FAQs
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I have a serious debt problem and I don't know what to do.
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What solution is right for me?
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Is an Individual Voluntary Arrangement (IVA) the best answer for me?
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How much can I afford to pay each month?
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I'm interested in an IVA. How does it work?
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It's difficult for me to get time off work. Do I have to travel to meet you?
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How much do my creditors want from me?
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Do my creditors have to accept my IVA proposal?
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Will the IVA settle all my unsecured debts?
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What if I come into some money whilst in the IVA?
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Will I ever be able to get credit again?
1. I have a serious debt problem and I don't know what to do.
You have a debt problem when you cannot afford to repay your credit commitments as they fall due. Often the seriousness of your problem is defined by the amount of debt that you owe. This is not always true, and we advise that you should always speak to an impartial and professional debt expert, such as ourselves, to get free advice.
It is especially important to take professional advice when considering taking out another loan. Always remember that when you borrow more, your debts increase. However, depending upon your credit rating, sometimes either a re-mortgage or consolidation loan (that transfers all your existing debts into one replacement loan) could be the appropriate solution if your monthly payments become affordable.
If another loan is not the answer, or you cannot get a loan, or you recognize that you need to sort out your debt problem without borrowing more, then typical solutions are detailed below.
Debts under £1,500
If you owe less than £1,500 to at least 2 creditors, of which 1 creditor has obtained a County Court Judgment, you are eligible to apply for a County Court administration order. The Court will decide what you can afford to repay each month after taking into account your income and expenditure, and will deduct 10% from your payment as a fee. You will repay your debts in full, but if you comply with the order, your creditors cannot take any further enforcement action against you, and debt collection actions will stop. For more information on County Court administration orders, details are available online at:
http://www.hmcourts-service.gov.uk/courtfinder/forms/n270_0499.pdf .
Debts between
£1,500
and £15,000
If you have unsecured debts between £1,500 and £15,000 a debt management plan may be the answer. 'Debt Management' is an informal process, ie not legally binding on you, your creditors & the debt manager. The debt management company offers a reduced monthly payment to your creditors, and charges you a fee, typically 20% of your monthly payment. Whilst this can reduce some of the creditor pressure, it should only be adopted in circumstances where other solutions are not available or appropriate, because there are several disadvantages
- The debt management plan continues until all your unsecured debts are repaid in full. This could be a considerably long period of time, often counted in 10s of years.
- Very few creditors freeze interest and charges. Therefore, interest continues to accrue and if your monthly payments do not cover the interest, your debt will increase and the process will never end.
- The debt manager's fees and interest and charges are added to the debt, further increasing the duration of your repayment plan.
For these reasons a debt management plan must be treated with caution and only considered as a short term solution.
Debts over £15,000
Typically there are 2 solutions for the more seriously indebted individual; Bankruptcy and an IVA (Individual Voluntary Arrangement). Before the introduction of IVAs, the decision facing most debtors was whether to declare themselves bankrupt or to continue to struggle with mounting debt repayments.
- Bankruptcy is one way of dealing with serious unsecured debts that you cannot pay. Bankruptcy proceedings eventually free you from overwhelming debts, however any assets that you may have may be sold and the proceeds shared amongst your creditors. A Court orders that your assets and liabilities are handed over to The Official Receiver, who will investigate your financial situation and make a report to your creditors. If you have assets, such as equity in your house, a Trustee may be appointed to realise their value and to distribute these as a dividend to your creditors. Unfortunately, your Bankruptcy Order is advertised in your local paper, and not kept confidential. You should prepare yourself for family, friends and colleagues becoming aware of your bankruptcy. It is highly likely that your bank accounts will be frozen, if not closed, and you should expect to have difficulty in re-establishing a new bank account. Whilst you are bankrupt (undischarged) there are restrictions which apply to you: (a) you are not allowed to obtain credit of over £500 without disclosing your bankruptcy and (b) you cannot act as a manager or director of a limited company. For more information about bankruptcy, visit the web site www.insolvency.gov.uk .
