DEBT SOLUTIONS

 

Individual Voluntary Arrangement

 
What is an IVA?

An IVA, or individual voluntary arrangement, is a legally binding agreement between you and your creditors, in which you agree to pay an affordable monthly payment for a set period of time – usually 5 or 6 years. After this set period of time any remaining debt will be written off. Your credit file could be affected for 6 years.

 
Will an IVA affect my property?

For homeowners regulations state that if you have equity, some form of equity release may be required by creditors. If you do not have equity and can’t re-mortgage, more times than not, you will have an extra 12 months of payments added on to your IVA.

 
How will an IVA affect you?

When you enter an IVA, your creditor accepts what you can afford to pay over the course of 5 years. Once that time period is up, your outstanding balance is written off. This amount could be up to 75% of your initial debt balance.

Your ability to obtain credit for credit cards, loans, mortgages and other unsecured debts may be affected for 6 years. An IVA will be on your credit report for a minimum of 6 years from the date of arrangement and longer if the arrangement lasts more than 6 years.

Your IVA will be added to the Insolvency Register and is removed 3 months after the IVA ends.

 
Who can set up an IVA?

An IVA can only be set up by a professional lawyer or accountant, known as an Insolvency Practitioner (IP).

What fees are payable if I decide to apply for an IVA

If we determine that an IVA is a suitable option for you and you agree, we will refer you to a third party associate firm at which time the fees will be explained to you. We will always recommend you speak to The Money Advice Service for free & impartial money advice before requesting to be referred for an IVA.

What happens during an IVA?

An IVA involves making a profile of your financial status and making contact with all of your creditors. As the proposal is being processed, you will be provided with an interim order which can prevent creditors from seeking further action. During a meeting with all of your creditors, your proposed monthly payment will be voted on. As long as 75% of your creditors agree upon the amount you proposed, your IVA will be approved (this is distributed based upon your debt level with each creditor). The proceeds from one payment sent to your insolvency practitioner each month will then be divided among your creditors.

Benefits

• Give you a date on which your debt will be cleared.

• Stop letters and phone calls from your creditors.

• Stop debt collectors and bailiffs from calling you.

 
Disadvantages 

• You will be obligated into the agreement for the full term.

• Your details will be recorded on the insolvency register.

• You will not be able to get additional credit of more than £500 without your supervisor’s consent.

• Homeowners will need to look into releasing equity from their home.

• Failure to comply with the TD may lead to bankruptcy.

• Your credit file may be affected for six years.

• Certain debts will still be outstanding.

 

Debt Management Plan

 
What is a debt management plan?

When you are looking into how to solve your debt problems, you hear the term ‘debt management plan’ and many people have absolutely no idea what one actually is, so here you will find out what exactly is a debt management plan?

A debt management plan is an informal arrangement so payments can be changed to meet your circumstances. What this means is that Debt Management providers come to an arrangement with your creditors to repay your debts, but at a rate which you can afford. They do this by looking at your income and expenditure and coming up with a realistic payment plan that is good for all parties – your creditors get paid in full and you can repay your debts without struggling for food or warmth. If your situation changes and you can afford to pay more (or less) you can change your payment amount quickly and easily. Alternatively if at any point you decide you no longer need to be on a debt plan you can cancel at any time, although you will still have any outstanding debt with your creditors. In many cases Debt Management providers can even have any charges and interest frozen, although there is no guarantee that the creditors will agree to this. A Debt Management plan is not a solution we administer in-house.

What are the debt management fees for?

Your monthly debt management fee will pay the daily administration of your plan, the assistance from an expert agent, setting up communication with your creditors, payment of postal fees and phone calls, requesting that interest and other charges be stopped and providing you with an annual review of your financial situation.

How do you set up a Debt Management Plan?

We will refer you out to a debt management company who will conduct a full financial review of your accounts and determine a monthly affordable payment. They will then communicate directly with your creditors on your behalf, and develop a repayment plan. Once the plan is in place, all you will need to do is make one monthly payment. We will always recommend you speak to The Money Advice Service for free & impartial money advice before requesting to be referred to a debt management company.

Can I pay off my debts early?

A debt management plan, unlike an IVA does allow you to pay off debt early. As a non-legally binding agreement, you will be allowed to use pay raises or other sources of income to make larger payments and relieve yourself of debt sooner.

Benefits

• Your plan is flexible so payments can be changed to meet your circumstances.

• If you complete the plan, your unsecured debts will be cleared.

• Making one regular monthly payment allows you better control over your finances.

• In many cases, you will no longer be contacted by your creditors or debt collectors.

 

Disadvantages 

• Creditors don’t have to agree to a debt management plan and may still contact you asking for immediate repayment.
• Mortgages and other ‘secured’ debts are not covered by a debt management plan.
• Obtaining credit in the future could be problematic since your credit rating will be affected for 6 years
• Your debts must be repaid in full – they will not be written off.
• Paying over time may mean the amount you pay is increased

 

Bankruptcy

Bankruptcy is one way of dealing with debts you cannot afford to repay. It is a court order that you can apply for if you have unmanageable debts. It may be the best way for you to free yourself from excessive debts but the decision should not be taken lightly.

