Individual voluntary arrangements.
An individual voluntary arrangement (IVA) is a formal agreement to repay your creditors at an amount you can afford.
This can be a one-off payment known as a lump sum IVA or over a longer period to spread payments which usually lasts five or six years. You make one affordable payment to us each month and we distribute it fairly among your creditors. During your IVA creditors should not contact you or increase your debt.
When the final payment is made, any remaining debt is written off.
IVAs are not available if you live in Scotland. In Scotland, a protected trust deed is a similar solution, but it’s important to note that it has different benefits, risks and fees associated with it.
You make affordable monthly payments, usually over five or six years.
If you have a lump sum to offer, this can be paid as a one-off ‘full and final’ settlement, or a combination of a lump sum payment followed by monthly payments.
Once you’ve made your final payment any remaining debt is written off.
Your creditors can’t pursue you for your debts.
If you’re a homeowner, you’ll usually be able to keep your home, provided you maintain the mortgage payments and any other loans secured on your property.
Not all debts are included.
If there’s equity in your home then you’ll need to try to re-mortgage.
If you are unable to re-mortgage you can make a maximum of 12 extra payments or a 3rd party can offer a sum equivalent to the equity.
Please be aware that remortgaging may result in a higher interest rate.
Your credit rating will be negatively affected.
Your IVA will be recorded in a public register.
Debt Relief Orders
Debt Relief Orders (DROs) are one way to deal with your debts if you owe less than £30,000, don’t have much spare income and don’t own your home.
If you get one:
your creditors can’t recover their money without the court’s permission
you’re usually freed (‘discharged’) from your debts after 12 months
You get a DRO from the official receiver, an officer of the bankruptcy court, but you must apply through an authorised debt adviser. They’ll help you fill in the paperwork.
The official receiver’s fee is £90. Your debt adviser can tell you how and when to pay it. In some cases a charity may be able to help you with the cost – ask your debt adviser.
You’re generally eligible if you meet all of these criteria:
you owe £30,000 or less
you have less than £75 to spend each month, after paying tax, national insurance and normal household expenses
your assets aren’t worth more than £2,000 in total
you’ve lived or worked in England or Wales in the last 3 years
you’ve not had a DRO in the last 6 years
You must follow rules called ‘restrictions’ if you get a DRO.
This means you can’t:
borrow more than £500 without telling the lender about your
act as the director of a company
create, manage or promote a company without the court’s permission
manage a business without telling those you do business with about your DRO
Bankruptcy is a form of insolvency. If you’re made bankrupt:
You don’t have to deal with the people you owe money to yourself – a public official called the official
receiver takes control of your money and property, and deals with your creditors.
The things you own may be sold and used towards paying your debts, such as your house or car.
Most types of debt are written off when you’re discharged from bankruptcy, normally after a year.
Going bankrupt involves going to court. It could cost you up to £705, or more if you use a solicitor, although using a solicitor isn’t necessary.
Your name and bankruptcy details will be published on the national register of bankruptcies, called the Individual Insolvency Register.
Can I Go Bankrupt?
There’s no minimum amount of debt required to go bankrupt. If the value of your unsecured debt is greater than the value of the belongings you own, such as property or vehicles, it may be an option for you. Unsecured debts include things like credit cards, personal loans and store cards.
If you have belongings like a house, car, savings, antiques or electrical goods, that you could sell to clear all your debts, but choose not to, bankruptcy could be refused. Belongings are known as assets.
If you don’t have a large amount of debt, there may be other options that are better for you.
As well as applying for bankruptcy yourself, someone else you owe money to can also apply to make you
bankrupt, even if you don’t want them to do so. For a creditor to make you bankrupt, you must owe at least £5,000.
What happens at the end of bankruptcy?
When the bankruptcy order is over, you can make a fresh start and the money you owe is usually written off. In most cases, this can be after only one year. Most types of creditor have to stop action to get their money back following a bankruptcy order.
What is a Debt Management Plan?
One of the most unsettling aspects of being in debt is dealing with the demands and threats from your creditors – the people you owe money to. By taking advantage of a Debt Management Plan we can help REDUCE THE WORRY by dealing with your creditors for you. Enabling you to concentrate on repaying your debt at a realistic, affordable rate.
A Debt Management Plan (DMP) is an informal agreement between you and your creditors whereby you agree to repay your debt in reduced payments that are more affordable for you.
It could be the right solution for you if you have unsecured debts and if you are struggling to make the repayments. All debt will be repaid and there is no obligation to release equitable interest or other assets to your creditors.
Although your regular repayments may be lower, your repayment period could be longer and the total amount payable.
Like the majority of debt solutions, entering into a Debt Management Plan will affect your credit rating and as they are not legally binding agreements, your creditors do not have to accept the proposal.
It might not be the right solution for you if you have an unsecured debt of £5,000 or more in which case an IVA (Individual Voluntary Arrangement) is an alternative solution.
An IVA is a formal agreement between you and your creditors whereby you repay a percentage of your debt in affordable monthly repayments, and they agree to write off any outstanding debt once your final payment is made.
For many people, an IVA is the preferred solution as it enables them to avoid bankruptcy and all the unsettling consequences that come with it.
So what’s the best option for you? The simple answer is that there is no definitive hard and fast rule.
There are several factors and criteria for both and your personal circumstances and preferences will affect what is best for you.
If you are unsure of what is the best option for you, contact us to discuss your options with our friendly team.
Advantages of a Debt Management Plan
In the majority of cases, debt management companies will recommend consolidating all your debts into one large debt to make it more manageable. This is hugely beneficial for you as a debtor, as this generally means that you will be able to consolidate all of your repayments into one low monthly payment. The affordable monthly payments will hopefully mean that you can comfortably and consistently pay the amount each month as required, thereby avoiding any late payment fees.
This will immediately reduce your stress levels as your debts will appear much easier to cope with. As long as you can stick to your budget, you will feel relieved that you are working towards slowly but surely clearing your debts.
A good debt management plan will help you avoid being declared a bankrupt.
Disadvantages of a Debt Management Plan
One of the main disadvantages of a debt management plan is that you will be charged more interest in the long run to benefit from the reduced monthly repayments. This generally means that, if you successfully complete your debt management plan, you will have in fact paid back more in total than you originally expected to repay.
Also, be prepared that some of your creditors may not accept your debt management plan. They are not legally obliged to do so and may therefore carry on charging you interest on your mounting debts.
You will have to be extremely disciplined once you have accepted your debt management plan. You have to stick strictly to a set monthly budget and make repayments on time. If you are late, you can lose all the benefits of the plan including the lower interest rates.
A debt management plan may affect your credit rating and your ability to obtain credit.
The bottom line remains that a debt management plan is still only a plan – you still have the heavy responsibility of repaying each and every one of your unpaid debts.