Debt Remedies

IVA's - Debt Management Plans - Debt Relief Order - Bankrupcy

IVA's


advantages

  • Legally binding on your creditors.
  • Prevents further legal action.
  • Freezes all further interest and charges.
  • Normally creditors write off some of their debt.
  • You will keep your property if you are a homeowner.
  • Procedures available to take account of changed circumstances.
  • Will normally allow you to continue to trade, if you are self employed. You can also in most circumstances continue to act as a Director of a limited company.
  • Will provide protection for unknown debts such as unpaid tax or overpaid tax credits.
  • Overseen by an insolvency practitioner who is highly regulated and fully insured.
  • Highly flexible and can include a lump sum in full and final settlement with potential completion of the IVA in a matter of months.

disadvantages

  • You will normally pay in to an IVA for 2 more years than a bankruptcy.
  • Your credit record will be adversely affected until one year after successful completion of your IVA.
  • Your details will be entered on to a register that can be accessed via the internet.
  • If you receive unexpected money during the IVA, such as an inheritance or a PPI refund, you will have to pay the proceeds in to the IVA.
  • If you are a homeowner you will be asked to attempt to release equity in to the IVA in the last year.

Debt Management Plans

advantages

  • More flexible than an IVA or bankruptcy.
  • Most creditors will initially agree to freeze some or all of the interest and charges.
  • Enables you normally to make 1 single monthly payment to your creditors.
  • Suitable for short term financial difficulties.

disadvantages

  • Doesn’t prevent creditors from continuing debt collection procedures.
  • No guarantee that interest and charges will be frozen.
  • Fees charged by the debt management company will extend the length of time it will take to pay the debt off in full.
  • Continuing adverse impact on your credit rating.
  • No safeguards if the debt management company goes out of business.

Debt Relief Orders

advantages

  • An inexpensive procedure to wipe out your debts.
  • Normally the procedure only lasts 12 months.
  • Assets with a value of £1,000 or less can be kept, together with a vehicle worth less than £1,000.

disadvantages

  • Only applicable to individuals with debts less than £20,000.
  • Not available to homeowners.
  • Not available to individuals with a monthly disposable income that exceeds £50.
  • You cannot own a car worth more than £1,000.
  • Your details will be entered on to a register that can be accessed via the internet.
  • Will not protect you from creditors who were not included on the original application.
  • Your actions before the debt relief order will be reviewed and sanctions can be brought against you if it is considered that you acted recklessly.
  • You cannot act as a Director of a limited company without Court consent.

Bankruptcy

advantages

  • Provides immediate debt relief and no further legal action can be taken against you.
  • It allows you to normally make a fresh start after 12 months.
  • You will be able to keep your house if a third party can purchase your share of the equity.

disadvantages

  • There may be local publicity about your bankruptcy.
  • If you intend to make yourself bankrupt the court fee and deposit will cost £680.
  • You lose control over any assets you own and these may be sold by the official receiver or your trustee on behalf of your creditors.
  • You will have to pay your monthly surplus income in to your bankruptcy for 3 years and no one can categorically say what you will pay until you are made bankrupt.
  • Your credit file will be seriously affected for 6 years and your past record can continue to affect you financially long after you have been discharged.
  • If your actions before bankruptcy are considered to have been reckless or irresponsible the restrictions of bankruptcy can be extended from between 2 to 15 additional years.
  • Transactions prior to bankruptcy that contravened insolvency law can be challenged or overturned and could result in money having to be paid back in to the bankruptcy by friends or relatives.
  • Bankruptcy can have serious implications for individuals with professional qualifications.
  • If you own a car worth more than £2,500 you may well be required to sell it and replace it with a cheaper model.
  • You cannot act as a Director of a limited company without consent of the Court.
“Speaking to Johnson Geddes made it clear how best to address my debt problem”
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Johnson Geddes is a member firm of and regulated by the Insolvency Practitioners Association

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