Debt Counselling

Informal arrangement – You could consider writing to all your creditors to see if you can reach a compromise. Include a timetable of when you will repay them.

Individual voluntary arrangement – This is a formal version of the previously described arrangement. You would need to apply to the court with the help of an authorised insolvency practitioner. He or she would supervise the arrangement and pay your creditors in line with the accepted proposals

Administration orders – If one or more of your creditors has a court judgement against you and if your total debts are £5,000 or less, the county court could make an administration order. Under the administration order, you make regular payments to the court, which will then pay your creditors. While you are paying the administration order, your creditors can’t take any further action against you to get their money, without asking the court first. Also, you will not have to pay any interest on your debts. You will have to pay a fee for an administration order, but this will be added to the money you already owe and not charged separately.

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.

The dreaded B-word, bankruptcy is an increasing possibility for many families and businesses and it can appear to be an attractive alternative for those struggling to pay off large debts, but what may seem like a get out of jail free card does have some long term implications that can be far worse

The first advice I would give to someone thinking about bankruptcy would be to get some free debt advice and look at all options especially an IVA before declaring yourself bankrupt, once the bankruptcy proceedings have started there can be no going back.

Once declared bankrupt by a magistrate, you will find yourself in a very limited position within the world of finance; it will be impossible to get a mortgage or a credit card, all assets will be lost such as house, car etc and there are restrictions on being a managing director or in charge of a company. You may also lose your career and some professions will not employ those who are or have been bankrupt. As well as all of this there is the social stigma; bankruptcy is advertised in local papers and if you are renting a property then the landlord will be informed.

The best alternative I’ve seen to bankruptcy is an IVA (Individual Voluntary Arrangement) which is similar to bankruptcy but is not surrounded by so much doom and gloom. It is a voluntary agreement between the debtor and the creditors on a settlement figure, and this is paid into a fund over a 5 year period. Interest charges are stopped and the creditors are not allowed to pursue any further legal action against the debtor. Having an IVA rather than declare yourself bankrupt has numerous advantages, the main being that you can keep your house and car (if it’s small and essential). The affordability of monthly payments is agreed in advance and fixed so there are no unexpected sales of assets. Employers do not require information about current or previous IVAs and having an IVA will not be printed in the paper. Your credit rating will not be harmed as much, but it will still be poor. I can’t see why anyone would choose bankruptcy over an IVA unless the creditors cannot agree on a figure for repayment or they wish to carry out an investigation into the debtors affairs.

It is never really in the best interests of the creditors to make someone bankrupt as they usually will get less of their money back through bankruptcy than if they agreed an IVA with the debtor. Court costs of bankruptcy are very high and repossessed houses that have quick sales do not achieve their maximum price.

As the credit crunch goes into full swing it seems likely that bankruptcy and IVA cases will increase as the nation falls further into debt. If you are teetering on the edge of financial collapse or ruin then get some free advice and take some weight off your mind.