- An 'Individual Voluntary Arrangement' (IVA) is a legally binding agreement between you and your creditors that allows you to protect your assets, such as your home. An IVA can only be proposed and implemented by a Licensed Insolvency Practitioner, who makes a proposal to all your unsecured creditors. Providing that 75% (by value) of creditors vote in favour of the proposal, your IVA can commence. Unlike a Debt Management Plan, the IVA is funded by your creditors. Debtsolver does not charge you a fee at all. After, typically 5 years, any debt that has not been repaid is written off. This can be as much as 75%
2. What solution is right for me?
The solution that will work best for you is down to your individual circumstances. Using our online Debt Wizard will give you an inital idea of which solution are available to you, but you really need to discuss the details of your situation with a trained Debt Advisor who can give you the pros and cons of each situation.
3. Is an Individual Voluntary Arrangement (IVA) the best answer for me?
- Do you have a minimum level of £15,000 of unsecured debt to at least 3 creditors?
- Do you have residual monthly income, after all your household bills and priority debts (i.e. your mortgage) have been paid for, which you can contribute to an IVA for 5 years of at least £200 per month?
- Do you want to avoid bankruptcy?
An IVA is available to you as an option, however, the proposal, implementation and management of an IVA is a time consuming and expensive process, these costs reduce the amount that is finally repaid to your creditors. Therefore, your creditors have basic thresholds to ensure that an IVA remains economical. For debts below £15,000, the costs of the IVA are too high as a proportion of the level of debt, and for cases where the monthly repayment is less than £200, the running cost of the IVA would take up a substantial amount of the money coming in from your monthly repayments. In such cases, it is unlikely that the IVA would provide your creditors with a satisfactory return.
Because an IVA potentially avoids all the pitfalls of bankruptcy (stigma and restrictions) it is reasonable for your creditors to expect a better return from your IVA rather than by making you bankrupt.
If you fail to comply with the terms of your IVA, (i.e. make all the monthly payments) then your Insolvency Practitioner, acting as Supervisor, may be obliged to petition for your bankruptcy. Therefore, do not enter an IVA unless you are confident that you can adhere to the repayment terms and you are committed to avoiding bankruptcy.
4. How much can I afford to pay each month?
You need to list all your income and expenditures in a similar way as shown below. Clearly this example is not an exhaustive list of all potential income and expenditure. In expenditure you should include all priority payments such as Utility bills your rent or mortgage payments, and any other secured lending that you may have. However you should exclude any unsecured debt repayment.
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Income |
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Expenditure |
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Your take home pay (inc. overtime)
|
£1,300 |
Mortgage/rent |
£700 |
| Partner's take home pay |
£600 |
Council tax |
£70 |
| Other income (Benefits, maintenance etc) |
£100 |
Water/Gas/Oil/Electricity/Phone/mobile
|
£80 |
|
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Food and other household
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£350
|
|
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Car expenses |
£90 |
|
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Car finance |
£100 |
|
|
Public transport |
£20 |
|
|
Clothing |
£150 |
|
|
TV Licence/rental/Sky |
£30 |
|
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Insurances (Home, life, health) |
£12 |
|
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Pension contributions
|
|
|
Total household income |
£2,000 |
Total household expenditure |
£1,642 |
|
Monthly Disposable Income |
£358 |
|
|
In the above example, you could reasonably propose to pay £358 per month into your IVA to settle your unsecured debts.
5. I'm interested in an IVA.
How does it work?
Debtsolver Ltd is part of the Accuma Group Plc. Accuma operates one of the largest personal insolvency practices in the UK. As such, we are highly skilled in helping people, just like you, to resolve your debt problem.
We will conduct a thorough financial factfind into your individual circumstances, and as demonstrated earlier, will evaluate your income and expenditure to determine how much you can afford to pay into your IVA each month.
Additionally we will determine the circumstances that caused your current financial difficulties.
If your creditors are taking any legal action against you, we will protect you from your creditors, by obtaining a Court Order, whilst your IVA is being set up.
We will prepare a detailed IVA proposal, on your behalf, which is issued to your creditors. The proposal, based on information that you provide to us, includes your monthly disposable income which you will repay into the IVA. At this point in the process, one of our Licensed Insolvency Practitioners will undertake the role of 'Nominee'; (i.e. nominating you for an IVA). Only Licensed Insolvency Practitioners are allowed to nominate you for an IVA.
