Debt Relief Order (DRO)
A DRO can be applicable on debts of £20,000 or less. In order to be able to qualify for a DRO, you must have little to no assets to your name. Furthermore, you must not have a disposable monthly income of any more than £50.
Homeowners cannot apply for a DRO.
You will need £90 to register an application for a DRO. If it gets approved, your debts will be written off within 12 months. Your creditors are not allowed to pursue you for your debts during these 12 months.
A DRO is a relatively low-cost debt solution compared to bankruptcy.
However, just like bankruptcy, it also has an extremely bad effect on your credit score.
Full and Final Settlement Offer
If you have a large lump sum of money, you may be able to use it to get a full and final settlement offer with your creditors.
This is typically used for unsecured personal debts such as credit cards, catalogues, etc.
This would mean that you would pay your creditors this lump sum of money and your creditors would agree to write off the remaining part of your debt.
You may get your creditors to agree to this if they feel that you won’t be able to make monthly payments towards your debt reliably.
They would rather have a lower amount all at once than have small, unreliable payments from you every month.
If you have an illness or a disability, there’s a chance you may be able to get some or all of your debts written off.
You’ll have to write to your creditors and provide them with proof of your health situation. All creditors, especially those regulated by the Financial Conduct Authority, are required to treat debtors with illnesses with compassion.
If you feel you are being treated unfairly, you can report your creditors to the FCA.
It’s likely that you may not be able to get approval to have your debts written off but at the very least, you may be able to secure a payment break or some sort of reduced payment plan with your creditor.
For more information on writing off debt due to illness, you can click here.
Depending on what type of plan you have on your student loan, you can get your student debts written off 25 or 30 years after they were first due.
Keep in mind that you are also never obligated to make payments towards your student debt if you are earning money that is below the stated income threshold.
For more information on student debt write off, you can click here.
How can I Tell Which Debt Solution would be Most Suitable for Me?
Deciding which debt solution would work best for you would involve sitting down and thoroughly assessing your financial situation.
There are a number of things you can look towards that can help you identify which debt solution would be right for you and which one would be absolutely wrong.
For example, if you have valuable assets such as a home or a successful business, you would not want to go for bankruptcy. You would want to go for a debt solution where your assets are protected such as an IVA.
If your conditions allow you to qualify for a DRO, you should definitely apply for that as it’s generally a less complicated debt solution but it has quite stringent criteria.
If you suffer from a physical or mental illness or a disability which prevents you from earning a steady income, you can use this to your advantage and get your debts written off.
If you’re confused about which debt solution would be most suitable for you, you should contact an independent charity such as Payplan to get free debt advice.
There are a number of ways and solutions that you can opt for in order to get your debts written off.
My final advice to you would be that no matter which solution you go for, always do your research to know what it takes for you to get approved for it.