Relief Order)
This debt solution is less severe than bankruptcy, though still considered an extreme measure, and is reserved for people who cannot pay their debts. These arrangements are ideal for people who have debts of less than £30,000, have no spare monthly income and who don’t own their own home.
This is easily the best debt solution option available if you are able to access one. IVAs can result in 90% of your debts being written off in some instances.
They 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.