Unemployed - debt solutions Debt solution case study

Summary: Unemployed - debt solutions - IVA (Individual Voluntary Arrangement) - this article looks at debt options open to the unemployed.


Ralph had not worked for several years. Initially he had been receiving DLA for a back complaint, but recently he had been declared fit for work (or at least some kinds of work) and benefits had been hit. But finding a job after several years without, and well into his 50's, proved as difficult as Ralph feared it would.

Priority Debts

Ralph had received sound advice when he first stopped working, namely to ensure all priority outgoings were maintained. He had housing benefit help - but there was some rent and council tax to pay which he regarded as an absolute priority. Utility bills were always paid on time - and so far he hadn't starved through lack of food. The priorities were covered - but the debts were not. These had built up over the years - so now old overdrafts and credit/store cards totalled over £10,000.


Another piece of advice that Ralph had been less diligent in following was to keep in touch with your creditors. Even if no meaningful payment could be made, better to at least inform them of the situation that was faced. Ralph had moved accommodation 3 years ago and had enjoyed some respite from the letters and phone calls. A change of address and phone number meant he could forget about the debts. However they had now caught up with him again.

Debt Relief Order (DRO)

One way forward for Ralph is a DRO. His debts are under £15000, his available income after all household and personal expenses are met is less than £50/mth and he has no car worth more than £1000 (in fact - no car at all!). In a DRO - he pays a 1-off fee of about £90, the debts are frozen for a year, and if he is still in the same position after the year, the debts are written off. It is a form of bankruptcy and will reflect that on his credit file.

Token payments

Alternatively, Ralph could buy some time by explaining his position to his creditors and paying each £1/mth as a token payment. It demonstrates that Ralph is doing what he can, acknowledging the debt and hopefully creditors will stop adding charges and hassling him. If/when he gets a job he can start making more meaningful payments back to the creditors.

The above is provided as information only. Iva.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.