People who are in serious debt tend to think that the only way out of a debt problem is to declare bankruptcy. However, they may not be fully aware of all the implications of bankruptcy.

These include

• The costs involved in declaring bankruptcy
• Not being able to apply for more credit while you are bankrupt
• The potential to have to sell your home and some of your possessions, like a car or any luxury items
• Losing your business as the bankruptcy process may result in your business being closed down
• Having your bankruptcy published on a list on the internet and in the local paper
• Not having all debts written off; even after bankruptcy, some debts such as court fines and student loans will not be written off.

However, it may be that you have other debt solutions open to you. Bankruptcy is really for people with very severe debt problems.

If you owe less than £10,000, you may be better off looking into a debt management plan, where you arrange one monthly payment to a debt management company. That payment is then distributed to your various creditors on your behalf, and the debt management company may be able to reduce or freeze interest charges through negotiation with your creditors.

Another option for dealing with debt is to take out a debt consolidation loan. This is where you take one large loan to pay off smaller and varied debts. Usually you can get a better interest rate on a debt consolidation loan, and you benefit from the simplicity of having one debt to repay. However, you will probably remain in debt for a longer period of time this way, and there is a temptation to start spending once you have cleared the original debts with the new loan. You need to have a strong self-discipline to avoid spending again.

If your debts are over £10,000 and you owe at least three creditors, it may be that you are eligible for an IVA, or Individual Voluntary Arrangement. This is the step before declaring bankruptcy, and is a legal contract between you and your creditors, usually brokered by a debt management company. An IVA usually lasts for a five year period, at the end of which time you will be clear of the debts, whether the amount has been paid in full or not, as long as you have adhered to the repayment schedule agreed. If you default on an IVA repayment schedule, you are likely to be declared bankrupt anyway.

As you can see there are other debt solutions to bankruptcy, but you should consider your options carefully, always seeking independent financial advice before taking any course of action.