Individual Voluntary Arrangements (IVA)

An IVA is an alternative to bankruptcy that was set up by the Government to help people in financial difficulty. It is a legally binding contract between you and your creditors. This means that once it is accepted you should not be contacted by them regarding payment of the debt as long as you keep up with the agreed payments.

Advantages

  • A single affordable monthly payment over a fixed repayment period (usually no more than 60 months).
  • An agreement that your creditors will freeze the interest and stop any charges so your debt balance does not increase.
  • Protection from further action by your creditors.
  • On completion your creditors legally write off any debt outstanding. (subject to conditions)

Advantages

  • A single affordable monthly payment over a fixed repayment period (usually no more than 60 months).
  • An agreement that your creditors will freeze the interest and stop any charges so your debt balance does not increase.
  • Protection from further action by your creditors.
  • On completion your creditors legally write off any debt outstanding. (subject to conditions)

Debt Management Plan (DMP)

A Debt Management Plan (sometimes called a “reduced payment plan”) can help you get back in control of your finances by giving you one single payment to simplify your debts.

Advantages

  • Each plan is designed for your individual circumstances.
  • We calculate how much you can afford after all your essential living costs.
  • One single affordable payment for all your unsecured credit commitments. At a date to suit you each month.
  • We negotiate with your creditors on your behalf and request they freeze interest and stop any charges. We deal with all the paperwork.
  • A Direct Line to your own Account Manager. You will always speak to the same person each time.
  • A monthly statement. So you can keep up to date with your account.

Disadvantages

  • A debt management plan could lengthen the time it takes for you to repay your debts, possibly increasing the amount that needs to be repaid, depending on your circumstances.
  • Your credit reference file will show details of the debt management plan. This may affect your ability to get credit in the future.
  • There is no guarantee that your creditors will accept the reduced payments and/or freeze future interest payments
  • During the negotiation process some creditors may continue to charge interest and other recovery charges. We cannot always prevent these charges being levied. These will however be paid off as part of your Debt Management Plan.
  • Entering into a Debt Management Plan will cause you to go into arrears with your creditors.

Bankruptcy

Bankruptcy is a form of insolvency which is normally suitable if you can’t pay back your debts in a reasonable period of time. After you have been declared bankrupt your creditors will write off your unsecured debts, this will allow you to make a fresh start, however, there are restrictions for the 12 month period of Bankruptcy whereby you will have to declare any changes to your personal circumstances to the official receiver. You will have to pay £680 to declare yourself bankrupt (£130 adjudicator fee and £550 bankruptcy deposit) this can be paid in instalments as low as £5. If you are living in Northern Ireland you will have to pay £647 to declare yourself bankrupt (£115 court fee, £525 bankruptcy deposit and £7 solicitor’s fee).

Advantages

  • Once granted you will be protected from creditor action.
  • You could be discharged after 12 months.
  • Debts written off at the end of the agreement and you will be granted “debt forgiveness”.
  • You don’t have to deal with your creditors.

Advantages

  • You may be required to sell your assets, including your property.
  • If your situation improves and you have a disposable income you may be required to make a monthly contribution for up to 3 years.
  • The bankruptcy will adversely affect your credit rating for 6 years.
  • Depending on your job role/title there may be restrictions from your employer that will not allow you to go bankrupt.
  • Cannot take out any credit until you are discharged from the bankruptcy.
  • Your bank account is very likely to be frozen.
  • Name will be published on an Insolvency register.
  • Bankruptcy cannot be joint.
  • You could possibly have a bankruptcy restriction made against you which can last up to 15 years and affect your financial affairs.

Debt Relief Order (DRO)

It is typically suitable for individuals who are struggling with their debts and have limited or no assets, as well as having less than £50 a month left over once all their normal household bills have been paid. A DRO can only be done by individuals who owe less than £20,000, however some debts do not count towards that total (student loans, court fines are just a couple of examples). A DRO will typically run for 12 months and during this time frame you won’t have to make any payments towards your debts that are included in the DRO.

The criteria to check for eligibility to see if you qualify for a DRO can be quite extensive; however the main ones are:

  • Owe less than £20,000
  • Have £50 or less left over each month after you have paid normal household expenses.
  • Not have, or own, any assets worth more than £1,000. This includes a car
  • You cannot own a home and apply for a DRO

Advantages

  • If your position remains unchanged, your debts will be cleared in 12 months.
  • Low application fee of £90.
  • Creditor calls/correspondence stopped once the order is accepted.

Disadvantages

  • Only able to obtain a DRO once every 6 years.
  • You are unable to apply if you are a homeowner.
  • The DRO will appear on a public register for 12 months.
  • The DRO will adversely affect your credit rating for 6 years.
  • Your assets need to be worth less than £1,000.

We’re here to listen & help you become debt free. See how it works:

1. Speak to Our Team

One of our trained advisors from the Money Help UK support team will contact you and discuss the options open to you. We will not charge you for this advice.

2. Find The Best Solution

Money Help UK support team will provide the best advice & solution for your circumstances and how to proceed. Guiding you through every step of the process.

3. Putting You First

Money Help UK are committed to helping you resolve your financial issues. All advice given is done so with your best interest in mind.

SEE IF YOU QUALIFY NOW

To find out more about managing your debts and getting free advice on solutions such as trust deeds, debt management plans, debt relief orders and IVA, visit Money Advice Service, an independent service set up to help people manage their money.