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IVA v bankruptcy – the big fight!
What is an IVA? An IVA is an Individual Voluntary Arrangement which gives you the facility to set up a formal agreed payment plan with your creditors. In order to be eligible you must have debts of over £15000 that you cannot afford the repayments on.
What is Bankruptcy? Bankruptcy is an order from a court that means your finances are controlled by the Official Receiver and there are a series of things you cannot do when you have been made bankrupt. This also means your bank account will be frozen and you will likely lose your home (if you’re a home-owner)
What debt solution is better for you? That’s a tough call that only you can make with the help of some serious debt advice. Overall an IVA seems to offer you much more freedom in having some control over your assets, in my humble opinion (but I’m no financial advisor). When you are bankrupt you can be made to hand over everything that is not deemed essential to your living (eg work items or household items like clothes). With an IVA you can still operate your bank account and have your wages paid in as normal. You still have to provide detailed information on all your income and expenditure and then you will be told how much you have to repay to your creditors. If you do not keep up with this you could be subject to bankruptcy proceedings.
The time in which you will be paying the debt back does vary between these two. The IVA is usually over 5 years whereas the bankruptcy order means you will usually be paying the debt for 3 years (although the bankruptcy order may only last one year, the agreement to pay is 3 years). Although you will be paying for less time with the bankruptcy order, it does affect you for longer as you can not be company director, Managing Director, MP or Judge and you will have severe difficulty in obtaining a mortgage (especially after the sub prime credit crisis in America).
So overall, if you can have an IVA over a bankruptcy order then this would seem the better option for the majority of circumstances but this depends largely on your debt.
From the inbox: Should you get home loan?
Back in June I wrote an article on Money Stand about potential advantages and disadvantages of home improvement loans and received a guest post from one of our readers on their opinion as a follow up. Some great points here. Keep them coming guys!
If you have good equity in your property and would like or need a new kitchen, bathroom, etc… then a home improvement loan may be worthwhile, especially if you are planning to stay in your property for some time to come.
If however you are just improving your home because you think it will increase the property value, then you really must look at what you are improving, if it is structural work, such as a new roof, or building work then it maybe worthwhile and you may gain your money spent back by selling.
For a new bathroom or kitchen, unless your old one is desperately falling apart, you should hold off because everyone’s chose of style and design is different, you don’t want to spend thousands on internal features which may then be ripped out as soon as the new people move in; in this case keep your firmly in your pocket.
Viable Alternatives To Bankruptcy
Before declaring yourself or business bankrupt it is worthwhile seeking debt counselling to make sure it is the right option.
Provided the directors of the company have and continue to act responsibly, voluntary liquidation may be an option for debts over £50,000. Although the company will cease to trade, the directors won’t be held financially culpable. If the company has no assets it will be necessary for money to be set aside to cover the practitioner fees.
If there only have a few creditors it may be possible to reach an ‘informal agreement’. It is similar to an IVA, but requires the agreement of all creditors. It is necessary that the company or individual has the spare money to offer creditors, but may result in a significantly reduced level of payment.
An IVA offers a less intrusive alternative to bankruptcy. You make a payment to creditors for a period of 60 months. It allows you to keep your home and maintain your professional status. Your insolvency isn’t printed in the local press.
Further Advice:
If you’d like to talk to someone about debt solutions and alternatives to bankruptcy, we’d recommend contacting an expert for free advice. Dropping into your local Citizens Advice Bureau or calling a company like Debt Free Direct is a good start. There’s also plenty of UK based forums where others going through IVA and bankruptcy talk about their experiences which could be a great place to get involved and ask some questions to people who are actually going through it before you make up your mind.
Simple ways to Increase your Income
Many people are struggling to keep their heads above water in the current economic downturn. Some have even had to take cut in pay, while their financial commitments have gone up and up.
One solution to the problem is to try and increase your income with extra work. If you already work full-time, you may be able to find a part-time evening job, say, working behind the bar in a pub, stocking supermarket shelves, or, perhaps, office cleaning; these are all jobs that can be carried out in the evenings, and will supplement the money already coming into the household.
