The first step towards freedom from debt and avoiding severe debt solutions like personal insolvency is facing up to the problem. Next, you’ll need to look carefully at your budget and cut out unnecessary spending. This will let you pay more money towards your debt repayment. After you’ve tightened up your budget and have an idea of what you owe and what you can afford to pay, seek out professional debt advice. Debtsolver can help you to find the right debt solution to suit your circumstances and if necessary, assign you a licensed insolvency practitioner.

A licensed insolvency practitioner (IP) is the only person who is qualified to act in relation to insolvent individuals, partnerships or companies. They’re also obliged to have professional indemnity insurance in addition to case-specific coverage. The Institute of Chartered Accountants are just one of the regulatory bodies who oversee the conduct of IPs. Like going to the doctor, there really is no case that they won’t have come across before so there is absolutely no need to be embarrassed. Don’t put it off and don’t hold anything back. With swift action and full disclosure, the insolvency practitioner will be able to help you find a reasonable, manageable solution to your debt problem.

Make a detailed account of your financial situation, including a complete breakdown of your incomings and outgoings, assets and liabilities. This is integral in helping the insolvency practitioner to guide you through your options. Each will have benefits and drawbacks that you’ll need to discuss in order to come to a decision on which will be best for you. If you have a limited income and no assets, it’ll probably be bankruptcy.

The right debt solution for you will depend on your financial circumstances. If you are looking to avoid bankruptcy, an insolvency practitioner might suggest an Individual Voluntary Arrangement. This is a legally binding arrangement with your creditors, which is brokered by an insolvency practitioner. A proposal based on your debt and ability to make payments is put to your creditors and if they agree to it, your IP will oversee repayment of your debt, so you won’t have to deal with your creditors any more.

IVAs have their benefits for all parties. Your creditors will tend to be repaid a greater proportion of the outstanding debt that they would have been if you had filed for bankruptcy. If you are a homeowner, the chances are that your property will be safe, although you may have to relinquish some of the equity towards repayment.

Of course, as everyone’s situation is different, you could find that an IVA isn’t right for you. For some people, filing for bankruptcy can be a more favourable solution to their debt problem. This will involve filing a petition at your local county court. The bankruptcy term usually lasts for a year but again, depending on your financial circumstances, this can fluctuate. When you have successfully completed the process and are discharged from the bankruptcy, you’ll be free from debt and ready for a fresh start.

You’ll be assigned a trustee by the court and they’ll deal with your creditors on your behalf. This includes dealing with your assets. More often than not, your main asset will be your home. Bankruptcy will not necessarily mean you lose your home; it depends on the value, the mortgage and your financial circumstances.

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The Debt Relief Order is intended for those facing debt problems without many significant assets. That is, for those who don’t own their home or have the material resources to supplement their earnings. In order to qualify for a Debt Relief Order, an individual must have a total combined debt amounting to less than £15,000. For those that match these criteria, the DRO could be an ideal solution; potentially freeing you from debt within a year and allowing you to avoid the more severe debt solutions on the market, like IVAs and bankruptcy.

The extent of your debt problem is not dependent on the amount that you owe. It’s a question of your ability to service the debt and maintain the repayments. The Debt Relief Order, as we’ve said, is pitched at those who aren’t homeowners. However, it’s also a debt solution that could provide the most manageable route out of debt for anyone who finds that they have under £50 left after paying their monthly bills. Your debts, which must amount to less than £15,000, can include any unsecured loans, credit card debt and your overdraft facility. Excluding you car, which can be worth up to £1000 but including your pension, your assets can’t be worth more than £300 in total.

The DRO term is usually a year and in that time your creditors will not be able to chase you for any payment or take any further legal action against you. However, you’re going to find it very difficult to obtain any credit. Considering your situation, this may be a good thing but if you do apply for any credit of over £500, you are legally bound to inform them of your DRO. It remains on your credit report for 6 years after successful completion of the terms.

Debt Relief Orders must be granted by the Official Receiver and if you come into some money while you’re under the terms of the DRO, you are obliged to let them know. If you break this or any other rules of your DRO, the Official Receiver will implement a Debt Relief Restriction Order, extending the restriction period to 15 years.

A Debt Relief Order can only be issued to individuals in debt who have been referred by an authority that is recognised and approved by the Insolvency Service. Debtsolver will be able to give you more information about the organisations that are authorised to make Debt Relief Order referrals; there are six of them. Providing it’s the right debt solution for you, your dedicated debt advisor will take you through all stages of the process and help you to complete the necessary paperwork for the Official Receiver. This is after you have talked to them about your situation and come to a decision on which solution is best for someone in your financial circumstances.

