According to your specific circumstances there will be a debt solution that's perfect for you, including;
Before agreeing to any kind of debt management, read the Insolvency Service's 'In Debt? Dealing With Your Creditors' (opens in a PDF).
Debt Management Plan
A debt management plan (DMP) is an informal arrangement with your creditors which allows you to make reduced repayments to your creditors over a number of years.
Payments are made until the debt is cleared in full or until you are able to make the full repayments again.
The monthly repayments are based on what you can afford after a realistic income and expenditure has been drawn up.
Creditors will also want details of your assets, including the value of your home (if you own it), so that they can consider whether your offer is reasonable or whether they expect any of those assets to be sold so that they will receive a larger payment towards their debt.
A plan can last for 5 to 10 years or much longer depending on what you owe and how much you can pay each month. Creditors will expect to be provided with regular updates of your income and expenditure so they can see whether you are able to increase your payments.
Individual Voluntary Arrangement
An individual voluntary arrangement (IVA) is a formal legal agreement between you and your creditors.
IVAs are popular because:
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they protect you from recovery action that your creditors may take
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they usually involve your creditors writing off part of what you owe them
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interest is frozen
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you make one affordable monthly payment over a fixed period of time (usually 5 years)
Debts Excluded From IVA and DMP
There are several debts that fall outside the limits of an IVA or debt management plan - These will be fully explained to you upon your visit from the advisor, they include:
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goods on Higher Purchase (HP)
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secured loans
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Council Tax arrears
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any fine or penalties imposed by a court
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liabilities arising under an order made in a family or domestic court action, such as CSA claims for child support
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liabilities arising under a confiscation order made under S.1 of the Drug Trafficking Act 1986 or S.71 of the Criminal Justice Act 1988
University Fees
We feel that it is not best practice to include university fees in a debt management plan, as they are only payable once you reach a payment threshold, where it is then deducted directly from your wage. We concentrate on paying off priority debts. Contact us now for further information.
Bankruptcy
Bankruptcy is one way of dealing with debts you simply cannot pay. Bankruptcy frees you from overwhelming debts so you can make a fresh start and make sure your assets (if you have any) are shared out fairly among your creditors.
Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves.
A court makes a bankruptcy order only after a bankruptcy petition has been presented. It is usually presented either by yourself (as a debtor's petition); or by one or more creditors (a creditor's petition) who are owed at least £750 by you and that amount is unsecured.
A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditor's claim, you should try and reach a settlement before the bankruptcy petition is due to be heard. Trying to do so after the bankruptcy order has been made is both difficult and expensive.
If you are considering, or threatened with, bankruptcy you should seek urgent independent debt advice from an expert. Bankruptcy has serious implications in respect of any assets that you own or business you may be running.
Debt Relief Order
Debt relief orders (DRO) came into force on 6 April 2009 and provide debt relief, subject to some restrictions. They are suitable for people who do not own their own home, have little surplus income and assets, and less than £15,000 of debt.
A debt relief order lasts for 12 months. In that time creditors named on the order cannot take any action to recover their money without permission from the court. At the end of the period, if your circumstances have not changed you will be freed from the debts that were included in your order.
DROs do not involve the courts. They are run by The Insolvency Service in partnership with skilled debt advisers, called 'Approved Intermediaries', who will help you apply to The Insolvency Service for a debt relief order.
County Court Administration Orders
If you owe no more than £5,000 to at least two creditors and have a court judgement entered against you by one of your creditors which you are unable to pay in full, you can ask the court to make an administration order. Under that order, you are required to make weekly, monthly or quarterly payments from your income to the court which distributes them to your creditors in the proportion to the amounts that you owe them.
The court may, if there are difficulties in obtaining payments from you, make an attachment of earnings order which is sent to your employer directing that amounts be deducted from your wages and paid to the court for distributing to your creditors.
Debt Arrangement Scheme
Scotland only
The debt arrangement scheme is a debt-payment arrangement system set up by the Scottish Government.
The scheme allows you to repay your debts at an affordable amount each month. While you are on a debt arrangement scheme you are protected from diligence or being made bankrupt by your creditors.
You may be able to apply for a debt arrangement scheme if you:
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live in Scotland.
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have more than one debt.
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have some money left over after you have worked out your essential expenditure and drawn up a personal budget.
Under a debt arrangement scheme you make one affordable monthly payment to your debts. Your payment is sent to an approved payment distributor who sends the money to your creditors. If you make the arranged payments your creditors can not add any more interest or charges to your debts.
Once you make an application for a debt arrangement scheme, you are protected from diligence for six weeks while your application is waiting to be approved. Once your debt arrangement scheme has been approved, you will continue to have this protection as long as you keep up the payments arranged.
Once you have repaid your debts in full your debt arrangement scheme will end.
The scheme will be cancelled if you don't make the payments that are required. Your creditors can then add back on to your debt all the interest and charges that had been frozen when you started the debt arrangement scheme.
