THE DILEMMAS OF DEBT IN DEBT? – THERE ARE OPTIONS
PERSONAL DEBT IN THE UK HAS TOPPED £1.4 TRILLION. If you are one of the many that make up this figure there is something you CAN do about it! Read this article supplied by Carbane Insolvency who are experts in the field of debt management.
Debts can start off in many different ways whether through a reduction in hours at work or at worst, redundancy through to health problems. Whenever there is a change in either income or expenditure or in many cases both, many people find themselves resorting to subsidising income initially with credit cards and then finally loans to consolidate and reduce the ever mounting monthly cost. The real problems arise when those circumstances haven’t really changed and the credit cards are then reused in order to keep things afloat. This is when it gets out of control with payments either being missed or further credit gained to keep up with the contractual monthly amounts. Unfortunately for many, letters requesting payment ensue, culminating in final demands from creditors or their agents – and all anybody wants is for them to go away. This article will look at the different options available to individuals in debt and how to resolve it.
IVA (Individual Voluntary Arrangement) First we will cover the IVA (Individual Voluntary Arrangement). The pin-
nacle word of any arrangement is ‘protection’ and an IVA gives just that. It is a ‘legally binding’ arrangement which means that you are protected from any legal action that a creditor may wish to take and in addition it will prevent the sale of assets such as your property, or your vehicles, especially when that vehicle is likely to be your income.
With an IVA, you enter a binding agreement with your creditors. Pre- dominantly, you will pay an amount per month (disposable income after working out your main expenditure) to your debt during a five year peri- od. An alternative to a monthly payment proposal would be a ‘lump sum’ offer where the duration of the IVA may be as little as six months. As long as 75% of your creditors vote in favour of the arrangement, it is accepted and the new agreement can then start. This decision is made at a creditors’ meeting (which you do not attend) and upon the suc- cessful outcome is binding on all of your creditors.
It has to be explained that for an IVA to be considered, you must be owing an amount of unsecured debt in excess of £15,000. You must have a regular source of income and have an amount of disposable income after taking into account your regular cost of living (the amount of money needed in order to service your home, car and general house- hold expenditure). This disposable income is the sum you will have to pay every month to your IVA and which is used to pay to your unsecured creditors and the supervision costs of your IVA which is managed by an Insolvency Practitioner. An IVA cannot be undertaken without the use of an Insolvency Practitioner (IP). The IP is fully licensed and all charges are included in the repayment amount by you, the debtor from your dis- posable income payment per month to the IVA.
If the IVA is accepted by your creditors, all recovery measures against you are suspended along with all interest charges. The IP assumes all communications with your creditors on your behalf and makes the pay- ments to your creditors from the money you pay into your IVA on a quarterly basis. It allows anybody to keep on plying their trade, irre- spective of any proportion of your assets (in a taxi driver’s case – the vehicle) being owed to a third party.
To summarise, an IVA is an arrangement that protects you from any legal action and seizure of your assets and allows you to pay an amount of money that you can afford, either monthly or as a lump sum.
BANKRUPTCY
Now onto the most formal personal insolvency arrangement, bankrupt- cy. Bankruptcy has always been deemed as the ‘last resort’ when in many situations it is considered to be the most appropriate. It is a for- mal insolvency process as with an IVA; however, it doesn’t have the same degree of flexibility and asset protection as the IVA. In some cases it is not suitable due to a debtor’s career as it has a long, permanent black mark on your credit rating. For taxi drivers remember any equity in your vehicle can be seized by your creditors. This can result in a forced sale at less than market value in order that any monies to your creditors are first repaid, irrespective of your income being affected.
If you are an owner driver, this can seriously affect your ability to earn. Your local Citizens’ Advice Bureau or a reputable company advising in debt and financial management will be able to assist in completing the forms and advise accordingly. They will either help you get all the nec- essary documents together in order that you can petition yourself, or even attend with you. There are fees and expenses which you will have to pay yourself when lodging the paperwork. Currently these total around £500. When the bankruptcy order is granted by the court, con- trol over your resources goes to an officer of that court, known as the Official Receiver (OR) who will either manage your case or appoint an Insolvency Practitioner (who for this process has the title of Trustee) to manage your case.
The Official Receiver/Trustee then investigates your financial affairs to ascertain what you can manage to settle your financial obligations. If this is the first time you have been made bankrupt and if you co-operate thoroughly with the Official Receiver/Trustee, you will be released or ‘discharged’ from your bankruptcy within twelve months and any amounts still owing to creditors will be written off.
Bankruptcy could well be the most beneficial insolvency route for you depending on your personal circumstances, specifically if you have no property or assets, are not employed or not employed in a professional capacity.
Whatever your circumstances, however much you owe and whether you are managing to keep up repayments or not, you may wish to talk to some- one about how to resolve your current financial situation and simply get back on track. The hardest thing to do is always to admit that there is a problem or an issue. It costs nothing to talk it through with a professional.
DEBT PROBLEMS?
Carbane Insolvency is a leading provider of confidential advice on debt problems, however serious, so if you are struggling with credit cards, loans or mortgage repayments, don’t leave it too late. Speak to us or visit
www.carbaneinsolvency.com
Call Us 0845 676 9101 PAGE 54 PHTM JULY 2011
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