An IVA is a contract between you and your creditors. You pay an agreed monthly sum, usually for 5 years. This is divided up between your creditors, who accept the sum in settlement of the amount you owe them.
The monthly payment depends on your income and expenditure, and is agreed so that it will be affordable to you. A standing order authority will be set up and your first payment must be made within one month of work commencing on your behalf.
Simply people who cannot pay their debts. If you cannot pay your debts as they fall due, you are insolvent and the law gives you two alternatives - bankruptcy or an IVA.
You could get all of your creditors to reschedule your debts, but this may be difficult if you have a lot of creditors. Some banks and building societies have debt counsellors, and you could try speaking to them. Bear in mind that unlike an IVA, an informal arrangement offers no guarantees. One or more of your creditors could change their mind at a later date, or charge you higher rates of interest later if your circumstances improve. You may also take longer to finally clear your debt.
- We help you to calculate what you can afford, and you make just one payment to your client account by standing order each month. The payment amount is the same over the whole period of the IVA unless your circumstances change and you can afford more. Typically, your circumstances will be reviewed annually.
- Once your IVA is approved, all of your creditors are legally bound by its terms, as long as you keep paying your agreed monthly sum.
- Once the agreed term of your IVA is over (usually after 5 years) you have no further obligations to your creditors. At this point you stop paying the monthly sum, and can start afresh.
- Your employment will probably not be affected. In fact, your employers will not know about your IVA unless you choose to tell them.
- Unlike bankruptcy, an IVA is not advertised in the local press and does not exclude you from running a business or lead to many professions terminating your employment.
Before your IVA proposal is put to creditors you need to sign it as a
"Statement of Truth". You do not need a solicitor for this: you simply
read it and sign it. We prepare all documentation for you and also
contact your creditors on your behalf (and if necessary we will make an
application on your behalf to your local County Court for an "Interim
A creditor meeting will then consider your proposal. You will not usually need to attend as typically most creditors do not attend, voting by proxy instead. Even if creditors do attend, the meeting usually only lasts for between 15 - 20 minutes. Someone from Debt Help Services will chair the meeting, and you need to be available at the end of a phone line during this period.
You might actually pay more out in an IVA than you would if you were made bankrupt. This is because bankruptcy income contributions usually only last for 3 years, whereas contributions in most IVAs last for 5 years. This voluntary increase in the total payment should make your creditors sympathetic to your proposal.
You will not usually have to sell your property when in an IVA. If you do own your home, you need to take reasonable steps at the end of the IVA to make any equity available to your creditors (usually by re-mortgaging). This requirement is also true for bankruptcy, except that bankruptcy often means you do have to sell your home.
At least 75% of votes (in value) at your creditor meeting must be in
favour of your IVA proposal. Creditors can suggest modifications to your
proposal and you can choose whether to accept them or not.
If your creditors don't vote in favour you will still have the option of an informal arrangement with your creditors, or of bankruptcy.
We don't charge you any fees since these are agreed with and paid by your creditors as part of the IVA. Providing you keep to the agreement for five years, any debt you can't afford to repay will be written off by your creditors. In summary, you pay only the affordable monthly amount you and your creditors agree to under the terms of the IVA.
A Debt management plan is an arrangement between yourself and a Debt Management company who agree to supervise and distribute your debt repayments to your creditors. Some people can restructure their repayments into a more convenient plan and you won’t have to sell your home as part of the agreement. Interest charges are not usually stopped and Debt Management companies may or may not charge a fee for their services – Debt Help Services would only ever recommend non-fee charging debt management companies
Bankruptcy is a legal process that can be started if you can’t afford
to pay all of your debts. It can also be started someone else if you owe
them more than £750. Bankruptcy allows you to free yourself from
overwhelming debts and make a fresh start. A ‘Trustee in Bankruptcy’,
(the person appointed to deal with your assets) sells your assets and
distributes the proceeds to your creditors.
After your bankruptcy ends your creditors can’t make further claims against you. However, bankruptcy brings with it certain restrictions. For example, the fact you have been made bankrupt is advertised in the local press, your landlord is told and your employment may be at risk in some occupations and professions.
When you make yourself bankrupt, all of your assets
automatically become the possession of your Trustee in Bankruptcy.
He/she has the authority to dispose of them without your consent.
However, you are able to retain tools, books and vehicle that are
essential for employment. You can also keep clothing, bedding,
furniture and household equipment needed to satisfy the basic domestic
needs of yourself and your family.
The assets which the Trustee in Bankruptcy can take are as follows:
- Any interest you may have in property, even if it’s held in joint names with a spouse or partner
- Any shares, bonds, endowments and savings policies
- Any funds held in bank or building society accounts
- High value assets such as motor vehicles and jewellery, although a suitable lower cost replacement can be provided instead
- Lump sums from private and occupational pensions if they mature during the bankruptcy. The Trustee may also be entitled to subsequent pension payments for up to three years.
You can also face having to pay part of your monthly
or weekly wage, either with your consent or through a court order.
This order is based on you contributing any surplus income and will
last for a maximum of three years from the date of bankruptcy.