Selling unwanted items via an online auction site, is one way of increasing your income. First of all, look around your own home to see if there are any unwanted items. Most families have things stored in attics and spare rooms that will probably never be used again. Start listing them, then research the auction sites to find out what is selling, and the prices they sell for. Of course, no-one has an inexhaustible supply of goods, so you could try asking around other family members, to see if they have items they no longer need.
For those people who are skilled at crafts such as knitting, crochet, sewing, card-making and so on, there are sites available nowadays that enable you to open your own online shop, to sell the items you make like Etsy. There is usually a small fee for selling, but you will not have to find premises or staff, so the earnings could be quite considerable. Similarly, if you are good at writing verse and poems, or drawing and painting, you may be able to offer your work to greetings-card companies. You will generally have to write to ask the company for their guidelines first, then submit a sample of your work.
All these are ways to potentially increase your income. By trying one that suits you, you may be surprised at how much extra money you could earn.
Online Money Management Review
Kublax Expenditure Graphs
I’ve been looking for a way to monitor my expenses online to help me see the ‘bigger picture’ of my finances for a while now. Despite budgeting and generally being quite frugal, I started looking for a program that could take some of the work out of budgeting for me so I can spend more time actually figuring out where I should be cutting back. That’s when I found Kublax.
I’ve tested the site and have to say, I’ve enjoyed using it. I found it more user friendly than Wesabe (I got frustrated just trying to upload my account!) and particularly like their ‘people like you’ functionality that gives you an idea of what other people spend on the same expenses.
Kublax is a free to use online money management platform that basically aggregates all your bank accounts in one place. Using bank level security, Kublax pulls together bank, credit cards and building society accounts and then divides all your purchases into an expense category. It’s a lot easier than other desktop accounting tools I’ve tried, and really easy to read, as you can view your finances in bar graphs and pie charts.
I started off by adding my accounts and setting my budgets and alerts to let me know if I start spending more than I would like to in a certain area. Once I’d gone into the transaction section and categorized my expenses, the magic started happening. I could then see my budget against my spending and revelations where made. I spend a lot more on shoes than I thought I did.
Kublax Money Management Tools
By using the ‘compare me’ function, I also discovered that I spend a lot more on shoes than the average other Kublax users. Another revelation.
The other feature of Kublax I think is great is the alerts function. At first I thought it would probably be an annoying function, telling me that I’ve overspent on shoes each day, and lets be honest, I already have my partner to tell me that. However, what this function could really be good for is alerting you to any unusual account activity.
If you’ve ever got that dreaded call from the bank, asking you if you’ve just spent a ridiculous amount on car rental in the Maldives on your credit card while you sit in dreary ole England, you’ll know that sick feeling in the pit your stomach. The alert function means that Kublax will tell you of any irregularity, most likely before your bank has called you.
Overall, I like it. I like that it makes me more aware of my spending habits, and that it makes me actually want to log in once a week to see how I’m going financially. Now, I just have to make myself cut back on shoes.
Tagged Budgeting, kublax, money management, saving money, spending
All about Debt Counselling
If you’re in debt, you’re probably familiar with that hopeless, stressed out feeling that seems to go hand in hand. Debt counselling can be a way to talk to some one about your problems and get that burden off your chest if you can’t talk to you friends, families or loved ones about what you’re going through. Main debt advice companies such as Debt Free Direct offer free advice and a push in the right direction. Many other agencies do the same, so it’s just a matter of finding one that services your area.
When you call, a trained counselor will carefully assess your financial problem and then make recommendations on what can be done. You don’t have to take their advice, but it’s always good just to hear the advice of an expert regardless. Some debt advice companies can also help you out with your budget too, so make sure you ask for their advice. If they don’t provide a service that is suitable for your debt, many companies might also suggest where else you could go for those debt solutions. All you have to do is ask.
