Debt Solutions
If you are struggling to repay your debts, please don’t worry, we’re here for you. No matter your situation there will be a solution for you, here we feature the most popular debt solutions, but in order for us to correctly identify the correct solution for your particular set of circumstances, we will need to talk to you.
What Is Bankruptcy
Bankruptcy is a formal insolvency procedure that may suitable if you are unable to pay your debts.
You can either make an application yourself or alternatively a creditor can apply to make you bankrupt. You must owe at least £5,000 for a creditor to make you bankrupt.
What Are The Benefits Of Bankruptcy?
Duration: Bankruptcy often lasts for only 12 months in total.
Legal Protection: Once approved, creditors can no longer proceed with legal action against you.
Stop Creditor Contact: Creditors are no longer able to contact you regarding your debts.
Interest & Charges: Interest and charges are frozen once the bankruptcy application has been approved.
What Are The Considerations Of Bankruptcy?
Assets: If you own a home or possessions of significant value, these items could be sold to help repay your debts.
Fees: There is an application fee of £680, although this can be paid in instalments.
Payments: You could be asked to make payments towards your debts for a period of up to three years.
Credit Rating: Bankruptcy will be recorded and have a negative impact on your credit file for a period of six years.
Public Register: Your personal details will be recorded on the Insolvency Register which is a public record.
Employment: Bankruptcy may impact upon your employment; therefore, you should always check the terms of your employment contract before making an application. You are also unable to be a company director unless you have permission of the court.
What Is The Breathing Space Scheme?
The Debt Respite Scheme (Breathing Space) can assist in providing you with some much-needed breathing space from your creditors.
If you are struggling with interest, charges and pending legal action, Breathing Space can give you legal protection for up to 60 days to allow you to get back on your feet, or to get a longer-term solution in place.
What Are The Benefits Of The Breathing Space Scheme?
Interest & Charges: No additional interest or charges to be added during the moratorium period.
Legal Action: No legal action can be taken against you whilst the Breathing Space is in place.
Stop Creditor Contact: Creditors are unable to contact you.
What Are The Considerations Of The Breathing Space Scheme?
Payments: You are still required to make payments to your creditors during the 60-day period if you can afford to do so.
Short Term: The Breathing Space Scheme is designed to relieve financial pressure but is not a long-term solution to financial difficulties.
Insolvency: You cannot be subject to a formal insolvency procedure such as a Debt Relief Order, Bankruptcy or an Individual Voluntary Arrangement.
Previous Applications: You must not have been in a Breathing Space Scheme in the previous 12 months.
Qualifying Debts: Some debts are not eligible for the scheme such as child maintenance payments, student loans and court fines.
What Is A Consolidation Loan?
A consolidated loan is one which combines all your unsecured debts into a single monthly repayment. The loan is used to pay off your debts, leaving one monthly repayment, rather than making multiple payments to creditors.
What Are The Benefits Of A Consolidation Loan?
Manageable: Consolidating your debts into one affordable monthly repayment can make your finances much easier to manage.
Reduced Interest: The interest rate may be lower than what was being paid to the debts that are due to be repaid with the loan.
Affordable: The loan could result in lowering your monthly repayments.
What Are The Considerations Of A Consolidation Loan?
Approval: There is no guarantee that the application will be approved and in some cases a guarantor may be needed.
Missed Payments: If you fall behind with your repayments, a lender can take legal action against you to recover the debt, which will have a negative impact on your credit rating.
Timescale: The repayments can be spread over a much longer term, which may mean you pay back more in total.
What Is A Debt Management Plan?
A debt management plan is an informal agreement that can be used to help people pay back their debts at an affordable rate.
Suitable for people who are struggling to meet the monthly repayments that were originally agreed with their creditors.
What Are The Benefits Of A Debt Management Plan?
Affordable: One affordable monthly repayment which is then distributed between each of your creditors.
Can Stop Creditor Contact: Most contact from creditors will be dealt with by the debt management company on your behalf.
Interest & Charges: Creditors may agree to reduce or freeze interest and charges, although this is not guaranteed.
Free Service: Debt charities offer a Debt Management Plan free of charge. Find out more.
What Are The Considerations Of A Debt Management Plan?
Timescales: Paying less each month means it may take longer to clear your debts in full.
Fees: A debt management company may charge fees for their services.
Priority Bills: Such as rent, council tax and utility bills are unlikely to be included in the plan.
Credit rating: A Debt Management Plan is likely to have a negative impact on your credit rating, making it more difficult to obtain credit in the future.
