For anybody struggling to repay debts, the idea of a debt write off is understandably appealing. Having your debts written off not only gets rid of problem debt, it also lightens the load on you financially – but how realistic is it?
In this guide we’ll explore the notion of a debt write off, including how it works, which debt solutions have the potential to write off your debts, and where to find them.
Can you really get debt written off?
Yes. If creditors don’t believe they will be successful in collecting your total debt, they may agree to write off a portion of it in return for partial repayment.It might sound too good to be true, but a debt write off is exactly what you think it is – a mechanism that allows you to write off some, or all, of your debts. It most commonly applies to unsecured debts (those not secured against an asset).
Debt write offs can come about in one of two ways. You might deal with your creditor directly and have them agree to write off a portion of your debts, usually because you have no realistic way of paying them back and it’s no longer worthwhile for them to chase you or send a debt collection agency to your home.
Or, you enter into a formal debt solution that includes some sort of debt write off. Debt solutions like Individual Voluntary Arrangements (IVAs) and Trust Deeds allow you to repay the debt you can afford through a series of monthly payments. Once your payment term finishes, any remaining debts are written off by creditors.
Whether or not you will be able to write off some or all of your unsecured debt depends on the severity of your financial situation.
To be accepted for a debt write off, either through a debt solution or a direct arrangement with creditors, you generally have to be able to prove that:
If this applies to you, you may be able to come to an arrangement with your creditors, or apply for a debt solution that includes a debt write off.
You should always seek professional debt advice before you do this, either from a money charity like Stepchange, an established money forum like the Money Advice Liaison Group, or a trustworthy debt management company.
It’s not uncommon that a creditor writes off a person’s debts
There are several debt solutions available in the UK that allow you to deal with outstanding debt at a rate you can afford, while writing off debts you can’t afford.
We’ve listed some of the most popular below.
The most popular solution in England, Wales, and Northern Ireland, and IVA allows you to make a monthly payment towards your debt based on your disposable income. At the end of your payment term, any remaining debt is written off by creditors.
IVAs are Government-backed and managed by an Insolvency Practitioner, a debt specialist licensed and authorised by the Insolvency Practitioners Association (IPA), so you know you’ll be in good hands.
This debt solution is essentially the Scottish version of an IVA, where you make monthly payments towards your debts based on your financial and personal circumstances and any remaining debts will be written off at the end.
It’s important to note that both Trust Deeds and IVAs are only suitable for unsecured debts. You won’t be able to have debts like mortgage arrears, child maintenance arrears, or court fines written off.
A DRO is often regarded as the best debt solution for people who have serious debts and very low income. A DRO will freeze your debts for 12 months, giving you time to improve your situation. If you still don’t have enough money after a year, a DRO will write off debt included in the arrangement.
Put simply, bankruptcy allows you to clear all your debts after one year (although you may have to contribute a monthly payment beyond that if you earn over a certain amount).
While that sounds positive, you will also have to turn over all your valuable assets, including your home and car. Bankruptcy also has a serious impact on your credit file, and so should only be considered in exceptional circumstances.
It was literally the best decision of my life, and it has actually changed my life, cheesy as that sounds, it has changed my life.
Paige , IVA Customer
It’s not uncommon that a creditor writes off a person’s debts, but they will expect you to prove that your personal life or financial situation prevents you from earning enough money to repay them.
They might consider it if one of the below scenarios applies to you.
If you’re on little or no income, it stands to reason that you can’t repay outstanding debts. That won’t guarantee you a debt write off, but it may help your case.
Mental health issues prevent many people from obtaining or keeping the jobs they need to repay what they owe. Creditors will likely be more considerate of your situation if you send them a debt and mental health evidence form (DMHEF), completed by a social worker.
Joint debts are any unsecured debts owed jointly by yourself and a partner, like a mortgage on a family home or a joint credit card held by a married couple.
Because they operate under the principle of strict and several liability, both parties are equally responsible for a joint debt – if one person can’t or won’t pay, creditors will expect the other person to repay 100% of the debt owed.
With that in mind, you may be able to write off a joint debt, but it will be more difficult. You will have to offer reasonable proof to creditors that both you and the cosigner have no realistic way of repaying within a reasonable timeframe.
It depends. If you have your debt written off entirely, it will usually be marked as ‘completed’, which should mean it won’t appear on your credit history.
If you come to some form of arrangement with your creditors that sees you pay less than the total amount you owe, whether that’s through a lump-sum payment or a debt solution which offers a debt write off, then your credit rating will be impacted.
In this scenario, your debt will be marked as ‘partially paid’, even though your creditors have consented to the arrangement. Any time you don’t repay the total amount you owe, it will be reflected in your credit score.
When you owe money to creditors, they often chase you for payments even when your financial circumstances mean that you just don’t have the money to repay them.
Sometimes it can be hard to make them understand this, but we can help. Your Debt Expert specialises in debt advice and debt solutions that allow you to write off unaffordable debt and gradually rebuild your credit file.
For friendly, free advice from an expert debt adviser, speak to Your Debt Expert today on 0800 082 8086.
Advice and support is also available at Money Helper.
*A debt write off amount of between 25% and 75% is realistic, however, the debt write off amount for each customer differs depending on their individual financial circumstances and is subject to the approval of their creditors. The example provided has been achieved by 10% of our IVA customers in the last 12 months.
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This website is in no way approved by the Government. The product (IVA) we administer through the group and process with our Insolvency Practitioners is covered under the following legislation: The Insolvency Act of 1986 (amended by the Insolvency Act 2000 and the Enterprise Act 2002) introduced a new procedure whereby a debtor could come to an arrangement with their creditors to pay their debts in full or in part over time as an alternative to bankruptcy. Our advisors will go through all your debt options including IVA (Individual Voluntary Arrangement) opportunities which are available for people living in England, Wales and Northern Ireland. Help can only be offered following an initial fact-finding process. An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Initial advice is free and there is no obligation to proceed into an arrangement. Arrangement fees will be clearly explained to you in writing by your advisor.