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Last Updated on August 1, 2019 by Marie Bautista
When you fall into debt, it can cause you to become stressed, anxious, and even depressed. This may cause you to simply ignore the bills and bury your head in the sand, but this is never a good idea. If you want to get out of debt, you need a plan, and you need to go through with it. While doing this, you need to make cutbacks and make adjustments to your budget to ensure that you don’t fall any further into debt. If you want to regain your financial fitness and get yourself out of debt, then you may want to consider one of these four ways.
Declaring yourself bankrupt is a very big step, so you need to have a serious think before making any decisions. When you apply for bankruptcy, you need to provide information on your debts, incomings, and outgoings. If you are accepted, then you are given a financial fresh start. This means that any assets that you may have will be taken off you to repay the debts you owe, and the remaining balance is wiped away.
Debt consolidation involves taking out a loan to pay off any existing debts, leaving you with just one large debt to pay. This could reduce the interest you have to pay, meaning that it slightly reduces your overall debt. However, debt consolidation loans can be tricky; You may not be eligible for the loan in the first place, and if you are you need to watch out for any hidden fees. Some people choose not to use this method at they view it as simply moving debt around. Visit debtrelief.xyz for more information on debt consolidation.
Debt Management Plan (DMP)
You can only use debt management plans on non-priority debts, like personal or payday loans, store cards, overdrafts, and money borrowed from friends and family. Priority debts, like court fines, property tax, and your mortgage or rent cannot be paid off with a debt management plan. A DMP allows you to pay off the non-priority debts at a rate at which you can afford. You pay the DMP provider a set amount each month, and they will contact and pay your lenders for you.
Individual Voluntary Arrangement (IVA)
An individual voluntary arrangement also allows you to pay back what you afford but can be used for your mortgage and property tax, unlike with debt management plans. An IVA will freeze these types of debts and will allow you to pay them back over a set period of time. Any money that you still owe after this period will be wiped away, and you won’t have to pay it. You need to prove that you have a regular income, as these plans tend to last up to five or six years. An IVA is legally binding, so once you and those whom you owe have signed it, neither party can back out.
There are several different ways to pay off your debt, so you need to do some research and ensure you think everything through before settling for any of them.