No Legal Protection: Creditor can choose to continue with their debt collection process, which can lead to further action such as a default or County Court Judgment.
What Is A Debt Relief Order (DRO)?
A Debt Relief Order is a formal insolvency procedure, which is only available to people who meet the following criteria:
- You reside in England, Wales or Northern Ireland.
- Your debts must not exceed £50,000 (£20,000 for residents of Northern Ireland).
- You have a disposable income of £75 or less each month (£50 or less for residents of Northern Ireland).
- You are not a homeowner.
- Your assets are worth less than £2,000 in total (£1,000 in Northern Ireland).
- Your vehicle is worth less than £4,000 (£2,000 in Northern Ireland).
- It has been at least six years since your last application for a Debt Relief Order.
- You are not subject to another insolvency procedure such as an Individual Voluntary Arrangement or Bankruptcy.
What Are The Benefits Of A Debt Relief Order?
Duration: Lasts for 12 months in total at the end of which your debts are written-off.
Legal Protection: Creditors can no longer proceed with legal action once the Debt Relief Order has been approved.
Payments: You are not required to make any monthly repayments.
Interest & Charges: Interest and charges are frozen once the Debt Relief Order is approved.
What Are The Considerations Of A Debt Relief Order?
Credit Rating: The Debt Relief Order will be recorded and have a negative impact on your credit file for a period of six years.
Public Register: Your personal details will be recorded on the Insolvency Register which is a public record.
Change in Circumstances: If your circumstances change during the 12-month period and you no longer meet the eligibility criteria, it is likely that the application will be cancelled, and you will need to make alternative arrangements to pay your debts.
Employment: A Debt Relief Order may impact upon your employment; therefore, you should always check the terms of your employment contract before making an application. You are also unable to be a company director unless you have permission of the court.
What Is An Individual Voluntary Arrangement (IVA)?
A formal insolvency procedure in which a legally binding agreement between you and your creditors is drawn up to pay back your debts at an affordable rate.
The Arrangement will typically last for five or six years, with any remaining debt at the end of this period being written off.
What Are The Benefits Of An IVA?
Assets Protected: If you are a homeowner, your home will be protected and not put at risk of being sold.
Affordable Payment: One affordable, monthly repayment which makes your finances much easier to manage.
Timeframe: A set time period (usually five or six years).
Legal Protection: Once approved, creditors can no longer proceed with legal action against you.
Stop Creditor Contact: Creditors are no longer able to contact you regarding your debts.
Interest & Charges: Interest and charges are frozen once your proposal has been approved.
What Are The Considerations Of An IVA?
Fees: There are fees payable for the work completed in setting up and managing your IVA, however these fees are taken out of your monthly repayments and are NOT in addition to the payments made to your creditors.
Credit Rating: An IVA will be recorded and have a negative impact on your credit file for a period of six years.
Public Register: Your personal details will be recorded on the Insolvency Register which is a public record.
Windfalls: If you receive a windfall such as inheritance or a lottery win, you are required to pay a proportion of this into the IVA.
Approval: Creditors may decide not to approve the proposed Arrangement.
What Is A Remortgage?
A remortgage consists of taking out a loan secured against your property.
The loan is used to consolidate your existing debts and save on high interest rates.
The secured loan can usually be spread over a much longer term, which can help to reduce your monthly repayments.
What Are The Benefits Of Remortgage?
Affordable Payments: One affordable, monthly repayment making your finances much more manageable.
Reduced Interest: Interest rates on a secured loan are typically much lower than those of an unsecured loan, although the debt may be spread over a much longer period meaning that you pay back more overall.
Debts Repaid: If you can release sufficient equity from your property, the loan could allow you to repay your unsecured debts in full.
What Are The Considerations Of Remortgage?
Advice: You should always seek independent mortgage advice before pursuing this solution.
Failure: If you to keep up with your monthly repayments, the lender could take legal action against you which could result in your home being repossessed.
Fees: There can be significant fees associated with remortgaging such as valuations, product fees, legal costs and broker fees.
What Is A Debt Arrangement Scheme?
A debt arrangement scheme is a debt management scheme available to residents of Scotland that allows you to repay your debts by applying for a Debt Payment Programme.
What Are The Benefits Of A Debt Arrangement Scheme?
Assets: Normally, assets are not taken into consideration meaning items such as your home and car are not at risk of being sold to repay your debts.
Affordable Payment: One affordable, monthly repayment which makes your finances much easier to manage.
Legal Protection: Once approved, creditors can no longer proceed with legal action against you.
Interest & Charges: Interest and charges are frozen once your programme has been approved.
