Writing off debt: What you need to know

Can debts be written off?

Yes, some unsecured debts can be written off. But it’s important to know that this is not something you can do just because you don’t want to pay your debts anymore.

Debt write-offs are for people who can’t afford to pay back their debts. Whether you can use this option depends on your personal and financial situation. There are certain criteria you’ll need to meet, and it will affect your credit score.

Which debt solutions write off debt?

There are different ways to help people write off their debt, including:

• Individual Voluntary Arrangement (IVA): An Individual Voluntary Arrangement (IVA) is a formal agreement between you and the people you owe money to (your creditors). Under an IVA, any debts included in the IVA do not increase, and your creditors stop charging interest. You’ll make monthly payments based on what you can afford over an agreed period (usually around five years). After that, any outstanding debts included in the IVA may be written off; however, you should check the terms of your IVA agreement to confirm this.
• Debt Relief Order: A Debt Relief Order (DRO) is similar to an IVA, but usually lasts for one year. It’s for people who have total debts of less than £50,000, with low income and few things of value (limited assets). You make affordable payments for a year, and then any remaining  qualifying debts included in the DRO are written off.
• Bankruptcy: If you can’t pay your debts because you don’t have enough money or your debts are bigger than what you own, you can apply for bankruptcy. It usually lasts a year, and after that, most of your debt is written off. If you own anything of value, like a house, it may be sold to pay part of the debt. Bankruptcy can make it hard to borrow money in the future and stop you from working in some jobs.
• Short Settlement (or Full and Final Settlement): If you have a lump sum of money, your creditors may allow you to use  it to make one big payment instead of monthly payments, in settlement of your debt. If your settlement proposal is accepted, the rest of your debt will be written off. 

Is writing off debt a good idea?

Getting some or all of your debt written off might seem like a good idea, but it’s important to think carefully about it.

Any debt solution that helps you write off debt will likely impact your credit score. This can make it harder to borrow money or get credit in the future, for example, when you try to buy a house. You can find out more about how debt(s) on your credit file can impact you in our handy guide.

Your name will be added to the Insolvency Register, whilst you are still in the payment arrangement, which means you might not be able to work in certain jobs.

It's also important to remember that using a solution like an IVA to write off debt isn’t a “loophole” to avoid paying your debt.  The creditor will look at your situation to decide if it’s the right choice for you. 

How does writing off debt affect your credit file?

If your debt is written off, these things will happen:

• The balance on your credit report may show as zero.
• The debt on your credit file will remain marked as “default” and if the debt was partially written off, then the debt will be marked as “partially satisfied".
• The defaulted debt will remain on your credit file for six years from the default date.

This means that if you want to borrow money, lenders will be able to see the debt write-off and will use this information to decide if they will lend you money. 

Alternatives to writing off debt 

Our main goal is to help you become free of your Lowell debt, so  we’ll always work with you to understand your financial situation and set up an affordable repayment plan, where possible.

We know everyone’s situation is different, and your income and spending are personal to you – that’s why we offer our customers the option to manage their debt online, in privacy. You don’t even need to speak to us.

We will never ask you to pay more than you can afford. If you lose your job or your financial situation changes, you have options. We can put your account on hold to give you time to get back on track with your money or find a new job. 

Seek advice before writing off debt

If you are worried about your debts, please get in touch with our friendly team. They will help you find the best way forward by talking about your situation.

If you have more questions about debt support, or want to know more about working with Lowell, you can find more helpful articles like this in our Debt Guidance hub or take a look at Your Next Steps.

If you need more support or are thinking about a debt write-off, it’s important to talk to a specialist for advice and help with options. You’ll find more information on our Independent Support page.