Debt Solutions

Introduction:

Depending on an individuals circumstance there are different options available. They can range from some simple advice on budgeting to helping someone to prevent themselves becoming bankrupt.

Options Available

The UK Insolvency Helpline can provide advice and help with the arrangement of:

Help with budgeting
Debt Management Plans
Credit Repair and getting a Mortgage when you have a bad credit history
Individual Voluntary Arrangements (IVA’s)
Trust Deeds (Scotland only)
Bankruptcy

Help with budgeting

Income Optimisation

According to The UK Insolvency Helpline, 75 per cent of the people who call them are able to better manage their debt through simple budgeting. This form of 'income optimisation' focuses on trimming the excess expenditure from your monthly budget in a way that doesn't leave you gasping for breath.

After detailing a precise monthly budget planner, an advisor will focus on helping make the necessary savings to reduce the amount of disposable income spent on servicing debts.

Debt Management Plans

What is a Debt Management Plan?

A Debt Management Plan (DMP) is suitable to those who are struggling to keep up with their repayments to their lenders. A DMP allows you to make reduced repayments to your lenders (creditors) over a number of years. Payments are made until the debt is cleared in full or until you are able to make full repayments again. The repayments are based on what you can afford after a realistic income and expenditure report has been drawn up.

A debt management company will negotiate the reduced payments with your creditors on your behalf. The payments are then made to the management company each month and are then distributed to your creditors for you.

Be careful when choosing a debt management company. The companies offering this service vary greatly. Some companies charge you fees for putting together a DMP whereas other companies pass the cost onto the creditor so you do not pay up-front fees. Also, make sure that the company you choose will send you regular statements if you require them to. This is to ensure that the payments to the creditors are actually being paid regularly and are not simply gaining interest for the debt management company.

The UK Insolvency Helpline can help by giving you information so that you can avoid the many pitfalls. For more information on Debt Management, contact us on 0800 00 86 104 or email us at: candis@insolvencyhelpline.co.uk.

The Advantages of a Debt Management Plan

You no longer have to deal with your creditors
You make payments that you can afford
Your payments are re-evaluated frequently so that any changes to your situation can be taken into account
You only make one payment a month.

The Disadvantages of a Debt Management Plan

Debt management plans are not legally binding so creditors do not have to agree to repayment schedules. However, if the arrangement works well the creditors will be happy to co-operate.
A Debt Management Plan may not be suitable if your surplus income is low and would therefore mean that you would be making the repayments for many years. If this is the case there are other options available such as an Individual Voluntary Arrangement or Bankruptcy

Credit Repair and getting a Mortgage when you have a bad credit history

How to do it yourself

For most of us credit repair is a mystery - you fill in a credit card application, send it in, cross your fingers and hope for the best. Many people get refused credit because they have poor credit history.

As many people find out getting credit can be a very disappointing process. A few late payments, maybe an account or two that went to collections. They may not seem like a big deal at the time but wait until you really need to buy something.

Perhaps you've even been put off buying a house because you're sure you won't qualify, you may even be paying more for your car insurance because of your damaged credit report.

There is a lot you can do to clear up your rating but you shouldn't expect overnight miracles. The UK Insolvency Helpline sorts out fact from fiction and can suggest legitimate steps you can take to start improving your credit rating today.

Do you have bad credit but want to buy a property?

If you have had bad credit such as late payments, defaults, repossessions, CCJs, or bankruptcy - you probably think that you’ll never be able to buy a property. This is not so. If you have a steady or secure income that is high enough so you can afford the monthly payments, and have a sufficient amount of money saved up for a deposit, you will probably be able to buy a property.

Candis' mortgage provider Blueprint Distribution may be able to help you. Please call if you require this service: 0207 562 5888.

Individual Voluntary Arrangements (IVA’s)

An IVA is a method of settling your debts.

