A problem with credit card debt can be a particularly tricky one, because the interest rates on credit cards can be a fair bit higher than on other forms of credit. With average rates currently standing at around 17-18%, it’s clear that if you can’t afford to repay your credit card debts, those debts could grow fast.

It’s important to note here that a credit card is one of the most flexible forms of credit available: you’ll only be required to make a small minimum payment each month, usually around 2-5% of the outstanding balance.

So, many of the people who find this unaffordable are experiencing some serious financial problems – which means they’ll need to find a debt solution that can address that kind of problem.

Here are a few of the most helpful debt solutions for people struggling with credit card repayments.

Debt management plan

A debt management plan can reduce the amount you pay towards your unsecured debts (including credit card debts) to an affordable level. It’s an informal arrangement which your lenders are under no obligation to agree to, but they may well do so if it’s clear that you can’t afford your existing repayments.

Lenders often reduce or freeze interest during a debt management plan, which could be extremely helpful with high-interest credit card debts. This means your debt can’t grow, enabling you to repay what you owe more quickly than you could if your debts were still growing.

A debt management plan lasts as long as it needs to (unless you or your lenders decide to end it earlier) – either until your situation improves or until the debts are repaid.

This site has some great information on debt management plans.

IVA (Individual Voluntary Arrangement)

An IVA works similarly in that it reduces your unsecured debt repayments to an affordable level, but it can also write off the unsecured debt you can’t afford at the end of the agreed term – usually five years. It’s only available to people who genuinely can’t afford to repay everything they owe within a reasonable period of time.

You will be expected to pay as much as you can throughout your IVA. In return for maintaining all the agreed payments, you will be legally protected against bankruptcy or any other action from your lenders regarding the debts covered by the agreement.

Bankruptcy

A lot of people enter into IVAs to avoid bankruptcy, but it can actually be the best solution in some cases. Indeed, it holds several advantages over an IVA: it’s usually over within a year, for example, and doesn’t always require monthly payments.

To apply (or ‘petition’) for bankruptcy, you must go to a County Court, which will assess your case. If bankruptcy is granted, your debts will be frozen, and you can be ‘discharged’ after a year – at which point those debts will be written off. You may have to make payments for three years if you can afford it, though.

Lenders can petition for your bankruptcy themselves, but if you think it may be your only option for clearing your debts then you can petition for it yourself.

Please note: different debt solutions can come with different drawbacks. They can all damage your credit rating, for example, while an IVA can require you to release equity from any property you own and bankruptcy can force you to sell your home – while repaying debt more slowly on a debt management plan can cost you more in the long run. It’s vital you discuss your options with a professional adviser before you commit yourself to anything.