Castle Hill Insolvency can look to help with financial options. Getting the right information is a must when looking to regain control of your finances.
1000’s of people in the UK struggle with debt and we understand that a small change in a person’s circumstances can push things over the edge very quickly.
The most important step when facing financial difficulty is not to ignore it and let it get out of control. We appreciate that money concerns can cause increased stress and worry.
Together we can find the most appropriate solution for you, giving you light at the end of the tunnel and the prospect of a debt free future.
Can an IVA help you?
Individual Voluntary Arrangement’s (IVA) are available to help you combine all your unsecured debts, such as credit card debts and personal loans. It will impact on your credit rating, but can help avoid bankruptcy, and potentially protect assets.
An IVA normally lasts for a period of five years and during this period you will make an agreed monthly contribution towards your debts. As long as you stick to the terms, your debt will be settled at the end of your arrangement and in most cases there will be some debt forgiveness, meaning you don’t necessarily need to pay your creditors in full.
We work with clients to ensure their IVA is suitable for them and agree payments they can afford, which helps them make all the required contributions.
If your proposal is accepted by your creditors, they will cease interest and charges and write off any remaining unsecured debt when your IVA is completed.
- An IVA offers legal protection from your included creditors.
- An IVA usually has a fixed term of 60 months/5 years, at the end of the arrangement, any outstanding balances on included debts will be written off.
- The payment you make into an IVA are based on your Income and Expenditure so should always be affordable for you.
- Fees are incorporated into your monthly IVA payments so you do not need to pay anything on top of the agreed monthly payment.
- Interest and Charges on included debts will be frozen.
- You can continue to act as a director of a limited company.
- Any debts not bound by your IVA will remain outstanding.
- Your credit file will be affected for a period of 6 years, starting when the IVA is approved and your ability to obtain credit will be limited.
- An IVA can impact on certain jobs such as those in finance and the civil service, if you are unsure, check your employment contract.
- Homeowners may be asked to re-mortgage 54 months into the IVA; if this is not possible you may be required to extend your IVA by a further 12 months. A re-mortgage may attract higher interest rates.
- Failure to keep up with IVA payments may result in your creditors filing for your bankruptcy.
IVA’s vs Bankruptcy
If you do not think you can afford regular payments and don’t own any valuable assets, bankruptcy may be the most appropriate course of action.
IVA’s offer some advantages over bankruptcy, but sometimes bankruptcy is the more appropriate choice. Whichever option you choose you’d be entering into insolvency, which would show up on the publicly available Individual Insolvency Register.
Generally, home owners with a reasonable amount of disposable income, who can commit to making regular payments for the next five years, may be better off considering an IVA, as this can protect the family home.
- Bankruptcy wipes the slate clean and discharges you from your debts.
- You are generally discharged after 12 months.
- You can pay the fee online in instalments and your bankruptcy application will begin once your fee has been paid in full.
- Bankruptcy will prevent your creditors from taking or continuing with any legal action.
- All interest and charges will be frozen.
- There are certain debts that cannot be included in bankruptcy, such as student loans, CSA arrears and court fines.
- Bankruptcy costs £680 per person.
- Bankruptcy will adversely affect your credit rating and your ability to obtain credit will be limited and the bankruptcy will remain on your credit file for 6 years.
- Once you are declared bankrupt an Official Receiver or Trustee will take control of your estate which could result in any assets being sold.
- If you can afford to make a payment, you will be asked to do so for up to 3 years.
- Any valuable assets you own are likely to be sold.
Is Debt Management better for me?
A debt management plan (DMP) is available to help combine your unsecured debts, it will impact on your credit rating and can include debts such as loans, credit cards, catalogues.
A DMP is a flexible arrangement and allows you to pay your debts at an affordable rate until your debt is paid off in full, by reducing your monthly payment this would increase the term of your debt.
Your DMP company would act on your behalf and negotiate with your creditors. Bearing in mind your creditors do not have to agree to the terms of the arrangement and can still legally contact you for payment.
If you are looking for more guarantees an IVA or Bankruptcy may be more suitable for you.
- A debt management plan is an informal agreement to pay one affordable regular payment which is shared amongst your creditors.
- Interest and charges on included debts may be frozen.
- It can slow down creditor contact.
- DMP’s are flexible, informal solutions and are not legally binding, so you can leave the plan at any time.
- Your DMP provider will deal with your creditors on your behalf.
- There are fee free DMP’s available. However if you chose a fee charging DMP company, you will usually be charged for their services monthly within your usual DMP payment. Fees very between DMP companies.
- Interest and charges are not guaranteed to be frozen.
- Creditors can still contact you about payments and may refuse to co-operate.
- A DMP may adversely affect your credit rating and your ability to obtain credit may be limited.
- Your debts still have to be paid in full. Reducing monthly payments to a level you can afford will generally increase the term of your debts.
What is a DRO?
A Debt Relief Order (DRO) is an order you can apply for if you can’t afford to pay a contribution to your debts. It is granted by the Insolvency Service and is a cheaper option to bankruptcy, however you must have debts of less than £20,000 minimal disposable income, and no significant assets to qualify.
A DRO usually last for 12 months and during that time your creditors included will not be able to contact you or take any action against you, at the end of the 12 month period you will be free of all debts listed in the order.
Some of the criteria you must meet to apply for the DRO:
- You must owe less than £20,000
- You’ve less than £50 a month spare income
- You’ve less than £1,000 worth of assets
- A DRO is a formal solution so creditors cannot chase for payments.
- All debts in a DRO are cleared after 12 months.
- During the 12 months the DRO is in place, you will not be required to make any payments towards the included debts.
- A DRO has a relatively low set up cost of £90.
- Interest and charges relating to debts included in the DRO will be frozen for the 12 months the DRO is active.
- A DRO will affect your credit rating and, your ability to gain credit will be limited and the DRO will remain on your credit file for 6 years.
- A DRO can impact on certain jobs.
- If your circumstances improve during the 12 months, the debts could be reverted back to the customer.
- You cannot have more than £1,000 worth of assets.
- It is a criminal offence to falsify information on a DRO.
Should you wish to discuss anything relating to personal debt, please contact Jody on 01392 539820 who will be happy to assist.
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