Individual Voluntary Arrangement
What is an IVA?
An IVA, or individual voluntary arrangement, is a legally binding agreement between you and your creditors, in which you agree to pay an affordable monthly payment for a set period of time – usually 5 or 6 years. After this set period of time any remaining debt will be written off. Your credit file could be affected for 6 years.
Will an IVA affect my property?
For homeowners regulations state that if you have equity, some form of equity release may be required by creditors. If you do not have equity and can’t re-mortgage, more times than not, you will have an extra 12 months of payments added on to your IVA.
How will an IVA affect you?
When you enter an IVA, your creditor accepts what you can afford to pay over the course of 5 years. Once that time period is up, your outstanding balance is written off. This amount could be up to 75% of your initial debt balance.
Your ability to obtain credit for credit cards, loans, mortgages and other unsecured debts may be affected for 6 years. An IVA will be on your credit report for a minimum of 6 years from the date of arrangement and longer if the arrangement lasts more than 6 years.
Your IVA will be added to the Insolvency Register and is removed 3 months after the IVA ends.
Who can set up an IVA?
An IVA can only be set up by a professional lawyer or accountant, known as an Insolvency Practitioner (IP).
What fees are payable if I decide to apply for an IVA
If we determine that an IVA is a suitable option for you and you agree, we will refer you to a third party associate firm at which time the fees will be explained to you. We will always recommend you speak to The Money Advice Service for free & impartial money advice before requesting to be referred for an IVA.
What happens during an IVA?
An IVA involves making a profile of your financial status and making contact with all of your creditors. As the proposal is being processed, you will be provided with an interim order which can prevent creditors from seeking further action. During a meeting with all of your creditors, your proposed monthly payment will be voted on. As long as 75% of your creditors agree upon the amount you proposed, your IVA will be approved (this is distributed based upon your debt level with each creditor). The proceeds from one payment sent to your insolvency practitioner each month will then be divided among your creditors.
Protected Trust Deed
What is a Protected Trust Deed?
Protected trust deeds are only available to residents of Scotland that are in financial difficulty with debts over £6,000 and meet specific criteria.
Provided you have maintained all of your trust deed payments, you will be free of all unsecured debts within 4 years.
Trust deeds are voluntary agreements between you and your creditors (the people you owe money to). You agree to repay part of what you owe them. A trust deed will normally include a contribution out of your income for a specified period; this is usually 4 years but can vary.
Each case is individually assessed, much in the same way as with an IVA in England or Wales. As such, you may qualify with £6,000 or more debt from 2 or more creditors.
Will my credit rating be affected?
Yes, by entering into a trust deed, you will no longer be repaying debts at the originally agreed amount, this means your credit rating will be affected for six years.
A record of the trust will be held on your credit file for up to six years following completion.
Debt Management Plan
What is a debt management plan?
When you are looking into how to solve your debt problems, you hear the term ‘debt management plan’ and many people have absolutely no idea what one actually is, so here you will find out what exactly is a debt management plan?
A debt management plan is an informal arrangement so payments can be changed to meet your circumstances. What this means is that Debt Management providers come to an arrangement with your creditors to repay your debts, but at a rate which you can afford. They do this by looking at your income and expenditure and coming up with a realistic payment plan that is good for all parties – your creditors get paid in full and you can repay your debts without struggling for food or warmth. If your situation changes and you can afford to pay more (or less) you can change your payment amount quickly and easily. Alternatively if at any point you decide you no longer need to be on a debt plan you can cancel at any time, although you will still have any outstanding debt with your creditors. In many cases Debt Management providers can even have any charges and interest frozen, although there is no guarantee that the creditors will agree to this. A Debt Management plan is not a solution we administer in-house.
What are the debt management fees for?
Your monthly debt management fee will pay the daily administration of your plan, the assistance from an expert agent, setting up communication with your creditors, payment of postal fees and phone calls, requesting that interest and other charges be stopped and providing you with an annual review of your financial situation.
How do you set up a Debt Management Plan?
We will refer you out to a debt management company who will conduct a full financial review of your accounts and determine a monthly affordable payment. They will then communicate directly with your creditors on your behalf, and develop a repayment plan. Once the plan is in place, all you will need to do is make one monthly payment. We will always recommend you speak to The Money Advice Service for free & impartial money advice before requesting to be referred to a debt management company.
Can I pay off my debts early?
A debt management plan, unlike an IVA does allow you to pay off debt early. As a non-legally binding agreement, you will be allowed to use pay raises or other sources of income to make larger payments and relieve yourself of debt sooner.
Creditors don’t have to agree to a debt management plan and may still contact you asking for immediate repayment.
Mortgages and other ‘secured’ debts are not covered by a debt management plan.
Obtaining credit in the future could be problematic since your credit rating will be affected for 6 years
Your debts must be repaid in full – they will not be written off.
Paying over time may mean the amount you pay is increased
Bankruptcy is one way of dealing with debts you cannot afford to repay. It is a court order that you can apply for if you have unmanageable debts. It may be the best way for you to free yourself from excessive debts but the decision should not be taken lightly.
What is bankruptcy?
Bankruptcy is a legally binding form of insolvency, which gives you some relief from your debt in return for you agreeing to certain terms. To clear your debts, your assets are sold and split among creditors. While you are usually discharged from bankruptcy after a year, certain circumstances and disposable income may require you to pay into it for three years. You are protected from legal action and at the end of the term your outstanding debt is written off.
How long will bankruptcy last for you?
Bankruptcy normally lasts for 12 months. Once this has passed, regardless of what you owe, your bankruptcy will be discharged.
Will your credit rating be affected?
Your credit rating will be affected in the long term as the bankruptcy order will remain on your file for 6 years following bankruptcy.
What are the criteria for a Bankruptcy?
WHAT HAPPENS DURING A BANKRUPTCY?
Debt Relief Order
What is a Debt Relief Order?
A debt relief order is an alternative to bankruptcy for people struggling with debts of less than £20,000.
A debt relief order is only available to people who have a disposable income of less than £50 per month and personal assets worth less than £1,000.
Motor vehicles worth less than £1,000 will generally not be included in this limit.
What debts count towards a debt relief order?
Who is a debt relief order suitable for?
Individuals with relatively low liabilities, small surplus income and few or no assets and who are possibly not in a position to pay off their debts in a reasonable time.
What are the criteria for a Debt Relief Order?
It costs £90 to arrange a Debt Relief Order and you can pay in installments over 6 months. However, you need to have paid the fee in full before your application will be looked at. To qualify for a Debt Relief Order, you need to meet the following criteria:
What will a Debt Relief Order mean to me?
Debt Arrangement Scheme
What is a Debt Arrangement Scheme?
A debt arrangement scheme (DAS) is a debt management program, run by the Scottish government, which allows you to repay your debts over an extended period of time whilst providing you protection from their creditors.
A Debt Arrangement Scheme is set up by the government and only available through a Debt Payment Programme. It is a debt solution available to Scottish residents who are struggling with debt but want to avoid bankruptcy. As a more formal debt payment plan that is not bankruptcy, this plan consists of one low monthly payment distributed by a DAS administrator to all of your creditors.
Who is a debt arrangement scheme suitable for?
To be eligible for a DAS you must be struggling to make your monthly debt repayments and also meet the criteria below.
You must not be involved in another formal insolvency procedure at the time of application, such as: