Debt management options, whatever your circumstances

The phrase “crippling debt” sounds melodramatic, but when you are facing them, financial problems can be every bit as debilitating as a physical injury or illness. The stress and anxiety can also lead to both mental and physical health conditions.

Debt, crippling or otherwise, is an everyday part of life. Most of us have loans, mortgages, credit cards and so on, but very few of us are financial experts. When you look at it that way, it is hardly surprising that we run into trouble from time to time. If your central heating breaks down or your car develops a misfire, there are experts out there who can find a solution. If your finances run into trouble, exactly the same applies. Let’s run through some of the options that are on offer.

Debt management plans

A debt management plan is a formal agreement with your creditors on how you are going to repay the debt in a way that works given your financial situation. This might mean taking a payment holiday or agreeing on an amount that is lower than that stipulated in the original agreement.

The positive here is that creditors will usually be willing to agree to revised terms – they understand that it is impossible to get blood from a stone and will appreciate your proactive efforts to do what you can. The downside is that when multiple creditors are involved, it can get complicated.

Trust Deeds and Individual Voluntary Agreements (IVAs)

An IVA is a compromise agreement with a set end date in which a professional debt management agent consolidates all your debts, agrees a single payment that you can afford and then reaches agreements with each creditor as to what proportion of this payment they will receive. In Scotland, trust deeds from Credit Fix do materially the same thing.

An arrangement like this is a huge weight off your shoulders, as the phone calls and letters from your creditors will stop immediately, and you also have the comfort of knowing that at the end of the period (typically four years) all your debts will be gone.

The down side is that it does involve defaulting on your original credit agreements. A marker will be placed on your credit report, so taking out any new form of credit will be difficult – even a mobile phone contract. On the other hand, if your finances are already in a mess, the chances are your credit score has already taken a tumble. Better to grab the bull by the horns, get rid of the problem and set about rebuilding.


It is a scary sounding word, but if you do not have much in the way of assets and your unsecured debts run to more than £20,000, going bankrupt can be the smartest choice. You file your application, and if you are formally made bankrupt, your bank accounts are frozen and non-essential assets are sold off. The bankruptcy period lasts for a year, and during this time, you will have to get by on basic essentials. But after that time, your debts are wiped and you can start again.

Clearly, there are pros and cons to all these options. That’s why it is so important to get the right advice from an impartial professional. Whatever your circumstances, just remember that the sooner you act, the sooner you can move on with life.