The Scenario
Amy is single and works as a clothes designer for Primark. She is in debt from her student days where she managed to run up £12,300 on various credit cards, store cards and overdrafts. Amy is only on £16,500 per year and is struggling to pay her creditors as she is also living in London.
Amy only takes home £1,100 per month and £500 of that goes on rent! She is hopeful that her wage will start to increase as she has now had quite a lot of experience. After all her bills and essential payments, Amy thinks she has around £140 left to pay her creditors. She is determined to get rid of her debt now and has really cut down on the amount she goes out (she now only goes out 4 times a week!).
How we could help
Amy only really has three options left to her at the moment due to the level of debt and the amount she has left over:
- Debt Management Scheme - Amy has enough creditors, surplus and debt to qualify for a DMS. It looks like she may be getting a pay rise soon, which means that bankruptcy may not be suitable for her (although it is still an option)
- Consolidation Loan - This would amalgamate all her creditors together and could potentially save her money on interest charged. It would mean, however, that she would have less options in future (she will only have one creditor). This would not affect her credit rating.
- Bankruptcy - It is still an option, but if she genuinely believes that her pay is going to increase, it may not be the most sensible route.
Why not an IVA?
Sometimes an IVA is not even an option. In Amy's case there are two reasons why an IVA cannot be an option:
1. Her level of debt is too low (generally has to be over £15,000)
2. Her surplus is too low (needs to be at least £200 but does depend on the level of debt).
* Please note that all characters and scenarios described are fictional, and are purely for illustration purposes
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