Write Off Debt

It’s an option that many people may look for and may seem ideal, but is being able to write off debt as simple as it may seem? There are options available that can help if your finances have become difficult to manage and you are unable to repay them, but not all are suitable for everyone. Like any agreement relating to finance, nothing is guaranteed. Here at Debt Consolidation Loans, we provide options to make repaying multiple debts more manageable and allow you to consolidate into one repayment each month.

To be able for you to stay fully informed on your options, below are some of the main details about the process of having bad debts written off. We want those in financial difficulties to be able to make a financially savvy choice for them based on the facts, helping them to get out of debt quicker and look forward to a brighter financial future.

A young couple sign an agreement for a debt relief order

Why debt consolidation?

  • Improve your monthly budget
    A debt consolidation loan will enable you to group all your existing borrowing and the monthly repayments are easier to manage.
  • Reduced overall repayments
    A debt consolidation loan could even save you money each month if the interest rate is less than the combined total interest of the previous loans.
  • Improved credit rating
    The simplicity of repaying a debt consolidation loan means that you are more likely to repay the debt on time every month. This will prove you to be a responsible borrower, which will have a positive effect on your credit score.

 

How Do I Write Off My Debt?

When talking about writing off debt, this refers to debt solutions that either fully settle your debts or have them partially written off. As you can imagine, this is usually a last resort for many people and creditors if they can’t recover the money owed and a borrower can no longer afford to maintain it. There usually needs to be a very good reason for wanting to write off debt and you would need to prove to your creditors why you would need to. As this can be difficult, this is where there are options to help you convince creditors this is the best option. These include in the UK:

  • Bankruptcy
  • Debt Relief Order (DRO)
  • Individual Voluntary Arrangement (IVA)

These options avoid the borrower having to negotiate directly with the creditor they want to write off debt with, which can be daunting to do, and you may not be fully informed on the legalities of doing so. Any of the above insolvency measures are a legally binding contract which means once agreed, creditors cannot do anything further to recover the funds from you. However, being able to legally write off debt does have disadvantages too.

What Happens After Having Bad Debts Written Off?

If your debts are written off, whilst this will leave you with nothing to owe your creditors, it will mean you:

  • Will have difficulty applying for credit again in future – sometimes for up to 6 years
  • Your credit rating will be negatively affected, and your credit report will be marked with the write off.
  • The written off debt will be marked as a default

There is also the possibility that your creditors do not agree to writing off the debt and instead may agree to a different solution. For example, they may agree to hold off any further action on the outstanding debt for a certain amount of time or stop contacting you. However, this doesn’t mean the debt has been settled and means the creditor may start pursuing the money again in future. If they agree to a partial write-off, this will mean that some of the balance is reduced, and you will agree to repay this for a limited amount of time.

Why debt consolidation?

  • Improve your monthly budget
    A debt consolidation loan will enable you to group all your existing borrowing and the monthly repayments are easier to manage.
  • Reduced overall repayments
    A debt consolidation loan could even save you money each month if the interest rate is less than the combined total interest of the previous loans.
  • Improved credit rating
    The simplicity of repaying a debt consolidation loan means that you are more likely to repay the debt on time every month. This will prove you to be a responsible borrower, which will have a positive effect on your credit score.

 

What Situations Can I Write Off My Debt?

Everyone’s situation can differ as to why they want to write off debt if they have bad credit, and the type of insolvency available will depend on this. Bankruptcy is usually used to write off any unsecured debts such as a credit card or loan, but your assets including any car or property may be used and sold to help pay them off. A DRO is sometimes agreed for those with smaller amounts of debt and who do not have any valuable assets to help reduce it. An IVA is a way to spread the cost of the debt over a number of years and at the end of the term, any unsecured debt remaining is written off. The risk with an IVA, however, is that your spending may be restricted throughout the duration of the term to ensure it is repaid on time and if you are a homeowner, you’ll need to re-mortgage.

Situations that creditors may consider in a write-off debt scenario include:

  • You have no savings or surplus income whilst renting a property, and no available assets
  • Long term illness or have a disability that means keeping a job is difficult
  • Only receiving benefit income and require a regular carer
  • You a pensioner or nearing retirement
  • Your financial situation is unlikely to improve and may worsen

In all scenarios, creditors will require proof of this for them to consider having bad debts written off.

Consolidating Your Debts

If your situation has not got to the point of no affordability, a debt consolidation loan can provide a way to organise your outstanding debts. Focusing on what you can afford to pay rather than a credit check, you can turn multiple creditors into just one and have a single manageable repayment to maintain instead. This is particularly helpful if you have many different repayment dates, and you are struggling to pay them all on time each month. Depending on the level of debt you have, a consolidation may even reduce the amount you have to pay each month, but this could mean taking longer to repay the debt.

If you want to find out more about debt management plans and how to consolidate if you are unsure how, please get in touch. We have helped many people find solutions to their debt problems by consolidating and taking back control of their finances. You can find out more about the eligibility requirements here. With any type of loan, you will need to ensure you have the affordability before proceeding to avoid any further financial difficulties.