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Other Debt Solutions
Individual Voluntary Arrangement (IVA)
Write off a percentage of unsecured debts included within this formal arrangement which usually lasts five or six years.
What are the advantages?
Stops further interest and charges
The number of monthly repayments are fixed (usually 60 or 72)
If approved, all creditors included in your IVA are legally bound by it, awarding you legal protection from further creditor action
Supervised by licensed insolvency practitioners
No further contact from your unsecured creditors
What are the disadvantages?
Need 75% or more of voting creditors to approve
Credit rating can be affected; the IVA will stay on your file for 6 years after approval
You may be required to release equity from your property
Your IVA will be listed on the Individual Insolvency Register
If your IVA fails, creditors can request the Supervisor to petition for bankruptcy
Creditors can vote to reject your arrangement – however, even if this happens – we will work with your creditors to try to find a resolution that will allow your IVA to become approved
Bankruptcy is a formal insolvency route for individuals with serious debts that they cannot pay. Fees apply.
Advantages of Bankruptcy
It includes all unsecured debt.
Interest is frozen (unless debts are repaid in full, then you may have to pay statutory interest).
And at the end of the year, any debts outstanding will be written off and no further action can be taken by creditors to recover it or contact you.
For a lot of people, bankruptcy is the quickest and cheapest solution to resolve their debts and it allows you to make a fresh start after only one year.
In England and Wales, you can apply online and pay the fee by instalments.
(for homeowners only) you may be able to avoid having to sell your home if a third party can buy your share of its value after any debts secured on it have been paid.
Disadvantages of Bankruptcy
Your employment may be affected (people considering bankruptcy should check their contract of employment).
If you have a property it may be sold.
Bankruptcy fees are – £680 (£647 in Northern Ireland) – additional fees and costs will be paid out of asset realisation.
You will appear on the Insolvency Register while you are registered bankrupt (usually 12 months) – the bankruptcy order will remain on your credit file for 6 years from the date of bankruptcy.
Your credit rating will be affected (probably for some time after your bankruptcy ceases) and there may be other restrictions, such as having your bank and credit card accounts closed.
Debt Management Plan (DMP)
A DMP is an agreement between you and your creditors to pay off all your debts. You make regular payments to a licensed debt management company.
Advantages of a Debt Management Plan
One affordable monthly contribution to your creditors.
Debt management is an informal arrangement that avoids the need for formal insolvency procedures such as an IVA or bankruptcy.
By reaching an agreement with your creditors a DMP may suspend actions against you such as County Court Judgments (CCJs).
In many cases, creditors may freeze interest or charges.
Your monthly debt repayments may be reduced.
Disdvantages of a Debt Management Plan
Your creditors are not obliged to accept a DMP. The arrangements are informal meaning your creditors can change their mind at any time.
Creditors including bailiffs, have the right to continue action
Your credit rating may still be affected.