If you can’t afford to pay back the money in instalments but can afford to pay it back as a lump sum, that’s something you should definitely consider.
Please be aware of the fact that the lump-sum you present to your creditor(s) does not even necessarily have to be the complete amount.
You might be able to get your creditor(s) to agree to write the remaining portion of your debt off.
Your creditor(s) would be willing to do this if they feel that you won’t be able to realistically pay back the debt if you do it through instalments.
On the other hand, if you can’t afford to pay anything at all to your creditor(s), then you may be able to get yourself a Debt Relief Order (DRO) or you could apply for bankruptcy.
Bankruptcy would involve all of your unsecured debt(s) such as credit cards, personal loans, etc. being written off.
Bankruptcy is extremely risky since none of your assets are protected. As a result of this, your home, vehicle and other valuable assets would be seized from you and sold off in order to pay for what you owe.
Please note that there are some debts that bankruptcy does not cover, for example, child maintenance fees.
A DRO is often called the shorter and cheaper alternative to bankruptcy. It’s aimed at individuals with low income and little to no assets.
If you get accepted for a DRO, your debt repayments get frozen for a year. After this year has ended, your financial circumstances are assessed.
If it’s concluded that you still can’t afford to pay back your debts, then they are written off.
Like all debt solutions, a DRO can cause people’s credit ratings to go down dramatically.
For more details on what to do when you can’t afford to pay, click here.