There are numerous websites that claim to offer ‘free’, impartial debt help advice but be wary! There are many businesses out there that are seeking to take advantage of your circumstances by offering loans or debt management to pay off all your debts. They may suggest solutions such as bankruptcy, an individual voluntary arrangement (IVA) or a debt relief programme. But ALWAYS seek legal or impartial advice before entering into any kind of agreement. Below is a list of websites which offer genuinely impartial advice:
While we have endeavoured to be as accurate and objective as possible, our suggestions should not be construed in any way as a substitute for legal advice. Before acting on anything we say it is essential that you first seek impartial advice from a government approved FREE debt counselling or advice service. See the list of contact details below. They are legitimate sources only, and they provide FREE expert advice. Do not pay for advice or debt management unless the complexity of your debt problem requires the services of a reputable solicitor or Insolvency Practitioner. And even then, ALWAYS seek FREE expert advice from your local Citizens’ Advice Bureau or the Consumer Credit Counselling Service (CCCS) first.
Readers will be on different rungs of the debt ladder and may require various levels of debt help. So for the benefit of everyone CV-Shop takes you quickly through;
CV-Shop will begin the debt help options for unstoppable debt from the point when you know you can no longer service your debt
This is definitely not recommended! Do not stick your head in the sand. It is important that you take responsibility. Ignoring debt problems will only make them worse further down the line. They will not go away on their own.
We would advise against this, although there are specific circumstances where it can work. But it requires some discipline. It really depends on the nature and extent of your debt. If, for example, the bulk of your borrowing is on credit cards, you haven’t missed any payments, and you have a regular and predictable income, you could wrap up your debt into a single loan or, better still, an extension on your mortgage (if you have one). This can leave you with a significant reduction in outgoings, and just one ‘manageable’ monthly repayment at a lower rate of interest.
If your credit rating is already damaged, (i.e. you’ve missed payments and it’s been registered on your credit file) it is unlikely that any high street lender, including your own bank and / or mortgage lender, will lend you money. The only way you will be able to borrow money is via the plethora of sub-prime loan brokers – the ones who advertise in the Yellow Pages and in the back pages of the tabloid newspapers. Not only will you pay well over the odds on interest, you will also be required to use your home or property as security. If you find yourself in this position, be very cautious; do your sums meticulously and take alternative advice before you commit yourself. Consider all your options first.
If you’re serious about debt consolidation, you must be prepared to ‘feel the pain’. Live within your means. Cut up your credit cards. Give up partying and fast cars and hunker down to an extended period of austerity! Or consider........
This involves working out your ‘priority’ expenses – mortgage, rent, council tax, utility bills, car, child maintenance, groceries, day-to-day living, etc, and dividing what is left (if anything) equally between your creditors.
ALWAYS prioritise the following:
When you make your offer, you should also ask your creditors to freeze the interest on your borrowings. They are not legally obliged to do this, but they will often agree on the understanding that you stick to the plan. Also, they have to be realistic: if they were to continue piling interest upon interest, it’s very likely that your repayment plan would remain in place long after you’ve departed this world!
If your debt is extensive and your offer of payment is small, it is unlikely that your lenders will accept it (it would take too long to pay off). However, even if your offer is declined, it is still a good idea to make a nominal monthly payment (even if it’s only £1). It’s up to the lender to decide to accept it. And if you’re biding time while considering your best course of action, you cannot be accused of ignoring your responsibilities.
A Debt Management Plan is an informal arrangement, and can (and will) be reviewed by your lenders at any time. You can contact your creditors yourself to propose a plan, or the CCCS will administer a plan on your behalf free of charge (contact details for the CCCS are at the top of this report).
How does an IVA work?
An IVA can be a workable alternative to a Debt Management Plan, especially where the option to make reduced payments under a Plan would result in a ridiculously long repayment period.
Before committing to an IVA, It is important that you are able to meet the monthly payments – i.e. have a regular and predictable income.
An IVA is particularly attractive (but not exclusive) to people who run their own businesses, because it allows them to continue trading uninterrupted, effectively giving them a second stab at getting it right.
You are also able to retain your home and other assets, although, depending on the terms of your arrangement, some creditors will only vote in favour of your IVA if you agree to release any equity in your property at the end of the repayment period, and pay it into the ‘fund’.
What is an Individual Voluntary Arrangement (IVA)?
It means you make a formal proposal for payment to your creditors. This has to be done through a licensed Insolvency Practitioner (who will also be an accountant or a solicitor). The proposed payments, paid monthly over a fixed period (usually five years), are significantly less than the total owed to your creditors. In practice, about 80% of your debt will be written off, and the remaining 20% is then spread over sixty payments, which is then divided among your creditors. Once in place, your life then continues pretty much as it did before you took out the IVA. The only difference being that you will sleep better at nights, because your outgoings are (in theory, at least) once more under control and your creditors have stopped hassling you. You will, however, have great difficulty in obtaining future credit, as an IVA will be recorded on your credit file.
By entering into the Arrangement, your creditors accept your revised payment offer in full and final settlement of their original claim. They cannot come chasing you for the balance at a later stage – unless, of course, you default on the IVA!
Not so many years ago, going personally bankrupt could be a tragic experience. People lost not only their homes, but just about everything in them, apart from the odd stick of essential furniture and the tools of their trade.
Luckily for us, we live in more enlightened times.
Bankruptcy - the facts:
What is Bankruptcy?
