Debt Management

How long will the plan last?
Most Debt Management plans will last between 4-8 years but this will depend entirely on your own individual circumstances. The term of your plan will be determined by the amount of debt you have, your monthly disposable income and other factors such as whether interest and charges can frozen and the fees you are charged.

What should it cost me?
The cost of your Debt Management plan will vary and is dependent on who you take your plan out with. Most reputable debt management providers will make it clear to you what the cost of the plan is and explain the fee structure. As a general rule you will be charged a set-up fee before the plan starts as well as an ongoing monthly management fee of up to 17.5% of your monthly contribution.

What are the alternatives?
There are many other Debt Solutions available to you instead of debt management, such as an IVA, DRO or even bankruptcy. We can usually recommend and guide you towards the most affordable and effective debt solutions once we have had the opportunity speak to you about your circumstances and identify the severity of your Debt Problems.

Individual Voluntary Arrangement (IVA)

How much will I be asked to pay?
The figure you are asked to pay each month toward the IVA will depend entirely on your individual personal circumstances. Your contributions will depend on a number of factors including your income, expenditure, levels of debt and whether you are a homeowner. The insolvency practitioner responsible for administering your IVA will agree an affordable figure with you once they have assessed your case but you are normally required to pay at least £250.00 PCM..

What are the advantages of an IVA?

There are a number of advantages to taking out an IVA instead of Bankruptcy or Debt Management, these include;

1. All interest and charges are frozen on the debts
2. You can continue to operate and normal current account (without an overdraft)
3. You are protected from further creditor action once the IVA is in place.
4. Public stigma isn’t as bad as with Bankruptcy and you can still hold certain public offices.
5. If you own a business you can continue to trade and earn money

Will my home be under threat?
No. In fact a lot of people choose an IVA as Debt Solutions because it still allows them to keep their home. If you are living in a rented home then there should be no risk to you at all, although you should always check your tenancy agreement before making this assumption.

Homeowners will come under more scrutiny as creditors will want to see details of the equity you have in the property before voting on your IVA. It is standard procedure for your Insolvency Practitioner to have your house valued to determine what equity you have, as your creditors are entitled to at least 75% of this. If you have sufficient equity in the home you could then be asked to re-mortgage.

Bankruptcy

Will I lose everything?
Bankruptcy is probably the most extreme solution you can undertake, because as soon as the petition is declared, all your assets will come under the control of your trustee. The only items that you will guarantee to keep after your Bankruptcy are your basic household amenities and any tools needed for your trade or employment. You may lose your home, car and other assets such as jewellery or shares if these are deemed to be of high enough value and these could be sold on without your prior consent.

Will others find out about my bankruptcy?
Definitely yes, all bankruptcy petitions are advertised in your local newspaper and your details are placed within the public domain on the Bankruptcy Register. Anyone that you are connected with financially will also be notified and you yourself will be required to tell anyone with whom you are applying for credit or work that you are bankrupt. You should bare this in mind as some employers will consider Bankruptcy a reason to terminate your employment.

How long will my bankruptcy last?
This again depends on your circumstances the average bankruptcy period is 12 months at which point you should be discharged. Although it is important to consider the prospect of receiving an income payments agreement before you are discharged which would effectively extend this period by an additional 3 years and require you to make contributions towards your debts.

Debt Relief Order (DRO)

What debts can I include?
You must not have in excess of £15000.00 in unsecured debts to apply for a Debt Relief Order and can include the following types of debt;

• Credit cards, bank Overdrafts and Personal Loans
• Arrears on Rent, Telecoms or Utilities inc. Council Tax
• Hire Purchase, Conditional Sale or Buy Now - Pay Later Agreements
• Catalogue or Store Card Debts

Will it affect my credit rating?
Yes, although it is important to remember that if you are in the position to propose a Debt Relief Order your credit rating will most likely already be affected. The (DRO) will be recorded on your credit file for a minimum of 6 years and may prevent you accessing significant credit for some time.

What happens when the Debt Relief Order finishes?
All of the debts included in the Debt Relief Order will be written off in full and you will no longer be responsible for making payments to those creditors.  You will not be able to apply for another (DRO) for a further 6 years and must continue to pay all debts that were not included in the original order.