He or she will arrange for a meeting of your creditors to be held to vote on the proposal. This is normally conducted by telephone as all your creditors will have been issued with your IVA proposal before the meeting in order to understand why an IVA is suitable for you, and the best option for them.
At the creditor meeting, the votes are counted to determine whether the required majority for approval has been obtained. At this stage it is possible for changes to the proposal to be received and considered
In the vast majority of cases the IVA proposal is approved at the first creditor meeting. However, in the minority of cases, if further negotiation is required with your creditors, the meeting can be adjourned (for upto 2 weeks) to secure support for your proposal.
When your IVA is approved, all your creditors are bound by it, even those who voted not to accept your proposal.
The Nominee reports to both your creditors and the court that your proposed IVA application has been accepted.
During the course of your IVA, you must make the agreed monthly payments to the Insolvency Practitioner who will now be known as your 'Supervisor'. The supervisor administers your arrangement until completion, ensuring that you comply with the terms, and is responsible for paying dividends to your creditors.
On successful completion of your IVA, the Supervisor issues the final report and dividend. A certificate of compliance certifying the successful completion of the IVA is filed.
6. It's difficult for me to get time off work. Do I have to travel to meet you?
In the majority of cases, most of our work is done over the telephone. However, if your case is complicated or you would prefer a face to face meeting with one of our Senior Advisors, this can be easily arranged as we have a number of offices around the country and operate a National service.
7. How much do my creditors want from me?
There is not a set figure that your creditors have to or will accept in deciding whether to agree your IVA proposal.
They want to see that you are proposing a fair repayment schedule, that is affordable to you and is sustainable, and in return they will agree to freeze all interest and charges and whatever remains outstanding at the end of your IVA will be legally written off by them. In addition, all legal action and collection calls and letters will cease.
Each case is different, and your IVA proposal will offer a different repayment than for example your neighbour, who may have the same level of debt as you. It's all about how much you can afford over the period of the IVA that is fair and acceptable to your creditors.
We are highly experienced in structuring IVA proposals and have excellent relationships with the creditors, which will ensure that we only propose IVAs that we feel the creditors will find acceptable.
We also want to ensure that you are able to retain a sensible standard of living throughout the IVA in order to reach its conclusion, allowing you to be free of debt.
8. Do my creditors have to accept my IVA proposal?
The proposal needs to achieve more than a 75% majority by value of creditors who vote at the creditors meeting in order for your IVA proposal to be accepted. For example, if you owe £30,000, then you would require £22,501 of your creditor votes, if every creditor voted.
Once an IVA is accepted, all creditors included in your IVA proposal, whether or not they voted against your proposal, are bound by your IVA.
9. Will the IVA settle all my unsecured debts?
Yes, providing that all your unsecured creditors are included in the IVA and that you complete your IVA, it is a once and for all settlement of your unsecured debts.
10. What if I come into some money whilst in the IVA?
This is usually called a windfall. This could be from winning the lottery to an inheritance or large bonus payment
As your creditors are agreeing to freeze all interest and charges and to write off a large proportion of your debt, it would clearly be unfair if you were to retain this money.
Your IVA will usually include a 'windfall' clause that will require you to pay the money into your arrangement. In the event of bonus payments, or regular overtime, depending on their value, you will be required to share the benefit on a 50:50 basis with your creditors. However you will never pay back more than is outstanding at the time the IVA was agreed.
11. Will I ever be able to get credit again?
Yes.
During your IVA you have agreed not to obtain further credit. When your IVA is completed, it is likely to remain on the credit reference databases for a further year. During this time you will probably still find credit difficult to obtain. However, when your IVA concludes successfully, your credit rating is likely to be repaired more quickly than if it fails.
Generally, you are better able to obtain credit once your debt problem has been resolved. When considering entering into an IVA, the last thing you should be thinking about is more credit! There are many lenders who will look at your ability to pay, and successful completion of an IVA, rather than just your credit file.
A successfully completed IVA is an excellent example of a good payment history.
To find out more about how an IVA can help you solve your debt problems, call us anytime 24 hours 7 days on 08000 434 336, or use our online application form.
