Managing debt is a challenge at the best of times and as the economic environment remains tough there is evidence that the growing personal bankruptcy rate is set to rise even further over the coming months. Therefore, as soon as debt issues start to take a grip it is essential that tough action is taken to get back in control since leaving things to themselves will only make matters worse and where bankruptcy becomes the only option.
Some have a natural gift for budgeting and know where every penny goes. Most, however, do not find this a natural talent and have to work hard to devise an accurate picture of where money is spent. But generating a budget of household spend will quickly identify where savings may be made and whether restructuring borrowings can ease the pressure on cashflow to help pay for soaring food and energy bills.
It may be that the core of the borrowings are on expensive credit or store cards or on relatively high monthly repayments for loans structured over short repayment periods. If this is the case then considering some form of debt consolidation may help generate some savings. Debt consolidation loans work by converting short term expensive debt into more affordable long term reduced payments.
Whist debt consolidation loans do not reduce the total amount of what is owed they do help make the borrowing more affordable. By taking out a new long term fixed rate loan it should be possible to achieve a lower monthly repayment than the aggregate of the debt to be settled. This generates some headroom in the budget allowing other costs to be met more easily. So whilst you may pay more in total terms under a debt consolidation arrangement, the net monthly payments in the immediate future help ease the strain considerably.
Bankruptcy is definitely the final solution when it comes to debt management plans. Fortunately, there are other less painful ways to manage debt issues before this has to be considered as a real option. Even if debt consolidation loans are not right for your situation there are other approaches that can ease the cashflow drain and help engineer a way back to financial health.
Any debt management plan should take a look at all the options available. Starting with a detailed budget it should be possible to identify both savings in household spend on discretionary items such as entertaining, clothes and club memberships through to debt consolidation options. But if there is simply too much debt for the income available even after considering these options then it may be necessary to look at an Individual Voluntary Arrangement (IVA).
IVA's are formalised debt management plans where a licensed insolvency practitioner works with you to identify how much can be afforded and then makes a proposal to lenders whereby they are asked to accept a reduced payment over a set period. If they accept then the structure is legally drawn up and approved and the plan managed by an insolvency agent to ensure that each lender gets what is agreed each month.
IVA's avoid the nasty side of bankruptcy such as repossession and sale of the family home. But the spectre still exists since if you fail to make the payments under the IVA as agreed lenders may still pursue you for the full amount of what is owed. That means that they may petition for your bankruptcy and seizure of assets including your home. Although much of the stigma of bankruptcy has declined over the years there are still long lasting effects that may restrict the type of work you can do and certainly your ability to borrow in the future.
Some have a natural gift for budgeting and know where every penny goes. Most, however, do not find this a natural talent and have to work hard to devise an accurate picture of where money is spent. But generating a budget of household spend will quickly identify where savings may be made and whether restructuring borrowings can ease the pressure on cashflow to help pay for soaring food and energy bills.
It may be that the core of the borrowings are on expensive credit or store cards or on relatively high monthly repayments for loans structured over short repayment periods. If this is the case then considering some form of debt consolidation may help generate some savings. Debt consolidation loans work by converting short term expensive debt into more affordable long term reduced payments.
Whist debt consolidation loans do not reduce the total amount of what is owed they do help make the borrowing more affordable. By taking out a new long term fixed rate loan it should be possible to achieve a lower monthly repayment than the aggregate of the debt to be settled. This generates some headroom in the budget allowing other costs to be met more easily. So whilst you may pay more in total terms under a debt consolidation arrangement, the net monthly payments in the immediate future help ease the strain considerably.
Bankruptcy is definitely the final solution when it comes to debt management plans. Fortunately, there are other less painful ways to manage debt issues before this has to be considered as a real option. Even if debt consolidation loans are not right for your situation there are other approaches that can ease the cashflow drain and help engineer a way back to financial health.
Any debt management plan should take a look at all the options available. Starting with a detailed budget it should be possible to identify both savings in household spend on discretionary items such as entertaining, clothes and club memberships through to debt consolidation options. But if there is simply too much debt for the income available even after considering these options then it may be necessary to look at an Individual Voluntary Arrangement (IVA).
IVA's are formalised debt management plans where a licensed insolvency practitioner works with you to identify how much can be afforded and then makes a proposal to lenders whereby they are asked to accept a reduced payment over a set period. If they accept then the structure is legally drawn up and approved and the plan managed by an insolvency agent to ensure that each lender gets what is agreed each month.
IVA's avoid the nasty side of bankruptcy such as repossession and sale of the family home. But the spectre still exists since if you fail to make the payments under the IVA as agreed lenders may still pursue you for the full amount of what is owed. That means that they may petition for your bankruptcy and seizure of assets including your home. Although much of the stigma of bankruptcy has declined over the years there are still long lasting effects that may restrict the type of work you can do and certainly your ability to borrow in the future.
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