What is bad credit?
There are certain circumstances in which creditors may consider money owed to them to be ‘bad debt’. This normally means that the creditor has entered into a legal agreement with the person who owes them money, and they have agreed to write a portion of the debt off.
Bankruptcy and Individual Voluntary Arrangements (IVA) are types of legal agreements where debts are written off because the individual holding the debt can no longer afford to repay it.
Effects of bad debts
Although you may become free of unsecured debts, you will still face effects that could make it difficult for you to secure credit in the future. In both cases, your credit rating will be adversely affected in the medium to long term. IVA clients who are homeowners could be asked to release equity from their property in the 4th year of the agreement, whereas those filing for Bankruptcy may have to sell their property and assets to repay creditors.
Throughout our site you will see thorough information on the benefits and effects associated to Bankruptcy and Individual Voluntary Arrangements, however if you would like to speak with a member of our team, please don’t hesitate to contact us on 0800 096 1331.
Baines and Ernst Ltd