RESOURCES
Even though the number of
people in the UK with
financial problems continues
to rise, many individuals who
cannot afford to pay their
debts want the opportunity to
at least act honourably and
avoid bankruptcy. Their
options are clear – either
borrow more money or offer a
repayment schedule to their
creditors.
I have already suggested why
borrowing more money by way of
a consolidation loan may not
be your best option. If you go
down the road of trying to
reschedule your debts you have
the choice of either coming to
an informal arrangement,
possibly with the assistance
of a debt management company,
charitable organisation or
government organisation.
Alternatively you could
enter into a Voluntary
Arrangement.
INFORMAL ARRANGEMENTS
An informal arrangement may be
difficult to administer if you
have a lot of demanding
creditors. Some lenders do
have their own debt
counsellors and you could try
speaking to them directly. It
may be better to speak to an
independent organisation such
as those mentioned below which
do not have a vested interest
in any of your debts.
I strongly advise that you
steer clear of private debt
management companies that will
charge you significant fees
to negotiate with your
creditors. You can end up
paying more to them than to
your creditors, and they are
taking advantage of an already
desperate situation. Remember
also that these informal
arrangements place no legal
obligation on your creditors.
The agreements are only made
for a short period of time
(e.g. six months or one year)
after which the whole
situation may need to be
renegotiated again.
Informal arrangements should
really only be considered if
you are absolutely certain
that your payment problems are
temporary, in which case you
should negotiate a reduced
payment schedule directly with
your creditors. Don’t pay your
money away to someone else to
do this for you.
INDIVIDUAL VOLUNTARY
ARRANGEMENTS (IVAs)
A Voluntary Arrangement is a
legal agreement between you
and your unsecured creditors,
whereby you pay an agreed and
affordable sum of money of
money each month, usually for
5 years. The total that you
pay is then divided up between
your creditors who accept this
sum in full and final
settlement of all that you owe
them.
Voluntary Arrangements (or
Individual Voluntary
Arrangements, often called
IVAs) were introduced in 1986
as part of government
legislation in order to
provide people in financial
difficulty with a second
chance. This procedure is
formally recognised but does
not carry the same burden or
stigma as bankruptcy. As a
result, Voluntary Arrangements
are today regarded as a
positive way out of debt,
enabling an individual to
protect themselves from legal
action by their creditors
including bankruptcy.
A Voluntary Arrangement is
administered by an insolvency
practitioner whose fees are
paid out of the money you pay
to your creditors, in other
words there are no additional
charges for you on top of your
debt.
BANKRUPTCY
A bankruptcy order may be
obtained by any creditor owed
more than £750, or you
yourself may ask the court to
make an order. In either case,
the Official Receiver, a
government official, will then
contact you for details of
your financial position.
Subject to certain exemptions,
bankruptcy means that your
assets are sold and the money
is used to pay your creditors
as much as possible. The
assets will be sold by the
Official Receiver or an
Insolvency Practitioner as
your ‘trustee in bankruptcy’.
Assets you will be allowed to
keep include:
-
Ordinary household contents
-
A modest motor vehicle
-
The benefits of a
residential tenancy
-
‘Tools of trade’ – things
you need to pursue your
trade or vocation
-
Any money you have in a
pension fund (although you
should seek advice if the
fund is large or if you are
due to take the benefits
within a few years from
bankruptcy)
I strongly recommend that you
should take financial advice
before deciding if any of
these courses of action is
right for you. Broadly, if you
are already significantly
behind on your debt
repayments, or failing to meet
the minimum monthly payments
due, it may be that you need
to enter into negotiations
with your creditors and the
Debt2Wealth System may not be
appropriate at this time.
There are some excellent
organisations that can help
you and I recommend that you
contact any of the
organisations below who will
give you free and independent
advice and assistance.
Citizens Advice Bureau
(contact your nearest local
office)
http://www.citizensadvice.org.uk/winnn6/cabdir.ihtml/
National Debtline (0808 808
4000)
http://www.nationaldebtline.co.uk/
Consumer Credit Counselling
Service (0845 272 5400)
http://www.cccs.co.uk/
Credit Action (01522 699 777)
http://www.creditaction.org.uk/
Business Debtline (0800 197
6026)
http://www.bdl.org.uk/
MORTGAGE ADVICE AND SERVICES
http://www.the-mortgage.co.uk/
HOME BUSINESS OPPORTUNITY
WEBSITES
http://www.leveragedincome.net/
