We understand your financial situation is deeply personal. Not everyone’s priorities, needs, or demands will be the same. We’re under no illusions, there’s no one-size-fits-all debt solution that will work for everybody. That’s why we take the time to fully understand your unique circumstances before suggesting any potential solutions.
So what different solutions are out there?
Individual Voluntary Arrangement - IVA
An IVA is an Individual Voluntary Arrangement. It’s a legally binding arrangement between you and your creditors. Between yourselves, you will agree on a monthly payment to pay over a set period by conducting an assessment of your income and expenditure.
After this period is over - usually five years - any remaining debt will be written off. To qualify for an IVA, you will usually need over £6,000 of debt from a minimum of two lenders.
An IVA can only be set up by a professional Insolvency Practitioner, also known as an IP. So, if we feel that an IVA is a suitable option for you, and you want to move forward, we will recommend you to a third-party associate firm. It’s at this point any necessary fees will be explained to you. We always recommend using The Money Advice Service for free advice and guidance before moving forward with an IVA.
As an agreement is being finalised between your IP and creditors, you will receive an interim order to prevent any further action being taken against you. Your creditors will then vote on your proposed monthly payment and so long as 75% agree, your IVA will be approved. Each month you will be responsible for sending one payment to your insolvency practitioner who will then distribute to your creditors.
• We work out one monthly repayment amount you can afford.
• An IVA will provide you with a set date when your debts will be cleared.
• Once you’re accepted, all interest and charges on your debts will be guaranteed to be frozen or stopped.
• No further action from creditors. If all your payments are made on time, they handle phone calls, letters, and any other hassles.
• Up to 75% of your initial debt balance could be cleared once your IVA comes to an end.
• You will be obligated to carry out the full term of the agreement.
• Applying for credit cards, loans, mortgages, or other unsecured debts will be affected for six years.
• An IVA will be on your credit file for six years.
• If you are a homeowner and have equity in your property, some release to creditors may be necessary. If this is not possible, you might have to add an extra twelve months of payments.
• There will be annual monitoring of your income and expenditure. You might be asked to reduce any expenses that are considered excessive.
• An IVA will be added to the Insolvency Register and removed three months after the IVA ends.
• Failure to comply may end in bankruptcy.
Protected trust deed - TD
A Protected Trust Deed is similar to an IVA but is only available to residents of Scotland. It’s a formal agreement between you and your creditors in which you will agree to give a contribution out of your income for a specified period. You will be doing so to repay part of what you owe them. This period is usually four years, after which you’ll be free of all unsecured debt.
Each case is individually assessed, and, like an IVA, you’ll usually need £6,000 of debt from two or more lenders.
Because you won’t be paying your previously agreed repayment amount, your credit rating will be impacted for six years. As well as this, a record of the arrangement will be on your file for six years.
• Will have a fixed term. You have a set date for when you’ll be debt-free.
• By keeping up with your payments you’ll no longer have the hassle of phone calls and letters from creditors.
• Will help you avoid sequestration (bankruptcy).
• Any debt left over at the end of the agreed term will be written off.
• Interest and charges will be frozen at the start of the agreement.
• One affordable monthly repayment.
• Your information will be added the Insolvency Register.
• Some debts cannot be included in a trust deed.
• If you are a homeowner and have equity in your property some release to creditors may be necessary.
• Applying for credit cards, loans, mortgages, or other unsecured debts will be affected for the duration of your repayment.
• A Trust Deed will show on your credit file for 6 years.
• Failure to comply may end in sequestration (bankruptcy).
Debt management plan - DMP
A Debt Management Plan is an informal arrangement between debt management providers and your creditors. They will look at your income and expenditures, agreeing on an affordable plan, realistic to your financial situation.
Your debts will need to be repaid in full. (debt management fees may occur although there are also non fee charging companies). You will have the flexibility to change your repayment plan should your circumstances change or pay debts back quicker if your finances allow.
If you choose this option, a third-party debt management company who will assess your situation and agree on a monthly payment. They will then communicate with the creditors on your behalf and arrange a repayment plan. 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.
• You can request interest and charges to be frozen, this option is not guaranteed. But this is down to their discretion.
• It’s flexible. One monthly affordable regular payment.
• After completing your plan, your unsecured debts will be cleared.
• You’ll only need to make one regular payment per month.
• In a lot of cases, your creditors will stop contacting you.
• It isn’t a legally binding agreement and sometimes creditors may continue to contact you and interest and charges may not be frozen.
• Your credit rating will be impacted for six years or longer depending on the duration of the plan.
