Getting the right advice is essential...
We understand that when financial difficulties occur the stress can be immense. It is vitally important when problems arise to get professional advice from a company that can offer a range of different solutions, each one tailored to the individual clients needs. A common and often disasterous mistake is to seek advice from the wrong source. Too many companies only offer one solution whether it be an IVA, Debt Management, Administration Orders, Debt Relief Orders or Personal Bankruptcy. At CFM we will assess your personal situation and advise you fully on the best financial solution to suit your individual needs. The Insolvency Service has a guide available of their website entitled 'In Debt? Dealing with your creditors' which covers the most common solutions to debt problems. In brief however;
Debt Management
Debt Management Plans are widely understood by creditors as being a fair and open way of sharing payments. At Capital Financial Management we will negotiate with your creditors on your behalf and as we enjoy a good working relationship with most creditors, offers are more likely to be accepted and interest and charges frozen than if you were to try and negotiate yourself. After being on a Debt Management Plan for some time, we may be able to negotiate with your creditors for them to write off a significant amount of the outstanding balance.
The downside of a Debt Managemnt Plan is that legally creditors could still take enforcement action although it is unusual for them to do so if you maintain the agreed repayments. Creditors cannot be foced to accept proposals and stop interest but they cannot refuse to accept any payments made to them. Again, creditors are generally keen to cooperate with those who demonstrate they are comitted to resolving their debt problems.
Individual Voluntary Arrangements (IVAs)
An IVA should not be entered into lightly. A court order is required following a meeting of your creditors where, 75% or more of the votes have to be in favour for the IVA to proceed. Each creditor’s vote is equal to the percentage of the total debt that the creditor claimed. It is not a foregone conclusion that creditors will vote in favour and by this stage substantial fees could have been incurred and owed to an Insolvency Practitioner who must supervise the IVA. In addition you may have to release the equity in your home after 5 years. An IVA can easily fail and if this occurs you will still owe outstanding balances to your creditors and in addition may be liable for Insolvency Practioner fees.
On the positive side, if granted, an IVA is binding upon your creditors and interest will be frozen as long as you maintain repayments. If the IVA suceeds any balance that you owe your creditors upon completion will be written off.
Administration Orders
An application needs to be made to the court and these orders are only suitable for those who owe less than £5000, have at least 2 creditors and already have a county court judgment registered against them.
An Administration Order will prevent creditors from taking enforcement action and interest will cease to accrue. A creditor can request to be left out of the order and the court may make an Attachment of Earnings Order.
Personal Bankruptcy
Where clients have little or no assets, issuing a Debtors Petition for Bankruptcy may sometimes be the best option. With the exception of student loans, court fines and debts arising from family proceedings, all debts will be written off. Under current legislation most petitioners will be discharged within 12 months. Bankruptcy can provide a fresh start and leave a client Completely Free of Debt.
It is however important to take advice before petioning for bankruptcy. You may lose your home and any assets that you have. In some circumstances employment can be effected, an Income Payments Agreement or Order can be sought by the Official Receiver and a bankruptcy restrictions order could also be made. You will also be committing a criminal offence if you apply for credit of £500 or more without first disclosing you are bankrupt. You will also be prevented from acting as a director of a company or from holding certain office.
Debt Relief Orders
If you do not own your own property, your debts are less than £15,000, your assets less than £300 and your monthly disposible income less than £50 then you may be eligible for a DRO. If you do qualify then your debts will be written off at the end of the DRO which lasts for 1 year. Similarly to bankruptcy you will remain liable for certain debts. DRO's are only available through approved intermediaries.
Equity Release / Remortgaging
If you own your own property then you may be able to release some of the equity to repay your debts. Your total monthly outgoings are likely to reduce but the total amount that you end up repaying may be substantially more than you currently owe. However, at Capital Financial Management we are often able to negotiate reduced Full and Final settlements with creditors which may still make this approach advantageous. Each case is different and advice needs to be sought.
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Or email us at advice@c-f-m.co.uk