Flexible: It may be possible to amend your payment if you have a change in circumstances and you may be able to take a payment break of up to six months.
What Are The Considerations Of A Debt Arrangement Scheme?
Fees: A charge of 10% is made from the payments made into the Debt Payment Programme, meaning that 90% of your monthly payments is received by creditors.
Credit Rating: A Debt Payment Programme will be recorded and have a negative impact on your credit file for a period of six years.
Public Register: Your personal details will be recorded on a public register.
Further Credit: It is normally a condition of your Debt Payment Programme that you will not be able to obtain further credit.
Timescales: As you are reducing your payments, it is likely that it can take longer than alternative debt options.
What Is A Minimal Asset Process?
Scottish Residents Only
A Minimal Asset Process is a route into Sequestration for people with minimal assets who are on a low income or benefits.
What Are The Benefits Of Minimal Asset Process?
Duration: Lasts for 6 months at the end of which your debts are written-off.
Legal Protection: Creditors can no longer proceed with legal action once approved.
Payments: You are not required to make any monthly repayments.
Interest & Charges: Interest and charges are frozen once your application has been approved.
What Are The Considerations Of Minimal Asset Process?
Debt Level: You must have a debt level of between £1,500 and £17,000.
Assets: Your total assets must be worth less than £2,000 and no single item can be worth more than £1,000.
Vehicle: Your vehicle must have a value of less than £3,000.
Fees: There is a one-off fee of £50 to process your application.
Credit Rating: The Minimal Asset Process will be recorded and have a negative impact on your credit file for a period of six years.
Public Register: Your personal details will be recorded on the Register of Insolvencies which is a public record.
Change in Circumstances: If your circumstances change during the 6-month period and you no longer meet the eligibility criteria, it is likely that the application will be cancelled, and you will need to make alternative arrangements to pay your debts.
What Is Sequestration?
Scottish Residents Only
Sequestration is a formal insolvency procedure that may suitable if you are unable to pay your debts.
You must live in Scotland and have a minimum debt level of £3,000.
What Are The Benefits Of Sequestration?
Duration: You are discharged from sequestration after one year.
Legal Protection: Once approved, creditors can no longer proceed with legal action against you.
Stop Creditor Contact: Creditors are no longer able to contact you regarding your debts.
Interest & Charges: Interest and charges are frozen once the sequestration application has been approved.
Debt Forgiveness: Once you are discharged from Sequestration, the balance of any remaining debt will be written off.
What Are The Considerations Of Sequestration?
Assets: If you own a home or possessions of significant value, these items could be sold to help repay your debts.
Fees: There is a £150 fee to make your application for Sequestration.
Credit Rating: Sequestration will be recorded and have a negative impact on your credit file for a period of six years.
Public Register: Your personal details will be recorded on the Register of Insolvencies which is a public record.
Employment: Sequestration may impact upon your employment; therefore, you should always check the terms of your employment contract before making an application. You are also unable to be a company director unless you have permission of the court.
Further Credit: You cannot obtain further credit of more than £2,000 without disclosing to the lender that you are in Sequestration.
What Is A Trust Deed?
Scottish Residents Only
A (Protected) Trust Deed is a formal insolvency procedure in which a legally binding agreement between you and your creditors is drawn up to pay back your debts at an affordable rate.
The Arrangement lasts for a fixed period, usually four years, with any remaining debt at the end of this period being written off.
What Are The Benefits Of A Trust Deed?
Assets Protected: If you are a homeowner, your home will be protected and not put at risk of being sold.
Affordable Payment: One affordable, monthly repayment which makes your finances much easier to manage.
Timeframe: A set time period (usually four years).
Legal Protection: Once approved, creditors can no longer proceed with legal action against you.
Stop Creditor Contact: Creditors are no longer able to contact you regarding your debts.
Interest & Charges: Interest and charges are frozen once your proposal has been approved.
What Are The Considerations Of A Trust Deed?
Fees: There are fees payable for the work completed in setting up and managing your Trust Deed, however these fees are taken out of your monthly repayments and are NOT in addition to the payments made to your creditors.
Credit Rating: A Trust Deed will be recorded and have a negative impact on your credit file for a period of six years.
Public Register: Your personal details will be recorded on the Register of Insolvencies which is a public record.
Equity Release: If you are a homeowner, you may be required to release equity from your home in order to help repay your debts. If you are unable to remortgage, the Trust Deed may be extended for 12 months instead.
Windfalls: If you receive a windfall such as inheritance or a lottery win, you are required to pay a proportion of this into your Trust Deed.
Approval: Creditors may decide not to approve your Trust Deed.