What is bankruptcy?

Bankruptcy is a legally binding form of insolvency, which gives you some relief from your debt in return for you agreeing to certain terms. To clear your debts, your assets are sold and split among creditors. While you are usually discharged from bankruptcy after a year, certain circumstances and disposable income may require you to pay into it for three years. You are protected from legal action and at the end of the term your outstanding debt is written off.

How long will bankruptcy last for you?

Bankruptcy normally lasts for 12 months. Once this has passed, regardless of what you owe, your bankruptcy will be discharged.

Will your credit rating be affected?

Your credit rating will be affected in the long term as the bankruptcy order will remain on your file for 6 years following bankruptcy.

What are the criteria for a Bankruptcy?

• Debt exceeding £750
• The cost of bankruptcy is £680 – this fee can be paid in instalments to the Insolvency Service via gov.uk until the £680 fee has been reached, so you can pay it at a rate that’s affordable for you.

 

WHAT HAPPENS DURING A BANKRUPTCY?

• During the bankruptcy you cannot use your bank account, credit cards etc

• The official receiver must be given details regarding all financial affairs

• Creditors cannot take legal action against, or pursue you, during bankruptcy

• Details of your bankruptcy status may be published so creditors can administer a claim

• You cannot act as a director of a company until you are discharged (released) from bankruptcy. This is usually 12 months from the date the court made you bankrupt

• If you are self-employed, you can lose your business and all employees will lose their jobs

• You are on an insolvency register for three months following discharge

  

Benefits

• Once you have completed the bankruptcy you will be completely free from any unsecured debts that were included in the bankruptcy proceedings.

• Bankruptcy provides automatic discharge after one year – less in some cases

 

Disadvantages

• Your assets, including your home and car, can be included and sold to raise money to repay creditors.

• You won’t be able to act as a director of a company.

• You will need court permission to take any part in the management of a limited company.

• If the official receiver believes it would help the investigation, members of your family, or employers could be scrutinised in court.

• It may be difficult to obtain credit in future, as a record of the bankruptcy order will stay on your credit history for up to six years.

 

Debt Relief Order

What is a Debt Relief Order?

A debt relief order is an alternative to bankruptcy for people struggling with debts of less than £30,000.

A debt relief order is only available to people who have a disposable income of less than £75 per month and personal assets worth less than £2,000.

Motor vehicles worth less than £2,000 will generally not be included in this limit (This is in addition to the general assets that you can have)

What debts count towards a debt relief order? 

• Unsecured debt – Loans, credit cards, store cards, overdrafts, payday loans.

• Household debts – Rent, utilities, telephone, council tax.

• Finance – Hire purchase, credit agreements, buy now pay later agreements.

 

Who is a debt relief order suitable for?

Individuals with relatively low liabilities, small surplus income and few or no assets and who are possibly not in a position to pay off their debts in a reasonable time. 

What are the criteria for a Debt Relief Order?

It costs £90 to arrange a Debt Relief Order and you can pay in instalments over 6 months. However, you need to have paid the fee in full before your application will be looked at. To qualify for a Debt Relief Order, you need to meet the following criteria: 

• Your disposable income must be £75 or less.
• You have less than £2,000 in assets and your car is worth no more than £2,000.
• Your debt totals less than £30,000

 

What will a Debt Relief Order mean to me?

• Discharge of a DRO usually occurs after a year

• Your name is placed into the insolvency register

• You are removed from the insolvency register after three months but your credit will be affected for at least 6 years following

• All debt is frozen while in the DRO

• Legal action against you cannot be taken while in the DRO nor can creditors pursue you

• A DRO can seriously affect current and future employment

 

Debt Arrangement Scheme

What is a Debt Arrangement Scheme?

A debt arrangement scheme (DAS) is a debt management program, run by the Scottish government, which allows you to repay your debts over an extended period of time whilst providing you protection from their creditors.

A Debt Arrangement Scheme is set up by the government and only available through a Debt Payment Programme. It is a debt solution available to Scottish residents who are struggling with debt but want to avoid bankruptcy. As a more formal debt payment plan that is not bankruptcy, this plan consists of one low monthly payment distributed by a DAS administrator to all of your creditors.

Who is a debt arrangement scheme suitable for?

To be eligible for a DAS you must be struggling to make your monthly debt repayments and also meet the criteria below.

• Live in Scotland.

• Have sought debt advice from a DAS approved adviser.

• Wish to repay your debts without the threat of creditors taking legal action.

• Have some disposable income following deduction of normal household expenses.

 

You must not be involved in another formal insolvency procedure at the time of application, such as:

• Protected trust deed.

• Bankrupt or subject to a bankruptcy restrictions order or a bankruptcy restriction undertaking.

• Your DAS application only includes one debt and you are subject to a time to pay direction under section 1 (time to pay directions) or section 5 (time to pay orders) of the Debtors (Scotland) Act 1987.

• The DAS application only includes one debt and is subject to a time order under section 129 (time orders) of the Consumer Credit Act 1974 (d), in relation to that debt.