If you acquire any asset during the term of your bankruptcy you have to advise your Trustee, who will realise it for the benefit of your creditors. Example assets include:
- Inheritances, including property, cash, investments and any other asset of value
- A windfall from a win on the National lottery, football pools or bingo
- Money received after the date of bankruptcy but before the date of discharge from your bankruptcy
Bankruptcy Orders are advertised in the London Gazette and in a
newspaper in your local area. Details are also placed on a bankruptcy
register maintained by the Department of Trade & Industry and the
Insolvency Service. This is a public document and can be seen by the
public via the internet.
Anyone who you have had a financial relationship with will be told of your bankruptcy, including banks & building societies, mortgage and secured loan companies, hire purchase companies, your landlord, people you owe money to and pension and insurance companies.
All of your bank accounts will be closed and any funds in them used by the Trustee to pay your creditors. If an account is in joint names with your spouse or partner then only half the funds can be taken. You’ll be allowed to open a new bank account with the authorisation of your Trustee.
If your student loan was taken out after 1st September
2004 then it can’t be written off. It will be treated as if the
bankruptcy had never happened – if you are currently having payments
taken directly from your salary then these will continue until the loan
is repaid. If you fall below the income threshold no payments will be
made until your salary reaches the level where repayments automatically
start. Note that interest will continue to accrue, as per your
agreement with the Students Loan Company.
If your student loan was taken out before 1st September 2004, you can include the Student Loan Company as a creditor in your bankruptcy and your monthly payments to them should cease.
Not always. If you are a member of a professional body you will need to check to see if you will lose your membership. This can result in you being unable to continue in your current role. Further clarification will be available if you look at the terms of your contract of employment.
Always seek your own legal or financial advice about bankruptcy and the other options available to you. Official bodies like courts or the Insolvency Service won’t help you decide on the best way forward. Debt Help Services will be happy to help you to review your own circumstances and advise on the best solution available to you.
If bankruptcy isn’t a suitable or agreeable option to resolve your debt problems then you may want to consider the following options:
- An informal arrangement with your creditors. You could write to all of them explaining your current financial position and agree an affordable payment plan to repay the debt
- A non-fee-paying debt management organisation that will agree a monthly payment with your creditors. Your only obligation will be to provide them with regular information and make the agreed monthly payment, which they will pay to your creditors. The arrangement generally continues until the debts and any accruing interest are repaid in full
- An Individual Voluntary Arrangement (IVA). This is a legally binding contract between you and your creditors – see the FAQs on IVAs above.
The first step is to complete and submit with a fee
the necessary forms. These will petition the bankruptcy clerk for your
bankruptcy, with the County Court that has jurisdiction for bankruptcy
in your local area.
The bankruptcy clerk will give you an appointment when your application for a bankruptcy order will be heard. This can sometimes be on the same day as you submit the application.
At your hearing, the court will do one of the following:
- ‘Stay’ or postpone proceedings - usually to await more information in which case a further hearing date will be set.
- ‘Dismiss’ your petition.
- Appoint an insolvency practitioner if an Individual Voluntary Arrangement (IVA) is found to be more suitable.
- Grant your petition if bankruptcy is found to be the way forward.
The general rule is that you will be discharged from
bankruptcy after a maximum period of twelve months. This period can be
shorter should the Official Receiver complete his enquiries earlier and
file a notice to that effect in court.
The duration of the bankruptcy can also be altered in the following circumstances:
- The court annuls the bankruptcy order on the grounds that all debts have been paid in full
- The court annuls the bankruptcy on the ground that the original order was not appropriate
- The discharge from bankruptcy has been suspended as a result of failure to co-operate with the Official Receiver or Trustee. Only after the breach causing the suspension has been rectified will the twelve month period continue.
Although you’re free of bankruptcy once discharged, it’s important to note that its effects may extend much longer, affecting your credit rating, for example.
When your bankruptcy order is granted, the court will contact the
Official Receivers’ office and tell them that the order has been made. A
representative of the Official receivers’ staff will then ask you to
attend an interview at their offices to discuss your financial
circumstances. You will be requested to complete and return a
questionnaire prior to this interview.
Once the Official Receiver has all the relevant information he will decide what assets, if any, will be taken from you. He’ll also assess your income and expenditure to determine whether or not to make an income payments order as well.
This is down to individual choice, mortgage rates are usually lower and set up fees higher than those of loans because of the length of time involved and your home will be at risk in both cases if you cannot meet the repayments.
If you can consolidate all of your existing debts into a loan that offers lower total repayments then a consolidation loan might be the best solution; you will save money in the long run and avoid more drastic solutions. This might not be possible in some cases as many people who are experiencing serious financial difficulties tend to have poor credit ratings; if this is the case then taking on more financial responsibility is likely to make your situation worse.
Yes, but you will normally have to pay an early settlement charge to your lender. If your settlement charge is high it might be best to opt for a secured loan.
Remortgages normally take approximately 6 weeks and secured loans approximately 3 weeks.
Not on Secured loans. A remortgage application fee will cover the cost of valuation, mortgage reference and administration costs.