29 Sep, 2007
A person petitions for Bankruptcy when they cannot afford to pay their debts and need to start afresh. Bankruptcy is a formal solution that you can solicit yourself at the court. It’s rare that a creditor will petition the court to make you bankrupt as it costs them money but it can happen.
Typically bankruptcy lasts 12 months and then you are discharged i.e. you are released from the restrictions imposed on you. It can however last much longer - from 5 years up to even a maximum of 15 years. A Bankruptcy Restriction Order is applied beyond the initial 12 months in cases where the bankrupt was dishonest or especially blameworthy for the bankruptcy. Such cases include when the debt was incurred through gambling, fraud or negligence. However misconduct prior to 1 April 2004 will not be taken into account.
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27 Sep, 2007
The majority of IVAs, are monthly repayment IVAs, which, as described in the IVA facts article, involve the debt being paid over a five year period. An alternative, where the debt is settled once and for all by the payment of a lump sum is called a final settlement or lump sum IVA. This is attractive option to your creditors when you can obtain a lump sum but have low disposable income making a repayment IVA difficult. The money for the lump sum can be obtained from sympathetic relatives or via a re-mortgage of the property.
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22 Sep, 2007
An Individual Voluntary Arrangement or IVA is a legally binding agreement between you and your creditors. You agree to make monthly payments towards repaying your debt over a period of five years. If there is debt remaining then it is written off. (However, please be aware if you choose the IVA route that there are a number of situations where the amount you have to pay off could equal or exceed your total debts). In addition, your creditors will probably require you to re-mortgage your house (if you have one) towards the end of your IVA. Again please be aware that, due to the higher new monthly mortgage payment, this can be and has been a major contributory factor in the cause of people going bankrupt at the last stage or end of their IVA.
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19 Sep, 2007
A Debt Management Plan (DMP) is an informal solution to your debt problem that allows you to repay your creditors at a reduced monthly rate that you can afford. It’s not a great solution as paying the debt can take years longer and your creditors can alter the agreement you make with them at any time. You could use this solution if your debt is very low and you have a temporary income problem. It might be useful as a short term solution before you declare bankruptcy or get an IVA or even perhaps as a bridge before you come into that big windfall!
People in Scotland can avail of the “Debt Arrangement Scheme” which is a free DMP that protects you from creditors.
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18 Sep, 2007
Debt Consolidation is a solution for someone who has plenty of disposable income. Many people with credit and store card debt pay exorbitant interest rates, in some cases as high as 25%. It doesn’t take a genius to understand that if you were to pay a lower interest rate for such loans you can save quite a bundle of money! This is achieved by combining all the high interest debts into one low interest loan. Debt consolidation, therefore, amounts to restructuring your old debt. You take out a new loan so that the payments you make are less each month. Some people take out debt consolidation loans that have similar interest rates to existing debts but are paid over a much longer term. Because the loan is over a longer period the monthly payments are therefore less. This approach to debt consolidation is not the most optimal as it results in saddling yourself with more debt for a longer period.
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14 Sep, 2007
I call this debt solution the “skip solution” as “skip” is the term used by debt companies to classify people who have literally skipped the country without paying off their debts.
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12 Sep, 2007
Having completed your statement of affairs you can now try and get a general idea of the best debt solution for your situation. It’s important to take your time to get all the facts about the debt solutions available. Don’t hurriedly decide on a specific debt solution such as an IVA without learning the alternative debt solutions available to you. Also make sure you understand fully the repercussions of choosing a particular solution.
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8 Sep, 2007
In order to tackle your debt problem, you need to organize and gather information on your personal financial situation into a document called a “statement of affairs”. This article explains how to construct your Statement of Affairs (SOA) and offers pointers on some of the downloadable tools and examples that you can use to help you. For example, there is a link to a budget sheet from the National Debt Line that you can download, print out and complete in pencil. Alternatively, if you are comfortable completing your Statement of Affairs online you can use the “Debt Remedy” tool from the CCCS.
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5 Sep, 2007
This is the second part of two posts on the actions you need to take prior to choosing your debt solution. The first part is here
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5 Sep, 2007
So you have finally admitted to your debt problem and have informed yourself of the potential solutions available. After receiving professional debt advice, you are now determined to proceed with a debt solution to destroy your debt problem once and for all. Is there anything else left to do?
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