Credit Card Debt Written Off – Tips, Tricks, FAQs & More
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With so many Brits making use of credit cards, the number of people with credit card debt in the UK has only increased over the last few years.
I get a lot of questions about how one can get creditors to write off debt and whether it’s even possible to do so.
Today, we’ll explore this together and see under what situations can you have your debt written off.
Is it Possible to Have Debt Written Off?
It’s definitely possible but whether you’ll be able to get your creditors to write it off or not depends entirely on your situation. It also depends a lot on how you’re dealing with your creditors and what your relationship is like with them.
If you’ve been upfront and transparent about your financial situation with your creditors, they may be more likely to write off some or even all of your debt.
On the other hand, if you’ve been dishonest or dismissive when they’ve tried to contact you regarding your debts, there’s a high chance they won’t respond well to the idea of writing off your debts.
I say again: While it is possible to get creditors to write off your debt, it only occurs in rare cases and situations. For example, you may contract a terminal illness or you may be injured in a way that permanently causes you to be unable to work.
In cases like these, the probability of creditors writing off your debt is quite high. However, even in cases like these, your creditors may ask you for proof such as a medical report, etc.
Some creditors may also agree to write off your debts if:
- They feel that they will be unable to get regular repayments from you.
- They understand that you have little to no assets and very little income that could be used to pay off your debt.
- You are able to show them proof that it would be unfair for them to pursue you for your debt. For example, a medical report as I mentioned above.
As I mentioned earlier, it can be quite difficult to get your creditors to write off all or even some of your debt.
In most cases, a lot of creditors might agree to giving you some time to sort out your affairs until you’re in a better place to pay off your debts. This would mean that they wouldn’t contact you regarding your debt for a certain period of time.
How Does Writing Off My Debt Affect My Credit Score?
If you are able to get the debt on your credit card written off completely, it will typically be marked in your credit history as “paid”.
Most credit card companies are regulated by the Financial Conduct Authority and they enter all information about your conduct into your credit report.
If you happened to miss any monthly payments or were late in paying them or if your account had defaulted, all of such details will definitely be recorded in your credit file.
Details like this that negatively impact your credit score stay in your credit file for six years.
Sometimes creditors are willing to write off some of your debt if you are able to pay a certain lump sum of money to them immediately. This type of settlement is typically known as a full and final settlement offer.
In most cases, a lot creditors agree to this rather than writing off debts completely. If you happen to reach a full and final settlement with your creditor, this will typically be mentioned in your credit file as a partial payment.
Note that the mention of a partial payment also stays in your credit report for six years.
What are Some Formal Insolvency Solutions that can Help Me Write Off My Debt?
It can definitely be a good idea to consider these because unlike informal agreements between you and your creditors, these insolvency solutions are legally binding. This means that once your creditors agree to them, they can’t do anything else to get their money back from you.
Which insolvency solution you should go for as well as if you should go for any of them at all depends entirely on your situation.
If you’re confused between them and feel like you need help, I definitely suggest that you get free debt advice from a registered charity.
Definitely avoid private debt management companies that promise you they’ll help you write off your debts using loopholes. These are often shady scams and they may land you in legal trouble or in even more debt than you originally started with. Be especially wary about debt management companies that ask for upfront fees for their advice.
The great thing about getting debt advice from a registered charity is the fact that they do not charge you any fees. You can get free and high-quality debt advice from them any time you need help with your credit cards.
They will analyse your financial situation and tell you about options that you may have not even been aware of.
While insolvency solutions can be a great way to write off your debts, they also carry risks with them. For example, some of them have additional fees whereas others may cause you to lose some of your assets such as your car or even your house.
Here are some insolvency options available to you if you want write off some or, in some cases, all of your credit card debt:
Bankruptcy is an insolvency solution which completely writes off your credit card debt and offers you a clean slate to get started again.
While a bankruptcy definitely seems like an attractive option, it definitely has a lot of disadvantages that you need to be aware of.
None of your assets are protected in a bankruptcy. This means that any valuable assets you have may be seized from you in order to take care of your debt.
Furthermore, even in a bankruptcy, you may be required to make payments towards your debt for the next three years if you can afford to.
Your job may also be affected by you going bankrupt. Hence, there’s a definite chance you may lose your job if you decide to declare bankruptcy.
Bankruptcy also has a highly negative impact on your credit history and it stays within your credit report for six years.
I highly recommend you seek debt advice from a professional before you consider choosing bankruptcy as your insolvency solution.
Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement (IVA) is a formal and legally-binding agreement between you and your creditors which states that you will make payments towards your debt for a certain period of time. Typically, the duration of this is five years.
You will only pay what you are able to afford each month towards your debt. At the end of the agreed-upon duration, if you have been unable to pay off your debt completely, then the rest of the debt will be written off.
An IVA is a very attractive option for a lot of people in debt because it is quite flexible and unlike bankruptcy, your assets are protected.
Since an IVA is a legally binding agreement, your creditors cannot pursue you or threaten to make you bankrupt while the IVA is in place.
Furthermore, you will never be asked to pay any more than you can afford during the course of your IVA.
An IVA does have some setbacks though. One of them being that it lasts for a long time. For five whole years, you will be expected to make payments towards the debt each month. If you happen to miss too many payments or are late in paying them, your creditors could become dissatisfied and your IVA could fail.
There is also a chance that you may invest a lot of resources and money into making up an IVA proposal but your creditors might ultimately reject it.
You can seek debt advice from a professional about whether an IVA could be right for you or not.
For an IVA, you’ll need to find an Insolvency Practitioner who is the main individual that handles your IVA throughout its entire course. They deal with the creditors as well as you throughout its duration.
They also give you debt advice and help you make your initial IVA proposal.
Debt Relief Order (DRO)
A Debt Relief Order is a process through which you can write off the entirety of the debts you have.
However, there are very specific criteria in place for you to be eligible.
It only applies for debts that are under £30,000 and is only available to people living in England, Wales or Northern Ireland.
You cannot apply to it if you’re a homeowner and you will most likely be rejected for it if you have too many valuable assets in your name.
In short, a DRO is a formal debt solution that you can opt for if you have relatively less debt and you don’t have a lot of assets as well as a very low income.
You can seek debt advice from a debt management professional if you’re considering a DRO. Again, I would suggest that you seek advice from a debt management professional that works for an independent charity and not someone that works for a private company.
Debts on their credit cards is something that a lot of Brits in today’s day and age are struggling with.
Many of them feel trapped because they aren’t able to afford the repayments. However, you need to be aware of the fact that even if you can’t afford to pay back your debts, there are options available to you that you can utilise.
Before losing hope because of your overwhelming debts, definitely try doing some research as well as seeking advice from a professional. You may just find your path to financial freedom.