Bankruptcy effectively writes off ALL of your debts (apart from student loans and money acquired by fraud). It is especially recommended when your debts are overwhelming and there is little prospect that you will ever clear them by any other means.
That said, although bankruptcy has traditionally been seen as a last resort, recent changes in legislation and a new leniency on the part of the state in favour of the individual have made it a more acceptable prospect, even if your level of debt is relatively low.
The Official Receiver
The Official Receiver is the court officer who handles the administration of your bankruptcy. The Official Receiver will agree what is to happen to any assets you may have and, in cases where you have sufficient income to make regular payments, how much the payments should be and how long they will be made for. After a Bankruptcy Order is made they will inform your creditors. Creditors can then take no further action against you.
When you go bankrupt it means that any significant assets you may own, such as equity in your home, become the property of the Official Receiver. Your bank accounts will be frozen and closed.
These days, the Official Receiver is no longer interested in seizing your everyday possessions – TV, Hi-Fi, furniture, etc. He defines ‘significant’ assets as those that could be replaced with cheaper alternatives, e.g. antique furniture, or an expensive car. And even then, only those that he knows about, or can prove to exist. Unless you’re a high profile case, or he has a very good reason, (e.g. has been informed by a disgruntled creditor) or if you have been made bankrupt by a third party and you haven’t responded as instructed, the Receiver (or his representative, the bailiff) is unlikely to pay you a home visit to confirm that your declaration is accurate. There just isn’t the manpower.
Although the law was recently relaxed to reduce the bankruptcy term from three years to one year, if you are in receipt of a regular surplus income, the Official Receiver can apply for an ‘income payment order’. In theory, this can be claimed for three years, not just the one year of bankruptcy. This is unlikely to be enforced in the event of a typical low-profile bankruptcy.
What will happen to my home?
Understandably, this is by far the number one concern of most homeowners faced with the prospect of bankruptcy.
Here are the facts in brief:
When you go bankrupt, the legal title of your home will transfer to the Official Receiver or trustee. (Unless your home is jointly owned, in which case the Official Receiver will apply a restriction on an equal share of the beneficial interest of the property. The beneficial interest is the difference between what the property is worth and what is owed on the mortgage or any other loan secured on your property – i.e. what is left over if the property is sold.) If a restriction applies, it means the property cannot be sold without the knowledge and permission of the Official Receiver. If the beneficial interest in your home is less than £1,000, then it is unlikely that your home will be included in your bankruptcy.
Your husband, wife, partner, a relative or friend may be able to buy the beneficial interest in your home. This will stop the Official Receiver or trustee selling your home. In which case your home will effectively remain outside of the bankruptcy, and when you are discharged and / or the Official Receiver has concluded his inquiry into your affairs, the legal title will return to you.
Most people are unaware of this clause, and many ‘for profit’ debt advisers will fail often to inform you that it exists (although most are only too aware).
If you are unable to find a buyer for the beneficial interest, then the Official Receiver is likely to sell your home to release its value for distribution to your creditors. If there is money owed on mortgages or other loans secured on the home, these will be repaid first from any proceeds of the sale. The beneficial interest is calculated after deducting these amounts.
If your husband, wife and / or children are living with you, the Official Receiver will normally not sell your home for at least one year from the date of your bankruptcy, the aim being to allow you time to make alternative arrangements.
How to go bankrupt
You can petition for your own bankruptcy by obtaining the forms from your local County Court (The Petition: Insolvency Rule form 6.27 and The Statement of Affairs: Insolvency Rule form 6.28). Just phone and ask. Alternatively, you can download and print your own forms at www.insolvency.gov.uk
The forms are easy to complete, and come with detailed notes. But if you require help, the CCCS will willingly walk you through the forms (by phone) or visit the Citizens’ Advice Bureau, where you will receive expert assistance in person.
A fee is payable when you attend the Court with your petition. The current cost is £325 plus a Court fee of £150. (Payment is in cash only) In some circumstances, for example if you are living on benefits, the Court fee of £150 will be waived (take evidence of your status with you when you attend Court, and inform them in advance of your intention to make sure that you have the right documents with you when you arrive).
The £325 is non-negotiable!
The Insolvency Service also produces some very informative free booklets and leaflets, including:
A Guide to Bankruptcy
Dealing With Debt - How to Petition for Your Own Bankruptcy
What Will Happen to my Home?
What Will Happen to my Bank Account?
All available from: www.insolvency.gov.uk
There is also a telephone enquiry line: 0207 291 6895.
Where to get help:
To find out whether you’re entitled to benefit and, if so, how much, contact your local Citizens’ Advice Bureau or local council welfare rights office. They are able to offer expert and impartial advice. If you’re new to this, do not neglect to claim out of misplaced pride. You’ve paid your dues over the years, and the welfare system exists as a safety net to get us through the hard times. Use it! Don’t abuse it!
Remember that it is permissible to work part time while claiming benefits, just as long as you inform the authorities of how much you earn.
If you lose your home, and you have nowhere else to go, your local council has a legal obligation to re-house you. However, due a shortage council housing and housing association stock, there is a severe shortage of available accommodation.
Depending on what area of the country you live in, this means that if you are assessed as ‘homeless’ you are likely to be housed in ‘temporary accommodation’ (i.e. a bed and breakfast or hostel) prior to being re-housed. Be warned.
That’s all for now, CV-Shop sincerely hope you’ve found this report on debt help helpful.
The CV-Shop Team