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Debt Myths: Common Misconceptions

Debt Myths: Common Misconceptions
"""There are numerous misconceptions about debt and the solutions to money problems. We have outlined five of the most prevalent misconceptions held by those in debt.

1. I can be imprisoned for being in

Thousands of individuals believe that being in debt will result in prison time if you default on your credit agreement. The reality is that you cannot be sent to prison for debt. If you disregard a court summons where you have been ordered to pay a debt, the court may punish you for disobeying a court order; however, you will not go to jail if you cannot afford to pay your credit card bill.

However, a default may appear on your credit report.

2. My residence will be removed from me

Your home cannot be repossessed simply because you are in debt. In the most extreme debt situations (bankruptcy, an individual voluntary arrangement, or a trust deed), you will only be required to relinquish the available equity in the property. If there is no equity in your property, the insolvency practitioner will not attempt to sell it.

If you have equity in the property but are unable to obtain the necessary funds (through family, friends, or a remortgage), you may be forced to sell the home. The misconception is that losing your home is an automatic process. If you and your companion share a home, then half of the equity would go toward the debt solution.

3. I can cancel my debt

In some debt solutions, you can write off a portion of your debt. These alternatives are referred to as Bankruptcy, Sequestration, IVA, and Trust Deed. The debt relief options in Scotland are a Trust Deed and Sequestration. In the remainder of the United Kingdom, the options are bankruptcy and an IVA.

You may be able to write off a portion of the money you borrowed, but it is a common misconception that the process is simple and open to everyone. These debt relief options are designated for individuals with the most severe debt problems, where it has become impossible to make even the minimum monthly payments on all debts.

These debt solutions come with a warning, as they can have a negative impact on your credit file and future ability to obtain credit.

4. My debt is my partner's debt

Some couples frequently believe that their partner shares responsibility for their debt. Money may be lent to you directly or to you and your partner jointly. If the debt is mutual, such as a mortgage loan, you are both equally responsible for its repayment. If you jointly borrowed $10,000 and one of you went insolvent, the other person would be responsible for the entire $10,000.

If the funds were withdrawn in your name alone, your partner would not be responsible for making repayments.

5. I will do nothing and it will disappear.

Contrary to popular belief, ignoring debts will not make them disappear, particularly if creditors are contacting you via phone and mail. The best course of action is to seek advice from a debt charity, which can advise you on the optimal path to debt freedom.

Additional information

Visit the Wikipedia pages: ""Protected Trust Deed IVA"" for more information on some of the aforementioned debt relief options.

" - https://www.affordablecebu.com/

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"Debt Myths: Common Misconceptions" was written by Mary under the Finance / Wealth category. It has been read 77 times and generated 0 comments. The article was created on and updated on 01 June 2023.
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