Debt Management
Having looked at our 6 point plan of action and deciding that there is little or no prospect of the balance between your income and spending becoming positive enough to reduce your debts. Don't panic. You can still take control of the situation.
Solutions available:
- Bankruptcy
The term ‘bankrupt’ is used when someone has become insolvent. Personal insolvencies in England and Wales are dealt with mostly under the Insolvency Act 1986. When the court is satisfied that there is no hope of the debt being paid, a bankruptcy order is issued on the petition of the debtor (you) or one or more of your creditors who are owed £750 or more. The official receiver investigates the financial affairs of the debtor for the period before bankruptcy and is appointed to act as trustee from the date of the bankruptcy order until a trustee takes control.
The trustee in bankruptcy is appointed for the purpose of realising and distributing the bankrupt's estate. This is by no means an ideal way of dealing with your debts, though, because there are severe restrictions placed against a bankrupt, such as:
- Continuing a business in a different name from that for which the bankruptcy was made without informing all people doing business with you
- Acting as a director of a company or starting, managing or promoting a company without the court's consent
- Obtaining credit of £250 or more without disclosing you are bankrupt Also, details of your bankruptcy will be advertised and your bank, landlord etc will be informed. All future assets will be lost and bank accounts etc closed. Any item purchased by lease or hire purchase will be returned immediately.
- Debt Management Program
If you are having difficulties in negotiating with your creditors then it might be in your interests to enlist the help of professional debt counsellors.
Central Debt Management can organise a debt management programme for you whereby they deal with the creditors on your behalf.
- Good debt counsellors will have experience of negotiating with a range of credit companies and banks
- They can sometimes get the interest frozen for you and arrange affordable terms for the payment of your debts
- You will be able to make one monthly payment instead of paying all your creditors separately
- You will get the peace of mind is often the best solution for people with temporary problems who are confident income will soon increase or their spending will go down
- Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) is a legal process for UK residents with serious debt problems. They can be arranged with the help of professional insolvency practitioners. An IVA can be effective in sorting out debt problems while avoiding many of the negative aspects of bankruptcy, and is an especially viable solution for those with equity to protect.
You agree the details of an IVA with your creditors at a creditors’ meeting, with a 75% majority of those that vote needed for an agreement. Depending on your circumstances, IVAs can write off a high percentage of your debt and, if you keep up the arranged monthly payments, you can be debt free in as little as five years.
With an IVA you can avoid or cease any legal actions; freeze all debt interest and charges; wipe out any County Court Judgements; create a programme of manageable monthly payments based on what you can afford. An IVA also protects you from the stigma of bankruptcy where the details are advertised publicly (although they are recorded on a public register and your credit file). You also avoid the penalties associated with bankruptcy such as being disqualified from being a director, etc.
However, IVAs are usually only suitable for those with unsecured debts of at least £20,000. Also, if the IVA fails, you could still be made bankrupt, in which case the costs of the IVA would be added to the debts.
Chronic Debt Problems
Your debt problem is chronic if there is no prospect for you to reduce your debts. This may be because you have no hope of increasing your income or of decreasing your spending by enough. It could be that you are being threatened with court action. Don't panic. There is a solution contact us today either on 07770 444 108 or complete the form on the right for free advice on where to begin solving your debt problems.
Read how Kevin and Sarah were reduced their debts by 65% when they used one of our debt councellors.