• You are paying a debt(s) under a conjoined arrestment order. If a creditor (whether the creditor is involved in the conjoined arrestment order or not) has tried lawfully to enforce another debt that is owed, then you may be eligible to apply for DAS.

 

Fee Policy

IVA Fee’s

How much does an IVA Cost?
The IVA fees will have been fully explained by your advisor and will be detailed in your IVA proposal. But, if, at any time, you do not feel you fully understand the fee structure we have in place, please contact us and we will explain the cost in more detail.

The fees charged for initiating and supervising your IVA are included in the agreed amount you pay each month into your arrangement. There are no additional or hidden IVA costs.

There are two sets of fees which are charged for an IVA: The Nominee’s fee and the Supervisor’s fee. No other fees are charged.

The Cost of an IVA: Nominee’s Fee
The Nominee’s fee covers the time and expertise needed to consult with you and establish your income and expenditure, assets and liabilities in order to put together the IVA Proposal which is submitted to your creditors. The Nominee represents you from the beginning of your instructions to help you put a proposal to your creditors until the creditor’s meeting and, if the proposal is accepted, your Nominee becomes your Supervisor thereafter.

The Nominee’s fee can typically vary from £1,000 to £2,220 depending on your creditors agreement. This will be drawn over the first year of the arrangement (usually within the first five months).

If you are a sole trader, partner in a business or have complicated affairs, the Nominees fees may occasionally be higher – but we will explain the reasons for this if they are higher than as previously stated.

The Cost of an IVA: Supervisor’s Fee

In addition to the above, following approval of the IVA, a monthly Supervisor’s fee will be taken. The Supervisor’s fee covers the specialist work carried out throughout the duration of your IVA (normally a five year period) to ensure it is managed correctly and ethically. You will have appointed a Personal Supervisory Advisor who will manage the day to day running of your account who is qualified to help you should any changes to your circumstances affect your ability to pay your monthly IVA contribution. Furthermore, your Supervisor will conduct annual reviews throughout your IVA term to ensure payments are still affordable and to address any variations that may be needed.

The Supervisor fees are never more than a maximum of 18% of all the contributions you make over the period of the IVA, taken monthly, in fulfillment of the supervisory role.

The Cost of IVA Advice
We don’t make any charge to you for any debt advice given prior to the IVA being prepared, however if a Meeting of your Creditors has been arranged and you decide not to proceed, our partners reserve the right to charge you £250 to recover costs and disbursements that we have incurred. There are never any other charges whatsoever.

If, in the unlikely event your proposal is refused by creditors, we do not make any charge to you. We will suggest an alternative program to you which may be acceptable to your creditors at that time.

Trust Deed Fee’s

How much does an Trust Deed?
The Trust Deed fees will have been fully explained by your advisor and will be detailed in your IVA proposal. But, if, at any time, you do not feel you fully understand the fee structure we have in place, please contact us and we will explain the cost in more detail.

The fees charged for initiating and supervising your Trust Deed are included in the agreed amount you pay each month into your arrangement. There are no additional or hidden Trust Deed costs.

There are two sets of fees which are charged for an Trust deed: The Nominee’s fee and the Supervisor’s fee. No other fees are charged.

The Cost of a Trust Deed: Nominee’s Fee
The Nominee’s fee covers the time and expertise needed to consult with you and establish your income and expenditure, assets and liabilities in order to put together the Trust Deed Proposal which is submitted to your creditors. The Nominee represents you from the beginning of your instructions to help you put a proposal to your creditors until the creditor’s meeting and, if the proposal is accepted, your Nominee becomes your Supervisor thereafter.

The Nominee’s fee can typically vary from £1,000 to £2,500 depending on your creditors agreement. This will be drawn over the first year of the arrangement (usually within the first five months).

If you are a sole trader, partner in a business or have complicated affairs, the Nominees fees may occasionally be higher – but we will explain the reasons for this if they are higher than as previously stated.

The Cost of a Trust Deed: Supervisor’s Fee
In addition to the above, following approval of the Trust Deed, a monthly Supervisor’s fee will be taken. The Supervisor’s fee covers the specialist work carried out throughout the duration of your Trust deed (normally a five year period) to ensure it is managed correctly and ethically. You will have appointed a Personal Supervisory Advisor who will manage the day to day running of your account who is qualified to help you should any changes to your circumstances affect your ability to pay your monthly Trust Deed contribution. Furthermore, your Supervisor will conduct annual reviews throughout your Trust Deed term to ensure payments are still affordable and to address any variations that may be needed.

The Supervisor fees are never more than a maximum of 20% of all the contributions you make over the period of the Trust Deed, taken monthly, in fulfillment of the supervisory role.

The Cost of Trust Deed Advice
We don’t make any charge to you for any debt advice given prior to the Trust Deed being prepared, however if a Meeting of your Creditors has been arranged and you decide not to proceed, our partners reserve the right to charge you £250 to recover costs and disbursements that we have incurred. There are never any other charges whatsoever.

If, in the unlikely event your proposal is refused by creditors, we do not make any charge to you. We will suggest an alternative program to you which may be acceptable to your creditors at that time.