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Should you find yourself facing severe debt problems, it’s possible that a creditor could file a county court claim against you. In essence, this signifies their intention to take you to court in order to get the money that they’re owed. It’s then the court’s job to examine the case and decide whether or not there is actually a debt to be paid, the value of the debt and then order you to pay it back in line with the instructions that they’ll give you. This isn’t a criminal matter, so even though you go to court, it’s not a case of guilty or not guilty. In fact, you don’t even have to appear in person. They’ll need you to provide them with information about your finances, as will be outlined in the county court claim form that you’ll be sent, advising you of the action being taken against you. This is where you’ll put your own side of the argument forward too.

Although at lot of what happens next will be down to the court, you still have options about how you would like to go forward with the repayment of the outstanding debt. It’s not too late to just pay it off. You can send payment directly to your creditor within 14 days of receiving the order. The court fees and extra interest will be added to the sum due for repayment but if you settle this, that’s the end of it.

In the majority of cases, this situation has arisen because of your inability to settle the outstanding debt. Should this be the case for you, you’ll need to fill in an admission form and make a proposal of how you actually intend to pay the debt off. So, if you get assistance from an impartial advisor in drawing up a repayment plan based on instalments, you’ll need to present this to your creditor for approval within the same 14 day period. Of course, if you dispute the amount that you owe, there are more forms to be filled in, where you can explain the situation, outline the amount that you feel you owe and how you intend to repay it.

If the need arises to defend yourself in court, you have 14 days to put together your case against the allegations. There is a form for extending this for another 14 days if you’re unable to construct a suitable case in this time. Should you be considering a counterclaim, that is, suggesting that it’s actually the creditor that owes you money, there’s a section to fill in for that too.

Upon review of your case, the court will come to a decision. They’ll issue a County Court Judgement (CCJ) if they find in favour of your creditors. This will clearly outline the repayment details. Should you have several judgements against you, the court might issue an administration order, compelling you to make a regular repayment to be distributed among your creditors.

Get in touch with the court at the first sign of difficulty in meeting the repayment criteria. It’s possible that you will be able to come to an alternative arrangement. All county court judgements that aren’t settled within one month are recorded on a public register for six years. This will have a negative effect on your credit score and make it difficult to obtain credit.

Get help with this process from a dedicated financial advisor. Drop by www.debtsolver.co.uk for a free financial health check, along with impartial advice and assistance in finding a solution to your debt problem.

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Failure to address the problem of mounting debt can have serious ramifications. Quite simply, the earlier you attend to debt problems, either by making an approach to your creditors directly or seeking out help from a specialist debt advisor, the greater the likely hood of come to a mutually beneficial conclusion. If you choose to ignore your growing debt, you run a severe risk of bankruptcy and with it, the possibility that your assets will be seized to pay off your creditors. This will, of course, include your home. There is simply no escaping the threat of repossession once you allow your debt problem to reach the level where creditors will be pushing for bankruptcy. The only way to try and avoid this happening is to face up to the debt and get help, the sooner the better.

An Individual Voluntary Arrangement, or IVA, is a favourable alternative to bankruptcy proceedings as it will greatly reduce the threat to your assets. The IVA, although it might mean giving up some of the equity, will allow you to keep your house. It would seem that this is having a really positive impact on the number of UK repossessions. Originally, the Council of Mortgage Lenders projected the number of repossessions to reach 75,000 during 2009. It projection was then reduced to 65,000 by June. This wasn’t the end though. Now at 48,000 repossessions in 2009, the latest figure released by the Council of Mortgage Lenders is a massive 35% less than their original estimate.

This could potentially be put down to more restraint being shown by borrowers, more conscientious lending habits or even the government maintaining the low rate of interest. However, it has interestingly coincided with a definitive increase in the number of people in the UK that have applied for an IVA. The government’s Insolvency Service has released figures showing that the number of Individual Voluntary Arrangements has increased by over a fifth in the third quarter of 2009, compared with the same period last year. In that three month period alone, there were 12,390 IVA applications. The pattern emerging seems to point to a direct relationship between a drop in repossessions and an increase in the number of borrowers entering into an Individual Voluntary Arrangement.

If you make contact with your mortgage lender early, advising them of your circumstances, there’s a good chance they’ll make every effort to accommodate a revised repayment schedule. You should also get some specialist debt advice and strive to do so in enough time to avoid bankruptcy proceedings. If you can enter into an IVA, you’ll be able to safeguard your assets and reduce your total debt by up to 75%. There is the added benefit of avoiding the stigma of bankruptcy too, as insolvency proceedings are published in your local paper. If you’re facing the threat of bankruptcy, you’re facing the threat of repossession. Help safeguard your home with an IVA. Talk to a specialist debt advisor at DebtSolver.

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