In response to increasing levels of personal debt in the UK, the British government has put together a variety of programs to help individuals get out of debt relatively painlessly. There are three main government debt schemes: Individual voluntary agreements, debt relief orders, and protected trust deeds. The most common government debt scheme is the IVA, mostly because it is available anywhere in the United Kingdom.
Here is a breakdown of what these government debt schemes involve, and how they are designed to help individuals get out of debt.
Individual Voluntary Agreements
An Individual Voluntary Agreement is a type of agreement offered in the UK that is designed to help individuals get out of debt without going through bankruptcy. It is an arrangement designed to help you avoid bankruptcy by making a formal agreement with your creditors to pay off a percentage of your debts over a fixed period of time. It is prepared by a debt management company, approved by an official, and then submitted to your creditors.
Only 75% of your creditors, based on value, must agree to the IVA for it to take effect for all your creditors. So if you have one large debt and many smaller debts, it only takes the large creditor to be on board for the IVA to take effect.
Debt Relief Orders
Debt relief orders are designed for low income individuals with few assets to essentially declare bankruptcy without going through the process. This is a type of insolvency procedure that will eliminate your debts without having to personally go through the bankruptcy court process.
There are many hurdles to filing a debt relief order, and it requires a professional to help with the process. If you think you qualify, this could be a good alternative to bankruptcy.
Protected Trust Deeds
This is an alternative to bankruptcy only offered in Scotland. It essentially allows the individual to pay what they can afford to their debts. It is structured in a way similar to an IVA, except that it last for a specific period of time, and after that time, all remaining debts are discharged fully. Protected trust deeds do have to be reviewed by an official, but they can be a good way to get out of debt without bankruptcy as well.