Debt Solutions

Information about the popular debt solutions

 

UK Insolvency Services specialises in IVAs

Depending on your financial situation, there are several debt relief options that may be suitable for you. We’ve outlined the most common solutions below, along with their key advantages and drawbacks, to help you make an informed decision on the best way forward.

Free debt counselling, debt adjusting and providing of credit information services is available. You can find out more by contacting Money Helper.

 

Individual Voluntary Arrangement - IVA

An IVA – Individual Voluntary Arrangement – is a legally binding arrangement with your creditors to pay all or part of your debts. Your Insolvency Practitioner, who you agree to make regular payments to, will share this money amongst your creditors and this will allow you to regain more control over your finances. An IVA is a formal debt solution available to residents of England, Wales and Northern Ireland.

Benefits of an IVA

  • One realistic and affordable payment over a set period of time
  • After successful completion of your IVA unaffordable debt that is included is written off
  • Protected Legally – After your IVA has been approved, no further action can be taken by creditors included in the plan and all interest and charges are frozen
  • The fees charged are taken from the affordable monthly payment you make over the agreed term of the IVA.
  • Interest and charges will stop
  • Support from our team who can help you through the journey
  • Your expenditure will be reviewed at the start and annually to ensure your payment remains affordable

Considerations of an IVA

  • Creditors don’t have to agree to an IVA proposal so it’s not guaranteed
  • It affects your credit file for six years
  • Your information will be held on the public insolvency register
  • There are costs involved with an IVA, which are outlined in our Fees and Key information section. However, costs are deducted from the contributions you make. These will be fully explained to you and detailed fully in your IVA proposal
  • If you own a property/properties, you may be asked to release equity from the value to pay off debts. A remortgage may attract higher rates of interest or, if no remortgage is available, an IVA may be extended by 12 months
  • If your IVA fails, it may result in Bankruptcy
  • If you earn additional income then a percentage of this may need to be paid into the IVA
  • Only unsecured debts included within the individual voluntary arrangement may be discharged at the end of the period and unsecured debts not included remain outstanding
  • Borrowing any amount over £500 can only be done with the express permission of the Insolvency Practitioner
  • There are restrictions on the expenditure of a person who enters into an IVA
 

Debt Relief Order - DRO

Debt Relief Orders (DRO) is a formal debt solution designed to help people with little or no assets and low income deal with their debts and make a fresh start with their finances.

If you don’t own your own home, have less than £75 of spare income each month and are looking for a way to deal with debts totalling less than £50,000, a Debt Relief Order (DRO) could be the ideal solution for you. It is an alternative debt solution to Bankruptcy or an Individual Voluntary Arrangement and is available to residents of England, Wales and Northern Ireland.

Benefits of a DRO

  • A Debt Relief Order typically lasts twelve months
  • Debt Relief Orders don’t require you to make payments into them
  • Creditors are stopped from taking any further action against you and all interest and charges associated will be cancelled
  • A Debt Relief Order is relatively simple process to start and can be done through various charity organisations

Considerations of a DRO

  • Your credit rating will be affected for six years
  • Owning your own property, having assets over £2,000 and/or owning a car that is worth £4,000 or more will prevent you from entering into a Debt Relief Order
  • A Debt Relief Order may be cancelled if your circumstances change during the the 12 month period
  • Entering into a DRO will be recorded on a public register
  • If you can afford more than £75 after your monthly essentials have been budgeted for then you will not qualify
 

Bankruptcy

If appropriate to your circumstances, bankruptcy is a debt solution that may be the most appropriate. If you are unable to pay your debts, you can apply to make yourself bankrupt. This means that your assets will be shared between your creditors. Bankruptcy is a formal insolvency route which can allow you to break free from your debts with some restrictions.

Bankruptcy is a debt solution available to residents of England, Wales and Northern Ireland.

Benefits of Bankruptcy

  • Your Bankruptcy could be discharged within 12 months
  • It can free you from the pressure from creditors
  • All debts that qualify for bankruptcy are written off
  • The stigma of bankruptcy is not what it once was
  • The process to make yourself bankrupt is now completed online
  • You may be able to keep your house (depending on circumstances)
  • The bankruptcy cost of £680 can sometimes be paid in monthly instalments

Considerations of Bankruptcy

  • You lose control of finances and assets, the official receiver or Trustee appointed on your case will decide what happens to your valuable assets and finances
  • Bankruptcy can affect types of employment under certain circumstances
  • It will affect your credit file for six years
  • It costs £680, and the protection of bankruptcy won’t be considered until this is paid
  • Depending on if you have proven disposable income and employment status, you may need to pay income payments for up to thirty-six months
  • Your information will be held on a public register
 

Debt Management Plans

A Debt Management Plan is an informal repayment agreement between you and your creditors to pay all of your debts. Debt Management Plans are also know as DMPs and are available to everyone in the UK. Debt management plans are an alternative debt solution to formal arrangements, such as an Individual Voluntary Arrangement and Bankruptcy for residents of England, Wales and Northern Ireland or Protected Trust Deeds, Debt Arrangement Schemes and Sequestration for residents of Scotland.

Benefits of a Debt Management Plan

  • You only pay one affordable payment to the DMP company
  • Flexibility – The payment is flexible depending on your circumstances, it can increase or decrease
  • Payments can be reduced & interest rates can be frozen by creditors, however, they are not obliged to do this
  • Some charities & organisations provide this service free of charge (you can contact the Money Advice Service for more information)
  • Avoids the need for a Formal Insolvency Procedure

Considerations of a Debt Management Plan

  • All the creditors need to agree to their individual arrangement for this plan to be effective
  • Interest & charges are not guaranteed to be frozen
  • Your credit rating is affected as your monthly payments are not contractual
  • Debt management plans can affect your credit file for a minimum of 6 years, as in most cases you will have defaulted on the original credit agreement terms once you enter into the arrangement
 

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