How can I clear my debt without having to declare bankruptcy or enter an IVA?

Summary: This article is to give some ideas to those looking to reduce their debt burden before they find themselves insolvent and facing possible bankruptcy.

In the current economic climate, more and more people are struggling with debt and entering a debt solution, such as an Individual Voluntary Arrangement (IVA), in order to become debt free. But the best way to deal with debt is to address it before it becomes a problem.


The first, and arguably most important, step in dealing with debt is to set a budget. A full review of monthly income and monthly expenditure should be carried out. When looking at expenditure, it should include all essentials, such as rent or mortgage, bills, food and household items, minimum debt repayments etc. Anything that would be deemed non essential should be stopped, for example takeaways and/or eating out. Can the television package be temporarily reduced? Are the movie channels essential? A strict budget should then be introduced for weekly shopping and so on. Any income outside of this budget should be viewed as additional income to repay debt at a faster rate.

Understand the interest rates.

It is quite common for individuals to continue repaying debt without fully understanding how much it is costing. By understanding the interest added to debt each month, it can help formulate a repayment plan. As a general rule, the debt accruing the most interest should be focused on first. By reducing and clearing high interest debt as soon as possible, the overall cost will be minimised.

Take advantage of interest free balance transfers

It can be easy to forget about the interest added to credit cards and loans, but it can mount up to quite an amount over time. Furthermore, if £500 per month is being paid onto credit cards, which are accruing £100 per month in interest, only £400 per month is actually being cleared, this increasing the amount of debt and lengthening the time taken to repay it. By consolidating debt onto an credit card offering 0% interest on balance transfers, it could save hundreds of pounds and allow the debt to be cleared faster. An added benefit is only having to deal with one lender, and one monthly repayment.

For anyone how feels they are really struggling with their debt, or have found that monthly income is not enough to cover monthly expenditure and debt repayment, it is possible they are insolvent (income is not enough to cover essential expenditure). In which case it is vital they seek advice from a licensed money advisor as soon as possible.