• Mortgages and ‘secured’ debts aren’t covered.
• You will have to pay your debts back in full - no amount will be written off.
• There may extra fees on top of your repayments.
• There is no protection for assets.
Debt arrangement scheme - DAS
A Debt Arrangement Scheme is like a debt management plan but is a formal arrangement; this is only available for Scottish residents. It allows you to repay your debts with one lower monthly payment. There will be a set time frame for your arrangement and during this time you’ll be protected from your creditors. You will pay your monthly payment to your DAS administrator and they will distribute this out to your creditors.
This option is only available through a debt payment program and you cannot be involved in any other formal insolvency procedure at the time of application. The time frame of your scheme can vary depending on the debts you have. A lot of the time, it will be less than ten years.
• It is a legally binding agreement with creditors and supervised by the Scottish government.
• All interest, fees, and charges are frozen.
• Any of your personal assets are unaffected.
• One monthly payment that you can factor into future planning.
• You are relieved of any legal action from creditors.
• Upon completion, your included debts will be cleared.
• Most of the time, contact from creditors will stop as long as you’re making your monthly payments.
• You can amend your payment proposal if circumstances change and your creditors view them as fair.
• It can be revoked if you do not comply with the conditions.
• Your credit rating will be impacted for six years or longer depending on the duration of the plan
• No debt is written off, meaning a DAS can take significantly longer than other methods.
• You can’t apply directly; you need to find an approved money advisor to act for you.
• If you own your own home, creditors may still get an ‘inhibition’ to stop you from selling your home or getting a loan secured on it.
• Your information will be added to a DAS register.
Bankruptcy is a court order you can apply for if you have unmanageable debts you are unable to repay. It’s a form of insolvency where you agree to a set of terms and in return will see some relief from your debt. As part of the process, your assets will be distributed and sold amongst your creditors.
Usually, regardless of how much you still owe, at the end of twelve months, your bankruptcy is discharged. In some circumstances though, you may be required to pay into it for three years through an income payment order.
Bankruptcy requires a debt higher than £750. The process itself costs £680 but you can pay it in instalments to the Insolvency Service.
•Through the process, you are protected from legal action.
• In most cases, after twelve months, your outstanding debt is written off.
• Once the bankruptcy is completed, you’ll be free of any unsecured debts that were included.
• Most of the time, you’ll have automatic discharge after one year.
• A bankruptcy order may stay on your file for six years after bankruptcy, meaning your credit rating will be affected.
• You cannot use your bank account or credit cards during the process.
• Your details will be added to the Individual Insolvency Register.
• You remain on the Insolvency Register for three months after discharge.
• Your personal assets can be sold to repay creditors.
• You cannot act as a company director and you will need court permission to take any part of managing a limited company.
Debt relief order - DRO
A debt relief order can be an alternative to bankruptcy. Requirements for a DRO are:
• Disposable income less than £50 per month.
• Personal assets below £1,000 and a car worth less than £1,000.
• Debts less than £20,000.
Unsecured debts, household debts, and finance all count towards a debt relief order.
It costs £90 for a DRO. You can pay in instalments over six months, but this must be paid in full before your application is looked at.
• Often, you’ll be discharged after a year, at which point all debts included in your DRO will be cleared.
• All debt is frozen while in the DRO.
• You’re immune from legal action during the year and creditors cannot legally contact you.
• You do not need to make any payments into the DRO
• Your name will be in the Insolvency Register until three months after you’re discharged.
• It will affect your credit rating for six years.
• The process can impact your current and future employment.
• If your circumstances change and you can afford to make repayments, or you fail to cooperate, the DRO may be revoked.
Get in touch with us
No one should have to deal with financial troubles alone.
Whether you’re looking to resolve your financial struggle once and for all or just want to ease the burden by talking things through, we can offer you advice and guidance on how best to proceed. Get in touch today to take the first step towards a better financial future.
The Debt Advice Service
Mills Hill Works
Chadderton OL9 9SD
Phone: 01706 404143
The Debt Advice Service is a trading name of BHDB Associates Ltd which is registered in England & Wales, Registered Office: Prince of Wales House 18/19 Salmon Fields Business Village, Royton, Oldham, England, OL2 6HT. Company number 10534486. ICO registration number ZA542533
The Debt Advice Service is an Appointed Representative (AR) of Pacific Financial Solutions Ltd. company number 09404359. Authorised and regulated by the Financial Conduct Authority, authorisation no. 688034. ICO number ZA207735
The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website: www.financialombudsman.ok.uk
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