In 1986 the law regarding insolvency changed. Among the changes was a section which dealt with the debts of individuals. The intention of the new law was to create a situation whereby people in financial difficulties could reach an arrangement with their creditors rather than go bankrupt.

If you cannot pay your creditors all the money they are owed, it might be worthwhile considering the IVA process. By proposing an IVA it may be possible to get your creditors to accept part-payment of the money they are owed in full and final settlement of the debts.

How it works

To prepare an IVA Proposal to your creditors you need the help of a licensed Insolvency Practitioner. The person who helps you prepare your Proposal is called the ‘Nominee’. The intention of the proposal is to outline your financial position and to offer your creditors some money to settle your debts.

The proposal will include:

A list of your creditors.

The sum you can offer them to settle your debts (either a lump sum or a
monthly amount).
Details of any assets you may have.
A short history explaining your present circumstances and an explanation
of how the debts occurred.

Interim Order

Your proposal will then be sent to your local court where it will be read by a district judge. If the judge considers the Proposal is worthwhile, he will grant an Interim Order. An Interim Order is granted for a set period of time. During this period unsecured creditors are unlikely to take any further action against you. This provides vital protection against bankruptcy petitions and other court actions. After the interim order has been granted, the insolvency Practitioner will send each of your creditors a copy of the Proposal.

When the Creditors have had an opportunity to consider the Proposal the Insolvency Practitioner will arrange a Creditors’ Meeting.

After approval the Insolvency Practitioner will act as Supervisor of the Arrangement. The job of the Insolvency Practitioner is to ensure that you pay your creditors the sum agreed in your Proposal and to take account of any change in your circumstances during the period of the Arrangement.

The Arrangement can last for as little as one month in instances where you have an asset to sell and make a single payment to your creditors, or up to five years if you are making regular cash payments.

What happens afterwards?

If you keep up your payments for the period of the Arrangement then your debts will be
discharged in full.

Supervision

When IVA is approved, our support does not stop there. A typical IVA lasts 5 years and during this time the UK Insolvency Helpline supervision department take an active role in looking after our clients. We deal with the real world and in the real world problems occur. As a client may have problems obtaining credit during an IVA, a broken down car or washing machine can seem like an impossible difficulty. It is situations like these that we deal with every day.

With the supervision department guiding a client through the arrangement, we maintain an enviable success rate for IVAs. It is often surprising to many of those who refer cases to us that five years later we are still caring for the interests of the client.

Trust Deeds (Scotland only)

A Trust Deed is a legally binding voluntary arrangement, available only in Scotland, which offers debtors an alternative to bankruptcy (sequestration).

Establish a monthly repayment schedule

It is designed to enable those who cannot repay their debts a way to establish, with the aid of a Trustee, a monthly repayment schedule based on what the debtor can afford to pay. The Trust Deed will last for a specified period, usually three years. When the specified term of the arrangement comes to an end, any remaining debts are written off.

Trust deeds are only applicable where a debtor does not have enough disposable income (the surplus money after day-to-day living expenses) to meet his/her unsecured contracted credit repayments.

It should be borne in mind that Trust Deeds are a formal and legally binding arrangement between the debtor and a licensed Insolvency Practitioner (the Trustee) and should only be entered into accordingly.

Although considered an 'informal' bankruptcy, a Trust Deed is still regulated by The Bankruptcy (Scotland) Act 1985.

If other criteria are met, a trust Deed can be registered as 'Protected'. Protection has the added benefits of preventing creditors from taking legal action against you and also ensures that interest will be frozen on your debts.

The Trust Deed Process

Initiating a Trust Deed is similar to most formal and informal arrangements. Here you provide the Trustee (a licensed Insolvency Practitioner) with the details of everyone to whom you owe money. You will also provide them with details of how much you can afford to pay into the arrangement each month (this will be your disposable income) and any other financial information which may be of relevance.

Following your signing of the Trust Deed, your Trustee will write to all your creditors. If more than two thirds of your creditors by debt agree to the Trust Deed, which they do in the vast majority of cases, it will become a Protected Trust Deed. Protected status prevents your creditors from taking any further action, such as arresting your earnings, and freezes interest. It also means that they have to accept the balance of the Trust Deed’s fund as full and final settlement at the end of the three year term.

Any correspondence you receive from your creditors after signing the Trust Deed should be forwarded to your Trustee for him to deal with. You pay your Trustee the monthly payment agreed with him, whilst continuing to pay your mortgage, other secured debts and living costs as normal.

Until the Trust Deed is finished, you must inform your Trustee if there is a change in your financial circumstances or if you move house.

Advantages

Trust Deeds offer a number of advantages over sequestration (bankruptcy):

Your Trustee deals with your creditors. You no longer have to.
You make just one payment per month from your disposable (surplus) income.
With a Protected Trust Deed, your creditors cannot take further action against you, arrest your earnings or continue to charge interest.
Unless your employers are one of your creditors, there is no need for them to know that you have signed a Trust Deed.
It can be possible for individuals to hold certain public offices, remain as directors and for companies to continue to trade.
Trust Deeds normally last three years. When it ends, the remaining debt is effectively written off.
A Trust Deed does not automatically impact on your credit rating.
Unlike sequestration, the information is not published.
There are no court proceedings involved.

Costs and committments

The Costs:

You have no initial cost for the work involved in drawing up the Trust Deed documentation. The Trustee’s fees and expenses are agreed with your creditors. They agree to a reduction in their overall income from the Trust Deed’s Fund in exchange for the Trustee’s administration and pay him from the contributions you make. This means you have NOTHING TO PAY UP FRONT.

Your Commitment:

In establishing a Trust Deed you are entering into a contract to repay your debts, most likely at a reduced rate. In doing so you must agree to:

Co-operate with the Trustee
Pay the monthly contribution as agreed
Take no further credit
Inform your Trustee if you receive any unexpected windfalls of money which are in excess of £200
Advise your Trustee of any change in financial circumstances
Inform your Trustee of any change of address

Bankruptcy

Please note that prior to deciding to go bankrupt you are advised to look into an Individual Voluntary Arrangement (IVA’s)

How do I petition for my bankruptcy?

First, you should get the following forms, free of charge, from a local court that deals with bankruptcy. Or you can print these forms off The UK Insolvency Helpline website at: www.insolvency.gov.uk.

The petition (Insolvency Rule form 6.27)

This form is your request to the court for you to be made bankrupt and includes the reasons for your request.

The statement of affairs (Insolvency Rule form 6.28)

This form shows all your assets (anything that belongs to you that may be used to pay for your debts) and all your debts, including the names and addresses of the creditors and the amount you owe each one. The form contains a declaration of insolvency that you will need to swear on oath before an officer of the court or a solicitor. You may have to pay an extra fee for this.

How much will it cost to make myself Bankrupt?

The court fee of £140. In some circumstances the court may waive this fee; for example, if you are on Income Support. If you are not sure whether you qualify for a reduction in the fee or whether you are exempt from paying the fee, court staff will be able to advise you.
The deposit of £310 towards the costs of administering your bankruptcy. This deposit is payable in all cases.
The fee to swear the statement of affairs. In a county court, no charge is made to swear this affidavit, which is part of the statement of affairs. But in the High Court or before a solicitor there is a £7 charge.

If you are a married couple and you are both applying for bankruptcy, you will each have to pay separate fees.

What are the advantages of Bankruptcy?

You lose control of your assets - this may include your house and vehicle.
You cannot obtain credit.
Your credit is affected for many years after the annulment.
You may be publicly examined in court.
Certain occupations and professionals will not allow you to go bankrupt.
You cannot act as a company director.
You cannot take any part in the promotion, formation or management of a limited company without the permission of the court.
You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy