DebtOptions

Which debt solution is right for you?

IVAs

Individual Voluntary Arrangements or IVAs, are arrangements made with your creditors to repay your outstanding debts within a certain timeframe, such as five years. Interest payments are frozen, nothing is made public (unlike bankruptcy) and you can often avoid being declared bankrupt – or losing your home.

IVAs are a completely legal, officially approved way of resolving debt problems. If you owe more than £15,000 to three creditors or more, and you can’t meet your repayments, you may be able to get an IVA. In some circumstances, as much as 75% of your debt can be written off under the terms of the IVA.

Creditors agree to IVAs because they often get more money back through the IVA than they would if you were declared bankrupt.

Debt Management Plans

Debt Management Plans are arrangements with a third party who manage your debts for you. Your Debt Management Plan provider will help you work out what you can afford to pay each week or month, and then negotiate with your creditors on your behalf. You make a simple, affordable monthly or weekly payment to the provider that is then passed on to your creditors. You can use a Debt Management Plan if you have debts of £5,000 or more, owed to two or more individual creditors, and have £100 or more disposable income each month. ‘Disposable income’ is money that is left over once all your basic living expenses and regular bills have been paid (mortgage/rent, food, travel costs/petrol, childcare, gas/electricity and so on).

Trust Deeds

Trust Deeds are only available to people who live in Scotland. They are legal agreements between people with debts and a licensed insolvency practitioner, who puts together a proposal for your creditors on how you will repay your debts – usually over three years. Sometimes, a Trust Deed may be registered as ‘protected’. If this happens, all your creditors agree that they will not contact you directly. Interest and other charges are frozen for as long as the Trust Deed is in force.

Bankruptcy

If you cannot pay your debts as they fall due, you may have to consider being declared bankrupt . If you are declared bankrupt, all your assets (including your home) are taken into the control of a Trustee and used to pay your debts. This is called ‘sequestration’.

A Trustee will decide, on behalf of creditors, how your debts should be repaid, and will carefully scrutinise your financial affairs in order to make their decision. Your basic living expenses are taken into account, but everything else may be sold (‘liquidated’) in order to pay off your creditors.

Becoming bankrupt places some restrictions on you in terms of trading and running a business, and your bankruptcy is made public. You will also have to tell any future creditors that you are bankrupt.

In some ways, bankruptcy is the ‘last resort’ if other forms of debt solution are not available to you. However, in some circumstances if may be the best solution to your debt problems.

Get Out of Debt

Whether you need help and advice with IVAs, Debt Management Plans, Trust Deeds or bankruptcy, we can support and guide you through the process of understanding and dealing with your debt. If you feel ready to start dealing with your debt problems, one of our specialist debt advisors can help you decide the best way to proceed. Contact Debt Options, apply online or call us on 0800 234 3605 to discuss the options.