Debt Settlement Vs Trust Deeds/ivas

Debt Settlement Vs Trust Deeds/ivas

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Take the subject of writing off debt. There are a few options open to you, such as debt settlement, and Trust Deeds / IVAs, but which you choose depends on how like to solve problems. In addition, all debt solutions have their pros and cons that can be more or less of an issue depending on your individual circumstances:

Problem solving style: fast and final
Debt solution: debt settlement

If you like to get to grips with a problem and solve it quickly, debt settlement is a good option for you. You ask your creditors if they will accept an up-front lump sum payment as a debt settlement to release you from your obligation to pay all of your debt back. Typically around 40p-70p in the pound is a good place to start with an offer.

But how do you raise the money for a debt settlement because this type of offer involves finding some serious lump sums of money. You could sell your home, release some equity by remortgaging or sell some non-property assets. Your family may even be willing to make the lump sum payment in lieu of an inheritance or interest in a family owned asset.

If you have already defaulted on your payments to creditors, your offer of a debt settlement has an even greater chance of being accepted as lenders may be willing to grab what cash they can from you rather than risk getting much less or even nothing at all if you declare insolvency.

Pros

Your debt problems are over with in a matter of weeks, and you will have paid significantly less for your debt than you might have done otherwise. You can make debt settlements on any amount of debt. There are debt settlement companies who can take the burden of negotiation from you and sort everything out on your behalf.

Cons

You could end up having to start again without the security of assets behind you. If you have borrowed money from relatives you may feel awkward around them for a while. Some creditors can get nasty so you may need the help Debt Settlement company. Until the debt settlement is complete, interest and charges will still apply. Debt settlementhelp you change your spending habits.

Problem solving style: slow and steady
Debt solution: Trust Deeds / IVAs

If you like to solve problems slowly and methodically or want to keep some of the assets you have built up throughout your life, then Trust Deeds / IVAs may be better options than debt settlement.

Trust Deeds / IVAs run for three and five years respectively, and they allow you to make an affordable monthly payment to your creditors, with any debt remaining being written off when they are finished. You have the help of a trustee throughout those years to guide and advise you, and you only pay back what you can afford once all your living expenses are taken into account.

Pros

Your agreement gives you the legal protection of a Trustee who will deal with your creditors. The interest and charges on your debt will be frozen. You will gain valuable new financial skills because of having to stick to a budget through the term of the agreement.

Cons

If you miss payments your agreement may fail and your creditors could apply for your bankruptcy. You have to stick to a budget for the term of the agreement and there is very little flexibility, although sometimes payment holidays can be arranged under special circumstances. It is down to Trustee discretion over what if any - assets are sold, so you may end up starting again if your Trustee decides that everything must go. However, you may not find this out until your have signed the Trust Deed / IVA agreement.

About the Author:
It may be that in order to resolve your debt problems you may have to bite the bullet and step out of your comfort zone in order to get free from debt. So if you believe slow and steady wins the race, i.e. a Trust Deed, it might transpire that under your circumstances a full and final debt settlement would stand you in better stead.



Article Originally Published On: http://www.articlesnatch.com


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