Debt management or debt consolidation can be defined as a process where your multiple high interest unsecured loans are merged to a lower rate secured plan. It also covers your credit card, store cards and overdraft debts too. Debt management plan makes your repayment of existing debt burden through a single monthly installment. The installment amount is prepared according to the loan you owe, your monthly income and expenditure. In a nut shell, your repayment capacity is given higher priority while estimating the monthly installment. Debt management plans come with secured debt consolidation loans and help a lot to improve your credit score.

Bankruptcy refers you the extreme financial instability while you are devoid of resources to get rid of your existing loans. Filing for bankruptcy helps you to get rid of overwhelming debts. Both individuals and organizations can opt for bankruptcy to make a fresh start. However, this is subject to some restrictions. Applying for bankruptcy ensures a fair sharing of your assets among your lenders. It is a legal binding process and only court of law declares you bankrupt after going through your bankruptcy plea. Your lenders can also file bankruptcy against you. To file such suit the lender needs to have at least £750 debt burden on you. An insolvency practitioner deals with your bankruptcy case and ensures that you remain debt free with in 12 months.

You can also take help of Individual Voluntary Agreement to get rid of mounting debt burden. This is a legal binding agreement where insolvency practitioner negotiates with your lenders to settle down an affordable monthly repayment plan. When 75% of your lenders agree to it IVA plea is filed at court. The tenure of this agreement is generally five years. During this period you need to stick to the monthly installment. After five years, you are declared debt free even if you have not repaid the entire amount. During IVA, lenders are debarred from repossessing your home. As your IVA petition is not publicized you enjoy the same credibility as before. Doctors, police officers, bankers and people serving in armed forces generally choose IVA for this purpose only. During the tenure of IVA you can raise fresh credit too.

Debt management is the process of unifying all your unsecured loan plans into one and repaying it at a lower rate of interest. Debt management includes debt consolidation loans, debt advice and negotiation. There are several agencies to help you in this regard. They offer you a secured loan to repay your high interest rate unsecured loan. The advantages of debt management and debt consolidation are lower interest rate and repayment to a single lender. It also helps you in increasing your credit score.

Bankruptcy is the extreme financial collapse. When you think that there is no way out to repay your debt burden you can file for bankruptcy. In terms of economics bankruptcy is defined as legally declared inability or impairment of ability of an individual organization to pay off the debt burden. In the year 2008, 67,428 cases of bankruptcy were filed in the UK. Bankruptcy offers you an opportunity to recoup and restructure your debt completely or partially according to tour income and repayment capacity. The agreement of bankruptcy is legal binding and every bit of it is publicized in the local newspapers. It helps you to avoid any sort of harassment by the lenders. The maximum tenure of bankruptcy in the UK is 12 months. UK bankruptcy law has changed in the year 200 and the changed law ensures occupation pension during the period

IVA or individual voluntary agreement is a legal binding arrangement to help borrowers in smooth repayment of the loan. It is done with the help of an insolvency prosecutor. He arranges a meeting of all your lenders and when 75% of them agree to the conditions of IVA, the arrangement comes into force. After it a suitable repayment plan is prepared keeping your income and repayment capacity in mind. There are several advantages of choosing IVA as a tool to get rid of debt burden. During IVA tenure your immovable properties like home are free from the risk of repossession. You are declared debt free even if you have completely repaid the loan amount during the IVA tenure. In this period you can raise fresh credit too. IVA unlike bankruptcy is not publicized. Hence there is no fear of publicity regarding your financial condition.

All the three ways explained above help a lot to make you debt free. Still, you need to adhere to a monthly budget and avoid unnecessary spending to get best results from these financial tools.