Is an IVA right for me?
If you are considering an IVA then you need to be aware of all the options that are open to you. An IVA may not always be the best option so before you decide here are some of the things you should consider.

What is an IVA?
An IVA (Individual Voluntary Arrangement) is a formal agreement between you and your creditors, the people to whom you owe money, to pay all or part of the debts you have with them. These arrangements are set up professionally by an authorised Insolvency Practitioner (IP) and as such there are professional fees that will have to be paid to enter into an IVA. An IVA will typically last for a five year period during which you will be expected to pay everything you can afford outside of agreed ‘reasonable’ living costs.

An IVA can be entered into when you meet the following criteria:

  • Your debts are greater than £5,500
  • You have three or more separate creditors.
  • You currently have over £70 a month in disposable income, and you have assets to sell towards paying your creditors

There are other criteria which should be met and if you want to discuss this please call one of our debt advisors on 0800 158 3539.

How does an IVA work?
An IVA is a simple way of formally agreeing to settle all your unsecured debts over a fixed time period. Once you have engaged the services of an Insolvency Practitioner they will be able to help you work out how much you can afford to repay each month after your living expenses have been deducted. As part of the service they will contact your creditors and ask them to agree to the terms of your IVA and they can stop creditors taking any further action against you, like taking you to court or trying to make you bankrupt, once your IVA is accepted. The Insolvency Practitioner will also arrange with your creditors to stop any interest charges or additional payments as part of the IVA.

What are the advantages and disadvantages of an IVA?

Advantages

  • You make a single affordable payment each month
  • All interest and credit charges on your existing debts will stop as soon as the IVA commences
  • All your creditors, even those who don’t agree with it, are bound by the terms of the IVA
  • Creditors can’t take any further action against you, so no more difficult calls or letters
  • Your outgoings are based on on guidelines acceptable to creditors and are reviewed over the five years
  • When the IVA is finished the balance of what you owe your creditors is written off forever.

Disadvantages

  • Your IVA is entered into a public register which means that credit reference agencies will be able to see it. This will seriously impair your ability to open a new bank account or get a loan as your credit rating will be impaired.
  • Some firms will require you to pay upfront fees to your Insolvency Practitioner to arrange the IVA, although at Knightsbridge Insolvency, which is part of the Money Advice Group, we don’t charge any upfront fees.
  • If you have equity in your home you will generally be required to release all or part of this in the fifth year of the arrangement as part of the settlement to your creditors.
  • If your IVA fails, or you fail to maintain the payments into an IVA, your creditors can take further action against you and you may be made bankrupt.
  • There are also restrictions on what expenditure is usually permitted when you are on an IVA. For example creditors will not usually accept extravagant expenditure or anything that could be seen as an unnecessary luxury such as gym membership. There may be individual reasons for such expenditure such as health problems however these are considered on a case by case basis.

What options are there other than an IVA?

We recommend that you read the publication “In Debt? Dealing with your creditors” which is a free guide produced by the Insolvency Service, giving you a clear, no nonsense summary of all the different options of resolving your debt problems. At Knightsbridge Insolvency we are part of the the Money Advice Group so we can offer free advice in helping you to decide the best option  in dealing with your debts taking into account your circumstances.

Bankruptcy

What is Bankruptcy?

Bankruptcy is a practical way of dealing with debts that you cannot pay. The process of becoming a bankrupt will free you from these debts and allow you to make a completely fresh start, subject to some restrictions. The process also ensures that any assets that you have are shared fairly amongst your creditors.

We recommend before you pursue a course of Bankruptcy that you read the Insolvency Service “Guide to Bankruptcy” which can be downloaded free of charge from their website.

If you choose this option you will be required to give up any assets you may have, including valuables, and you will lose any interest you may have in your home. If you are running a business it will almost certainly be closed down and the dismissal of any employees that business has.

To become bankrupt a court has to make bankruptcy order which comes about after a bankruptcy petition is placed before them. The petition can be presented either by yourself (known as a debtors petition) or by one of your creditors to whom you owe more than £750 (known as a creditors petition). The order can be made even if you choose to ignore the proceedings and/or disagree with them, so once the process has started it is imperative that you engage fully with it. If a creditor threatens to issue a bankruptcy petition and you disagree with it you must try your level best to resolve the issue before it reaches the court as stopping the process once it has started is both costly and time consuming.

Debt Consolidation
What is Debt Consolidation?

Debt Consolidation is a way of bringing all your debts into one place so you can repay them with a single payment each month. This might be particularly helpful if you are in a situation where you have a range of debts across a range of providers, such as credit card debts, unsecured loans, catalogue debts and store card debts.

Under these circumstances people see debt consolidation as a good option as it gets rid of all these nagging worries and allows you to make one payment to one creditor every month, and as long as you keep up your repayments you can start to see your debts shrink month on month.

Debt consolidation may utilise a number of different ways to achieve the aim of a singly monthly payment raging from an unsecured loan with one creditor, by way of a re-mortgage or if you are homeowner the creditor taking a charge on the property. One of our specialist advisor will be able to assess which is best for your circumstances.

Debt Management
What is Debt management?

A Debt Management Plan can often be the right solution when you are in employment and earning a regular income, but you don’t have enough free cash on a monthly basis to meet your debt obligations. Setting up a Debt Management Plan allows you to control exactly how much you pay your creditors on a monthly basis and ensures that you have enough left over for your own living expenses.

A Debt Management Plan will aim to:

  • Reduce or freeze interest and charges on existing debts
  • Create one single affordable monthly payment
  • Stop creditors chasing you for payments
  • Help you to get out of debt with advice from our Debt Experts

Please note however that:

  • During the negotiation process some creditors may continue to charge interest and other recovery charges. We cannot always prevent these charges being levied but these will be paid off as part of your debt management plan.
  • You might also incur extra or new charges as a result of missing payments whilst your debt management plan is being set up.
  • Creditors do not have to agree to freezing interest and charges.
  • As a result of switching to a debt management plan the total amount repaid and the repayment period may BOTH increase.

As you can see there are advantages and disadvantages to a Debt Management plan but our friendly helpful Debt Advisors will be abel to assess your personal circumstances and tailor a package that is right for you.

Debt Relief Order
What is a Debt Relief Order?

A debt relief order is simply an alternative to declaring yourself bankrupt. It is granted by the Insolvency Service and you can apply for one if you find yourself in the position of being unable to pay off your debts. One advantage of a Debt Relief Order over bankruptcy or and IVA is that they are cheaper option.
To qualify for one you must have unsecured debts of less than £20,000 and currently be on a fairly low income. Our trained advisers will be able to help you assess whether you could qualify for a Debt Relief Order.

Debt Relief Orders typically last for a year and during that time, none of the people you owe money to will be able to take action to get their money back from you. At the end of the order the debts will be wiped out.

Full details on the requirements for obtaining a DRO are outlined on The Insolvency Service website.

How much will it cost?

As you can see, there are a wide range of options open to you if you are in debt, and this is something you should take professional advice on before you decide which course is best for you. Our trained advisors speak to hundreds of people in debt each week and can help you understand the detail of each of the options and advise you on which course will be best for you.

As with all our services, the initial consultation and recommendation is completely free however should you decide to use our services, along with all other non charity providers, fees will be payable. These fees are clearly shown throughout the site however you will be given a clear understanding of our fee structure and how it is paid when you speak to one of our advisors. Full details of our fees can be found at the bottom of this page.

So why not call us today? Your call is free from a landline on 0800 158 3539 and our advice is free. And who knows, by making the first step today you too could be debt free.