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Your legal rights: Coping with many Debts

In this article, we will explore the ways of coping with several debts at once.
Administrative orders
In the event that you have a high court or CCJ against you and your total debts amount to no more than £5000, you can then apply for an “administration order,” which will allow the court to send payments to each of your creditors. You then make a single monthly payment to the court, which will then be split among your various creditors in any fashion that the court decides. Once the administration order has been put in to effect, the creditor is not allowed to take any action against you. They must also stop adding interest to your debt. The administration order can cover council tax, fines, and utilities bills.

Individual voluntary arrangement (IVA)
An Individual Voluntary Arrangement is a legal process that applies to those individuals with unsecured debts that they are unable to afford. It is a formal agreement among you and your creditors that enables you to pay them what you can afford, usually in a period that exceeds sixty months. After that period, the outstanding debt is then written off.

IVAs are very effective, in that they can help you reduce your debt by up to seventy percent. You only have to repay what is affordable after taking in to account your personal circumstances. What is more, within five years, you will be completely debt free. (This factor is, it must be said, dependant on approval of 75 percent of your creditors. It also requires that you maintain your payment schedule throughout the duration of the IVA.) IVAs also put an end to harassment from creditors and debt collectors, as they are not allowed to pursue you once an IVA has been put in place. IVAs help avoid bankruptcy, as your creditors are not allowed to bankrupt you as long as you continue to maintain your IVA payments. Finally, IVAs stop interests from gathering upon your debts.
Bankruptcy
After two or three years, bankruptcy releases you from your debts. Your finances will be officially investigated, and you will be held responsible for making reasonable payments towards your debts for the first two to three years, as long as you are able to do so.

This is not an easy option. Before declaring bankruptcy, you should get expert advice. Bankruptcy is not suitable for those who own their own homes, who have certain types of jobs, or have a lot of other assets.  Some types of debt will still have to be paid after bankruptcy is declared. These include magistrates’ fines, debts from fraud, maintenance for children and partners, and certain forms of student loans. You will also have to pay a lump sum fee in order to make yourself bankrupt.