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Are there any legal loopholes to get rid of debt?

Read any article on how to get out of debt, and the general essence will be "work hard and spend as little as possible" or "use our practical trick and write everything".

The last of these options seems too good to be true.

And the first seems, well … difficult.

When you consider the possibility that you will not be debt free for several years, the heavy work and the penny that extends in front of you are bleak.

That is why some people choose to bury their heads in the sand or look for these mystical debt killers who will reduce their balance from thousands of pounds to a few pounds a month.

Although they promise to cancel the debt, however, there is a feeling that the borrowed money cannot surely be canceled.

Companies are famous for displaying terms and conditions in lowercase sources or saying them once at the end of an ad. But if they say there are gaps, could they lie?



The answer to that is no, but with a lot of warnings.

These so-called "loopholes" that can help you cancel the debt only come into play in certain cases, usually when you cannot pay the lenders, or when the credit sold badly or there were other discrepancies.


Most companies that claim to be able to get rid of debt are actually announcing a VAT (Individual Voluntary Agreement) service.

An IVA is a legal agreement with your creditors that means that you are protected against further actions against you, and there are established guidelines for an affordable amount for you to pay, with some of the debts canceled.

Most debts can be included in an VAT, but some, such as mortgages, rental products and student loans, will not be included.

All of your creditors have to accept a VAT, which is usually the reason why companies or charities are hired. They can negotiate with their creditors to guarantee a favorable outcome (although they cannot force their creditors to accept VAT). )

Usually, you will pay more than 60 or 72 months and get a certificate at the end to show that your outstanding balance is paid.

When your agreement is being resolved, an affordable amount will be determined for you to pay each month, taking into account your living costs. If your creditors accept this, they will freeze the interest on your repayments and cancel any outstanding debt that exceeds this amount.



Some VAT companies claim that they can get rid of up to 90% of their debt. This is usually a rather extravagant statement, but it is possible. In general, you are more likely to see up to 60% of your canceled debt.

It seems like a dream, right?

There are disadvantages of a VAT. First, they are designed for people with larger debts (usually around £ 15,000 or more), so you cannot request to cancel the balance of £ 200 on your credit card.

It is not a miraculous solution, and it means that you will have to adjust to a strict budget for about five years to pay a portion of what you owe.

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On top of that, your credit rating will be adversely affected. This mark on your credit report will remain for six years after VAT begins, usually until one year after you have finished paying.

That does not mean that VAT is not a lifeline for several people. It is worth putting into perspective that it is not a magic wand to have canceled debts, but that it is designed for people with financial difficulties whose debts are unmanageable.


A debt relief order (DRO) can cancel the debt of people who have a small disposable income, few assets and a relatively low level of debt.

It is available to those who owe less than £ 20,000 in unsecured debt and do not own a house, and it costs £ 90, which is paid to the Insolvency Service.

It means you won't have to pay anything back for 12 months, and the lenders can't contact you. If your situation remains the same in terms of affordability to pay once the 12 months have elapsed, your debt will be canceled.


You will have to prove your income and expenses and you will have less than £ 50 a month after your living costs and less than £ 1,000 in assets.

Like an VAT, this will also affect your credit score for six years, so it is not a decision made without due care, despite the benefits.


Bankruptcy is technically a way to get rid of debt, but it is not a suitable option for several people.

It tends to be for people who have very serious debts that have no other way of changing their situation, and for people when the value of their unsecured debts is greater than the value of the valuables they possess (it sounds complicated because it is).

It means that virtually all of your debts are written, but, again, it is not so much as a legal loophole, but an agreement that subscribes that has consequences that allow for this cancellation.

Unlike an VAT, in which you pay a portion of your debt in an affordable way for you and can keep assets like a house, if you file for bankruptcy, you may have to sell your house, car and other assets.

Once you file bankruptcy, this will have serious long-term effects on your financial history. It will remain in your file for six years and can affect everything from your ability to get a checking account to whether you can get a mortgage later in life.


It is a complex process (and one for which you will have to pay fees). It is not something that should be taken lightly as a kind of escape, but it can be a new beginning for those who do not see the light at the end of their debt tunnel.

Where to go if you have debts

None of the options mentioned in this article is a unique solution for everyone, and you should seek debt advice before deciding on any of them.

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You can call the national debt line at 0808 808 4000.

Alternatively, StepChange and Citizens Advice Bureau provide free and impartial debt advice.

These are the best places you can go to get fair advice, instead of getting advice from a company that may try to sell you debt relief options that don't suit you.

Complain through the Financial Ombudsman Service

This method is not yet an escape, and is not yet a way to technically "get rid" of the debt.

However, it is a way to appeal if you feel that your lender acted irresponsibly in your dealings with them, and if you feel that the amount you paid was unfair or incorrect.

In general, you should start complaining to the company you borrowed from, and you should get advice from people like National Debtline (details above), especially if you are still making payments.

More money

Services like Resolve provide guidelines on how to file a complaint and who is eligible. Then, the company will analyze and decide if it is entitled to compensation or some other solution.

If the company says it does not have a claim or makes an offer it does not consider acceptable, it can take your case to the Financial Ombudsman Service, which will see if the lender acted properly and will make a decision from there.

Again, this is not a form of debt forgiveness, and not all loans will be considered in terms of complaints. However, it is a way to make borrowers accountable if they are not treated fairly.

More: lifestyle

Regardless of whether you are entitled to any form of debt relief, it will still require work, budget and possible consequences to become debt free.

There is no free lunch or a free loan.

However, what there is is a series of charities and advisory services that understand that you are human and want to help you get out of debt forever.

Debt month

This article is part of a month-long approach in November on debt.

It is a scary word, we know, but we hope that if we address this head on, we can reduce the embarrassment around monetary struggles and help everyone improve their understanding of their finances.

Throughout November we will publish first-person debt accounts, characteristics, tips and explanations. You can read everything from the month on the label of the month of debt.

If you have a story to share, a topic you want us to cover, or a question that needs an answer, contact [email protected]

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Source: https://metro.co.uk/2019/11/13/are-there-any-legal-loopholes-for-getting-rid-of-debt-11084849/

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