It’s never fun being in debt that you can’t pay back. However, for many people, this is the sad reality. In the UK, nearly 27 million people have debt (aside from a mortgage or student loan), with around 33% owing between £2,000 and £10,000. Clearly, it can be difficult to manage such debts as well as be able to afford to live. That’s why some people look at whether there are debt government schemes that can help. We take a look at what’s available, as well as some of the best options out there to help with debt.
What is government debt help?
You’ll often see a lot of debt management companies use terms such as ‘government debt help schemes.’ It’s a tricky phrase that may suggest the company offering the help is authorised by the government to do so. This isn’t the case, so you should be wary of such claims.
Of course, that doesn’t mean that there aren’t options available to you that can help. Similarly, there are companies out there, such as insolvency practitioners, that can help with your debt. Usually, what ‘government debt help’ means is that they use a legal framework that the UK government has introduced.
Is there government debt help schemes?
Again, this is a tricky question to answer. There are government schemes out there that can help with things that often drive people into debt. For example, you can get help paying your energy bills, with your childcare expenses, and buying your first home. However, there aren’t any debt government schemes out there.
That being said, there are certainly solutions and agreements that exist and have legal backing from the UK government. They’re not run by the government, but they are approved by them. Often, this means that there are certain stipulations surrounding who can claim it and in what circumstances.
The best debt government schemes:
So, now that we understand the term ‘debt government schemes’ in a bit more detail, it’s time to look at some of the best solutions out there. It’s important to note that these might not be the best choice for you. You should consult with an approved organisation to determine which option best suits your financial situation.
Individual voluntary arrangement
An IVA or individual voluntary arrangement allows you to write-off up to 90% of your debt. However, you need to be in a fairly desperate situation to take advantage of such an arrangement. Essentially, you need to have at least £15,000 in debt to be eligible, and owe that money to at least three creditors.
Once an IVA is in place, your creditors can’t keep chasing you about repayments. Instead, you agree a small monthly repayment over around 5-6 years. At the end of that period, you can write-off any debts that remain.
Debt relief order
A debt relief order is another useful debt government scheme. Essentially, it’s a formal arrangement lasting for a year. During this time, unless your finances improve, you don’t have to repay anything towards your debts. Your creditors can’t chase you during this time, and anything remaining at the end is written-off. However, a record of the order stays on your credit file for six years.
Debt management plan
A DMP is essentially an arrangement that can help you pay off non-priority debts at a rate you can afford. So, for things like credit cards and loans, you can make one small monthly repayment to a DMP provider, who uses that to pay off your creditors. With such a plan, many creditors will freeze interest and charges on your debt.
Bankruptcy is a daunting word, but in reality, it may be a worthwhile solution to your debt problems. It’s a form of insolvency that allows you to write-off debts you can’t pay and make a new start. Of course, there are plenty of downsides with this option, including the fact that your home or vehicle may be included in the insolvency.
Protected trust deed
For those living in Scotland, a protected trust deed can help you make smaller payments over a period of four years. Once you’re at the end of that period, any remaining unsecured debts will be written-off. It’s a similar solution to an IVA, but specifically a debt government scheme in Scotland.
Because of the coronavirus pandemic, many creditors are allowing you to take a repayment holiday. So for things like credit cards and mortgages that are taken out regularly, you can take a break in paying them. This doesn’t mean that you don’t have to repay what you owe, but it can give you some breathing space.
Can I write-off my debt?
One of the questions that are often asked alongside debt government scheme advice is whether you can write-off your debt. As we’ve explored, there are a few different methods that let you clear some or all of what you owe. However, these are usually only applied if there is very little chance of you repaying your debts.
That being said, it’s also worth exploring whether your debt is statute-barred. Essentially, this refers to whether or not the time limit on the debt has expired. Usually, this is six years, but there are plenty of stipulations that you must meet in order for your debt to be statute-barred.
Similarly, your creditor has to be able to prove that you owe the debt for them to enforce it. You should always ask for them to provide this proof.
Where can I get debt help?
If you’re struggling financially and aren’t sure where to turn, there are some really useful resources that you can use. Many of these are charities or organisations that offer specific, impartial, and free advice to those with money problems. You can find a list of useful contacts and resources below:
- StepChange. StepChange is a charity dedicated to helping those who are in debt. They have resources and information that can help.
- National Debtline. Another charity is National Debtline. Again, you can find some valuable information about managing your debt here.
- Citizens Advice. Citizens Advice helps with all kinds of issues, including those related to money and debt.