If you feel that bankruptcy isn’t the correct solution for you then there may be alternative solutions available better suited to your circumstances. Bankruptcy is only suitable for people with extreme debt problems and you may find one of the debt solutions below better suits your needs. If you have debts under £15,000 or you are able to afford over £100 per month towards your debts then it may be advisable to consider an alternative solution to bankruptcy. Below are 3 alternative debt solutions that could help clear your debts without the implications imposed by bankruptcy. If you are unsure about which solution is best for you then please either call to speak to a debt expert on 0808 129 2011 or alternatively complete our quick online enquiry form and an advisor will be happy to go through your options with you.
Debt Management Plans (DMP's)
A Debt Management Plan (DMP) can help you re-negotiate your current payments with your creditors into an affordable and often lower monthly payment. A DMP would prioritise your essential monthly expenditure leaving you to pay only what you can realistically afford to pay to your creditors each month. When entering a Debt Management Plan, a debt advisor will calculate a manageable payment for you by going through your income and expenditure. Any surplus money available after your expenditure has been taken into consideration is known as your disposable income. If a suitable payment can be found using your disposable income, the debt advisor will send you out information in the form of a pack to enable you to read through the debt plan advised. Your debt advisor will go through all the payments you will have to make including any fees, and will be able to give you an estimation on how long it will take to clear your debts within the debt management plan. A DMP should mean you are paying one lower monthly payment each month and any interest and charges are frozen for the duration of the plan (though this cannot be guaranteed).
A DMP is often a great solution as it is an informal plan meaning you are not tied into to any agreements though there are also drawbacks. Creditors are not obliged to accept debt management proposals nor freeze interest and charges. Whilst it is rare a debt management proposal is rejected, it isn’t certain a creditor will accept the proposal. Your debt advisor should always advise you if there is an issue with any of your creditors and help push the proposal through. If your Debt Management Plan is accepted by your creditors, you will almost certainly be paying a reduced payment each month which can be great, though, as you are paying a reduced payment each month, the repayment term to your creditors is likely to increase and the total sum you need to pay may increase. Again, a debt advisor or debt administrator should advise you if this is the case and will carry out a regular review of your plan to ensure everything is running smoothly.
Reduce payments to creditors
Interest and charges frozen
The paperwork done for you
It is important with a debt management plan to ensure you are comfortable with the monthly payment proposed by your debt advisor. If you fail to maintain your debt management monthly payments then that may lead to the new arrangement with your creditors to be broken. This may lead to your debts increasing if your creditors add any interest or charges for late payments. If you are struggling with your payment on a debt management plan then you must call your debt advisor to see if an alternative solution can be put into place.
You and your creditors have the reassurance of knowing that payments will be made towards your debts from the first month your plan is in place.
IVA's & Trust Deeds
An Individual Voluntary Arrangement (IVA) is a very popular way for any individual who qualifies to repay their debt at an affordable amount per month. An IVA is a legally binding arrangement between you and your creditors to repay your debts at a payment you can afford usually over a 5 or 6 year period. The main difference between an IVA and a Debt Management plan is that an IVA is a formal arrangement. If your creditors agree to accept you onto an IVA then they are not allowed to contact you or chase you for money for the duration of the IVA period (provided you maintain your payments) and all interest and charges will be frozen on those debts. All our IVA's will be administered by Revive Solutions UK Ltd.
How do I qualify for an IVA?
You must live in England, Wales or Northern Ireland
You should have a regular disposable income of around £100
You should have unsecured debts of around £8,000 or more
Introducing Trust Deeds (Scotland)
A Trust Deed is an affordable solution for people whose debts are out of control and is a recognised alternative to bankruptcy (or sequestration). It protects you from your creditors and, on completion, enables you to write off what remains of your unsecured debts. A Trust Deed acts as a formal agreement between you and your creditors, administered by an Insolvency Practitioner, where you agree to pay one lower affordable monthly payment over a fixed period. Once the Trust Deed is completed (normally in just 48 months), your creditors will make no further claims against you, as long as you have stuck to the terms of the arrangement. Your remaining unsecured debts will be written off.
How do I qualify for an Trust Deed
You must live in Scotland
You should have unsecured debts of around £7,000 or more
You should have a disposable monthly income of around £100 or more
What are the negatives of IVA's and Trust Deeds?
Homeowners with equity in their property may be asked to release the equity to help pay off some or all of your debts.
There is a big effect on your credit rating.
Remortgaging to release equity from your property may result in a higher interest rate on your mortgage.
If you fail to maintain your payments then you may face Bankruptcy or Sequestration.
You must adhere to strict expenditure guidelines during the course of your IVA or Trust Deed.
What fees are involved?
For an IVA there are two fees which are charged: The Nominee’s fee covers the setting up of the IVA and can vary from £500 to £2500 depending on the number of creditors you have and the amount of work required to be carried out. It is usually taken out of the monthly payment you make into the IVA. The supervisor’s fee is a monthly fee which covers the specialist work carried out to administer your IVA for the duration of the IVA period (typically a 5 year period). This fee will usually be 15% of the monthly contribution you make, and is included in the calculated monthly payment you make to your IVA.
A Protected Trust Deed will normally charge between £2,500 and £4,500. There may also be additional costs depending on your circumstance but you shall be made fully aware of any charges involved before you enter any agreement.
An IVA/Trust Deeds Example
A typical case before an IVA/Trust Deed
Debt owed by customer (credit cards, loans, store cards and overdraft): £22,300
Number of creditors : 5
Monthly payments : £650.00
A typical case with an IVA/Trust Deed
New Monthly Payment: £200
Monthly Saving : £450
Monthly Fees : £30
Money to Creditors : £170
Debt Written Off : £10,300
Typical Debt Management Plan Costs
Court Fees: £175
Official Receiver Fees: £525
Professional/Legal Fees: £500-£700
Typical DMP Costs: £1,250+
A Debt Relief Order (DRO)
A Debt Relief Order (DRO) is a great way of clearing your unsecured debts if you owe less that £15,000, have little or no income and don't own your home.
How do I qualify for a DRO?
Your are unable to repay your debts.
You owe a maximum of £15,000.
Your total gross assets must not exceed £300.
Your disposable income after normal household expenses must not exceed £50/ month.
You must be a resident of England or Wales, or at any time in the last 3 years you must have been resident or carrying business in England and Wales.
You must not be involved in any other formal insolvency procedure when applying for a DRO.
How much does a DRO cost?
The fee for applying for a DRO is £90 and is non-refundable whether the official receiver approves or rejects your application. The DRO fee must be paid in cash to the court. If you apply for a DRO then you must provide your official receiver with a full list of assets and liabilities along with the names of your creditors. The official receiver may request for more information about your financial affairs to fully consider your application.
What are the restriction of a DRO?
You may not be involved in the promotion, management or formation of a limited company, nor act as a company director without the courts permission. You will not be eligible to apply for a DRO again for 6 years. If you wish to find out more about a DRO and see whether it is an option for yourself then please complete our enquiry form.
If you wish to find out more about a DRO and see whether it is an option for yourself then please complete our enquiry form.