What is a Debt Management Plan?
A Debt Management Plan is an informal agreement between yourself and your creditors. We will calculate the amount you can afford to pay after giving consideration to your priority debts - mortgage, utilities, council tax etc, and day-to-day living expenses.
Any money left (your disposable income) is then paid with a single monthly payment and then distributed to your creditors on your behalf.
IVA Alternatives – Debt Management Plan?
A DMP (debt management plan) can be an alternative to a, you make regular payments to a debt management company and they will distribute it to your creditors, use our online form and we will advise you on the best way
Advantages of a Debt Management Plan as an IVA Alternative
- Quick to set up
- Reduce your payments to an affordable level
- No fixed term
- The debt management company will deal with your creditors which should reduce phone calls and letters
Disadvantages of a Debt Management Plan as an IVA Alternative
- Creditors may continue to add interest and charges
- Does not stop Legal action being taken
- There is an initial set up cost - this reduces what you pay towards your debts
- Creditors may not respond as they would to a IVA or other formal arrangements
- It could take a long time to clear off your debts
For Scottish residents, there is a government backed debt management plan known as a Debt Arrangement Scheme, which DOES allow you to legally freeze creditor interest and charges. Find out more from DAS Scotland.
What are Debt Relief Orders?
IVA Alternatives - Debt Relief Orders
A debt relief order is aimed at individuals in debt who owe up to £15,000 to unsecured debt such as loans or credit cards.
In order to qualify for this IVA alternative, you must not own property or have assets of £300 or less, you also must have a disposable income after fewer than £50, after deducting all essential costs.
When a Debt Relief Order is applied for, the application is processed by one of the trusted intermediary bodies set up to administer the initial application.
The intermediary bodies will prepare and analyse each case to ensure that it meets the requirements of the Debt Relief Order and then submit it to the Official Receiver. The Official Receiver will then issue the Debt Relief Order.
Once granted, the individual will not be required to make any other repayments toward their debts during the time the order is in place and as long as their circumstances do not change during this time, their debts will be written-off when the Debt Relief Order comes to an end after the 12 month period.
The qualifying criteria that an applicant must meet before a Debt Relief Order can be applied for are as follows:
- Be unable to pay their debts
- Have unsecured debts of less than £15,000
- Have assets of less than £300, excluding a car up to a value of less than £1,000
- Have surplus income of less than £50 per month
- Be domiciled in England or Wales, or for the last three years have been resident or carrying on business there
- Not have an existing IVA, Bankruptcy Order, Bankruptcy Restrictions Order or have had a Debt Relief Order in the last six years
Advantages of a Debt Relief order as an IVA alternative
- Debt Free in less than 12 months
- Writes off debt when a total of less than £15,000 in owed
Disadvantages of a Debt Relief Order as an IVA alternative
- Permanent damage to your credit rating
- Only available to those in extreme financial difficulties
- Unsuitable for those with assets such as a home
What is Bankruptcy?
Bankruptcy and involves the transfer of your assets and property to a licensed Insolvency Practitioner.
The Insolvency Practitioner is responsible for selling your assets to cover some or all of your debt to creditors. It tends to happen when people do not take advice early enough and when there are no other options available.
- If you have an income you will have to make a regular contributions to the Bankruptcy
- Your credit rating will be adversely affected for up to 15 years or more
- Certain Careers will be off limits
- You may never get a mortgage, bank account or credit card
- Your assets may be sold to pay your creditors including your car and home
- Information about your Bankruptcy will be made public
- You may still be responsible for future payments out of any disposable income
You may be able to avoid Bankruptcy:
- There are alternatives to Bankruptcy, if you have an income then you may be eligible for a DMP (debt management plan) or an IVA. Fill in our 3 step form to get quotes.
Other information:
If Bankruptcy is granted you cannot become:
A Member of Parliament or act as a Justice of the Peace (JP) or Governor of a School.
A member of the Local Authority.
Who regulates Bankruptcy?
The Insolvency Service is in charge is of handling personal bankruptcy in England, Wales and Northern Ireland, In Scotland Bankruptcy is more commonly referred to as sequestration and is handled by the Accountancy in Bankruptcy (Aib). These bodies act as trustee in all Bankruptcy except those in which a private-sector insolvency practitioner is appointed
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