If you’re worried about being ‘judged’, don’t. You won’t be. Debt advice companies are there to help you, not scare you (and if they do you’ve probably called a bad one!). Millions of people are in debt across the world so remember that you’re not the only one is debt and there is nothing to be ashamed about for asking for debt help!
Tagged Debt Advice
Advantages and Disadvantages of an IVA
Individual Voluntary Arrangements (IVA’s) are becoming an increasingly popular method in which to ease any debt problems. Recent figures suggest that the amount of IVA’s taken out each month now exceeds that of the amount of bankruptcies. However, IVA’s are not always the best debt management solution for some, and there are some advantages and disadvantages which you would have to consider before applying for an IVA.
One of the biggest advantages of an IVA is that they are private; none of your friends or family has to find out. This means there is no social stigma attached to IVA’s. Furthermore, an IVA leaves you debt free in up to five years whilst safeguarding all your assets at the same time. Even during these five years, the repayments that you make are within your means. You are never asked to repay more than you are able to.
Perhaps one of the most stressing aspects of debt problems is having your creditors continually threatening you for your payments. Luckily, an IVA ensures that creditors are unable to contact you, make any demands or take you to court.
For some people, the IVA period of five years is a long time to be repaying debts, and filing for bankruptcy gives you the option of being debt free in as little as a year. Although an IVA is not publicised in the same way as bankruptcy, you can still find a record of your IVA on the Individual Insolvency Register, which is searchable by the public. In addition to these disadvantages, the life of a debtor in an IVA period is highly monitored during an IVA period, with wage slips and salaries checked regularly to ensure that you are repaying the highest amount possible.
If you are seriously considering an IVA, be sure to do a thorough check of the Debt Management comany before you choose. Debt Free Direct discovered several agencies were giving consumers misleading advice on IVA terms, so it is always advisable do your reasearch first.
Tagged IVA
Personal Loans
What is a personal loan? Some key points:
1) Either money or items that you have borrowed from someone, may it be an individual, group or organization
2) Consists of relatively high interest. If interest is low, it is likely more of someone doing a favor to you.
3) The creditor has a motive for loaning, mainly getting more interest or bonds.
4) Loan is usually taken to do something constructive and have long term benefits, example setting up business, renovating houses, furthering education, etc.
5) Personal loan is more flexible and can be used for personal consumption benefits
6) Unsecured personal loans are not productive in long run because they have very high interest rate and only very high risk investment can offset this interest.
7) Personal loans should be taken at the appropriate times to invest in long term investments, example real estates or shares for greater profits.
Loans should be taken when purchasing expensive necessity, for example buying cars. However, aim for low interest loans.
Tagged Personal Loan
Pay to improve your home
Home improvement loans are loans taken out specifically for the purposes of spending the money on your home to make it better. In general most home improvements will add value to your home, but you do need to consider the amount you will be paying – including the interest on repayments, when calculating whether the improvements are worth the time and money.
Home improvements loans are best taken out when it is essential to improve part of your home. Bathrooms and kitchens are big winners in terms of adding values – these often help sell a home, and a clean, fresh modern look can add a lot of money – often more than the cost of the room itself, plus your repayments.
However not all improvements will add money. Any improvements you make should be in keeping with the style of the property, and to really add value you should aim to make sure that you consider the tastes of your prospective buyers, should you decide to sell. It is also important to consider whether a bathroom or kitchen really needs replaced – if it is already quite modern, then the extra value added may not be as much as the loan.
Tagged Home Improvement, Loan
Let others help you
Debt is a serious issue, and has serious consequences. If you are in debt it is important to look for debt advice.
Although it can be hard to come to terms with the fact that you are in financial difficulty, once you do this you are opening yourself up to a lot of resources that can help you get back on the straight and narrow.
There are many companies that offer credit cards or loans to assist you with eliminating your debt, but rather than commit yourself to further borrowing it is better to speak to somebody about your options. There are confidential debt lines with trained staff that work with you to look at your options, their aim is to help you be debt free, and so who better to speak to? By talking to these people you will become more informed about what you can do and begin to relieve some of the stress related to being in debt.
Tagged debt, Debt Management