What are my options with debt write off other than bankruptcy?

The word ‘bankruptcy’ would fill most people with dread but when people find themselves up to their eyeballs in debt, they think that’s their only option for debt write off.  This article applies to residents of England, Wales and Northern Ireland.

It isn’t.

Bankruptcy isn’t the only option, there are two other options that should be considered:

  • An Individual Voluntary Arrangement (IVA)
  • A Debt Relief ORder (DRO)

Individual Voluntary Agreement

What is an IVA?

An IVA is a legal agreement to make regular payments for all or part of a person’s debt.

What is the duration of an IVA?

An IVA normally lasts 5 years then the debts will be written off.

Will I be contacted by my creditors wanting money?

No, you will be allocated an ‘insolvency supervisor’ and they will deal with your creditors.

Can creditors take action against me if I have an IVA?

No, they can’t take action. Once approved, the IVA will legally protect your from the creditors taking further action such as bailiff action and attachment to earnings. 

Will an IVA stay on my credit report?

Yes, an IVA will stay on your credit report for 6 years.

Do I have to set up my own IVA?

No, an IVA can only be set up by a licensed Insolvency Practitioner. We strongly advise you to seek guidance from a reputable debt organisation to see if you qualify for an IVA and to make sure it’s a suitable solution for  you.  

Who calculates my monthly repayments?

AnFCA authorised debt help company can  calculate your repayments to ensure they are affordable for you.

Can my IVA get cancelled if I don’t keep up my debt repayments?

Yes, your IVA can be cancelled if you don’t make your repayments.

What happens if the monthly repayments are unrealistic and I can’t afford them?

You won’t have to pay more than you can afford.

 

Can I borrow more money if I have an IVA?

You won’t be able to borrow more than £500 and you need permission from your insolvency supervisor to borrow more money. 

 

Do I have to sell my assets if I have an IVA?

Maybe.  The IVA can protect assets, such as your home and you must tell your creditors about any other  assets and possessions of value. By speaking with approved debt counsellors they can let you know if you need to sell your assets or not. 

Will my monthly repayments change?

If your circumstances change, your monthly repayments may change too. 

 

What else do I need to know if I want to set up an IVA?

People’s financial circumstances can vary, there are different types of debt, different amounts, different interest rates and different assets. The best thing to do is seek professional advice and get a tailor-made IVA. 

We can help you with this.

What is a DRO?

A debt relief order (DRO) is one way to deal with your debts if you don’t own your own home, don’t have much spare income, and your debts are £20,000 or less.

You may be able to get a DRO if all of the following things apply to you:

  • you’re unable to pay your debts
  • your debts are worth up to £20,000 
  • you’ve got £50 or less left over each month after you’ve paid your usual household expenses
  • you don’t own your home
  • other savings or things of value you own, called assets, are worth less than £1,000 (some assets are ignored when working out the value)
  • you don’t own a car worth £1000 or more, unless it’s one that’s been specially adapted because you have a disability

What is the duration of a DRO?

A DRO using lasts for 12 months

Will I be contacted by my creditors?

No, you will be protected from any further action being taken. 

Can creditors take action against me if I have a DRO?

No. 

Will a DRO stay on my credit report?

Yes, a DRO will stay on your credit report for 6 years.

Do I have to set up my own DRO?

You have to go to a DRO adviser, also called an approved intermediary – you can’t submit your own application. You can find a DRO adviser at most local Citizens Advice Bureau. 

Who calculates my monthly repayments?

An approved intermediary will calculate your monthly repayments. Depending on your circumstances you may not have to make a monthly payment during your debt relief order. 

What happens if the monthly repayments are unrealistic and I can’t afford them?

Then a DRO may not be the best option for you and you can look at other debt solutions, such as an IVA which also helps write off debt. 

What about my assets?

Homeowners do not qualify for DRO’s. If you have savings or things of value you own worth more than than £1,000 they may have to be sold. 

If you own a car worth £1000 or more it may have to be sold, unless it’s one that’s been specially adapted because you have a disability

If you want to keep your assets but still want to see if you can write any debt off, then an IVA may be a better suited solution for you. 

What is my circumstances change and I can afford to pay more than £50 per month?

You must make your approved intermediary aware and the DRO may end. Your debts will then become repayable again. 

What else do I need to know if I want to set up a DRO?

People’s financial circumstances can vary, there are different types of debt, different amounts, different interest rates and different assets. The best thing to do is seek professional advice and get a tailor-made debt solution. 

We can help you with this.

Are you concerned about your debts and you’re not sure what to do next?

We are here to help you understand the different options when it comes to debt. We won’t judge you, we will ask you some questions and offer you a way forward. We recommend that any communication you have with regards to your debts with any company you do so in writing. 

These are the kind of questions that we may ask you if you were to contact us:

  • What debts do you have? Loans, credit card debt, etc…
  • Have you been late or missed any of your debt payments?
  • Roughly how much are you having to pay to your unsecured debts at the moment?
  • If you had one monthly payment to replace your currently payments to your debts, how much could you afford?
  • Have you discussed your debts with your creditors? Have you come to any agreements?
  • What is your income?
  • What assets and possessions do you have?
  • Have you had debt help before?
  • Are you struggling to cope emotionally? We can offer avenues of support

Even if things feel really bad and you can’t see light at the end of the tunnel – we can help.

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