Debt Advice UK Tips
The consumer debt advice sector in the UK is poorly regulated. Basically, anyone wishing to setup as a debt advisor, pretty much can do as long as they obtain an OFT Consumer Credit License, which is, in truth, more concerned with evaluating an applicant's grievance and money laundering procedures than what constitutes the basis of the applicant's advice. This isn't the OFT's fault, there simply has been no appetite at Government level for regulating advice in the UK. That's why, if you're experiencing financial difficulties, it's vital that you arm yourself with as much knowledge as possible, before seeking advice from a 3rd party. That way, you can be much more comfortable about what you're being told is correct.
There are a number of solutions to a debt problem, which one is best for you depends on your financial and professional circumstances.
Bankruptcy
Bankruptcy can rid you of your unsecured debt (excluding student loans), in approximately twelve months (if your income significantly exceeds your living costs, your Trustee may require you to make payments to your creditors for an additional two years, this is called an Income Payments Agreement). This solution should really only be considered by those who have no assets to protect (the Trustee in Bankruptcy will look to release any equity in your property, which can include a forced sale) or those that have nothing to offer their creditors each month because their income isn't sufficnet to cover essential living costs. In this situation, declaring Bankruptcy is actually a secondary consideration as the immediate concern should be bridging that deficit so you can survive each month. Initial Bankruptcy costs can be anything between £450 and £612, which includes a bankruptcy deposit, court fees and a statement of affairs fee, depending on which court you use.
IVA
A legally binding five year agreement between you and your creditors, that can potentially reduce the amount you pay back to your creditors significantly. Any assets you own, such as your home will be protected and any impending creditor enforcement action, such as petitioning for your Bankruptcy, will be suspended as long as you keep up with your payments for the full five years. However, failure to keep up with payments may result in your IVA failing and your creditors petitioning for your Bankruptcy.
Debt Consolidation Loan
You'll have seen the television ads talking about ‘one simple, monthly payment to cover all your existing debts'. The reality is that this solution is only appropriate in certain circumstances, where lots of smaller debts with high interest rates (such as credit cards) can be consolidated into a single loan with a lower rate of interest, bringing your payments down to a manageable level. If that isn't the case, all you are effectively doing is increasing the amount that you owe and paying it back over a longer period.
Debt Management Plan
An informal agreement, in which your advisor will attempt to negotiate with your creditors to stop interest and charges in return for you paying back what you can realistically afford each month. This should really only be considered if a statutory solution such as a Debt Relief Order or IVA, which provides you with legal protection from your creditors, won't discharge you from your liabilities sooner. You should also be aware that there are two types of debt management, fee charging, which is where 15% of your monthly payment is taken as a fee by the advisor (i.e. only 85% actually goes to pay off your debt) and non-fee charging, where 100% of your payment goes to pay off your debt. There are a number of national charities that offer a non-fee charging service, although critics will point out that they are often extremely busy, which means the level of service you receive is poor.
Debt Relief Order
This solution is for unsecured debts only, with a maximum threshold of £15,000. You also need to have less that £50 per month disposable income (the amount left over after essential living costs have been taken from the household income), non-vehicle assets must not exceed £300 and any vehicle you own must not exceed £1000 in value. This solution provides you with legal protection, which means your creditors cannot take any enforcement action against you and any debt still outstanding after twelve months shall be written off.
If you find yourself with a debt problem contact one of the following not-for-profit organisations to ensure you have the best solution to the level and type of debt you are in:
Debt Advice UK
National Debtline - 0808 808 4000
Debt Advice Foundation - 0800 043 40 50
CCCS - 0800 138 1111
Debt Advice ROI
Money Advice and Budgeting Service (Ireland) - http://www.mabs.ie/
There are a number of solutions to a debt problem, which one is best for you depends on your financial and professional circumstances.
Bankruptcy
Bankruptcy can rid you of your unsecured debt (excluding student loans), in approximately twelve months (if your income significantly exceeds your living costs, your Trustee may require you to make payments to your creditors for an additional two years, this is called an Income Payments Agreement). This solution should really only be considered by those who have no assets to protect (the Trustee in Bankruptcy will look to release any equity in your property, which can include a forced sale) or those that have nothing to offer their creditors each month because their income isn't sufficnet to cover essential living costs. In this situation, declaring Bankruptcy is actually a secondary consideration as the immediate concern should be bridging that deficit so you can survive each month. Initial Bankruptcy costs can be anything between £450 and £612, which includes a bankruptcy deposit, court fees and a statement of affairs fee, depending on which court you use.
IVA
A legally binding five year agreement between you and your creditors, that can potentially reduce the amount you pay back to your creditors significantly. Any assets you own, such as your home will be protected and any impending creditor enforcement action, such as petitioning for your Bankruptcy, will be suspended as long as you keep up with your payments for the full five years. However, failure to keep up with payments may result in your IVA failing and your creditors petitioning for your Bankruptcy.
Debt Consolidation Loan
You'll have seen the television ads talking about ‘one simple, monthly payment to cover all your existing debts'. The reality is that this solution is only appropriate in certain circumstances, where lots of smaller debts with high interest rates (such as credit cards) can be consolidated into a single loan with a lower rate of interest, bringing your payments down to a manageable level. If that isn't the case, all you are effectively doing is increasing the amount that you owe and paying it back over a longer period.
Debt Management Plan
An informal agreement, in which your advisor will attempt to negotiate with your creditors to stop interest and charges in return for you paying back what you can realistically afford each month. This should really only be considered if a statutory solution such as a Debt Relief Order or IVA, which provides you with legal protection from your creditors, won't discharge you from your liabilities sooner. You should also be aware that there are two types of debt management, fee charging, which is where 15% of your monthly payment is taken as a fee by the advisor (i.e. only 85% actually goes to pay off your debt) and non-fee charging, where 100% of your payment goes to pay off your debt. There are a number of national charities that offer a non-fee charging service, although critics will point out that they are often extremely busy, which means the level of service you receive is poor.
Debt Relief Order
This solution is for unsecured debts only, with a maximum threshold of £15,000. You also need to have less that £50 per month disposable income (the amount left over after essential living costs have been taken from the household income), non-vehicle assets must not exceed £300 and any vehicle you own must not exceed £1000 in value. This solution provides you with legal protection, which means your creditors cannot take any enforcement action against you and any debt still outstanding after twelve months shall be written off.
If you find yourself with a debt problem contact one of the following not-for-profit organisations to ensure you have the best solution to the level and type of debt you are in:
Debt Advice UK
National Debtline - 0808 808 4000
Debt Advice Foundation - 0800 043 40 50
CCCS - 0800 138 1111
Debt Advice ROI
Money Advice and Budgeting Service (Ireland) - http://www.mabs.ie/
