Debt Correct | Key Assistance
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KEY ASSISTANCE

People who may be able to help you cope

 

  • The Samaritans.  If you’re in despair. 24 hour help line 08457 90 90 90.
  • NHS 111.  For health advice. Dial 111, 24 hours a day.
  • Rethink Mental Illness. Call 0300 5000 927 between 10am and 1pm.
  • MIND.  Help for mental distress. 0300 123 3393, 9am-6pm.
  • Saneline.  Emotional support line.  Tel: 0845 767 8000.
  • Turn2us.  Benefits and grant search.  Tel: 0808 802 2000.
  • Shelter.  Housing specialists.  Tel: 0808 800 4444.
  • Alzheimer’s Society.  Support and advice.  Tel: 0845 300 0336.
  • Age UK.  Information & advice for older people. Tel: 0800 169 6565.

DEBT MANAGEMENT PLAN

A debt management plan (DMP) is an informal arrangement that can help you pay off unsecured debts, such as credit cards and payday loans, within a reasonable time period. You could benefit from a DMP if you’re struggling with multiple monthly repayments.

 

A DMP makes life easier because all your unsecured debt repayments are consolidated into a single, affordable, monthly amount. If a DMP is the best way to manage your debts, we’ll agree your new payment amounts with your creditors and deal with all their letters and phone calls. This takes away much of the stress and hassle of managing your debts, so you can focus on getting your life back on track.

 

Also, creditors will often agree to reduce or freeze interest and charges on your debts because you’ve committed to paying them off in full. This means your repayments will go towards reducing your balance, rather than interest and charges.

 

What to consider

 

A DMP is a popular choice for people who want to consolidate several unsecured debt repayments into a single, affordable monthly amount. So if you have some disposable income and can commit to making monthly payments – possibly for several years – it could be an option.

 

DMPs are flexible as they’re not legally binding, so you can cancel your plan and switch to another debt management solution in the future. However, their informal nature also means that creditors don’t have to accept them, and they could keep pursuing your debts in other ways. So a DMP isn’t right for everyone.

The PROs

 

It’s fairly quick to set up. We take care of all the paperwork.

 

You’ll make one simple, affordable monthly payment. We’ll agree new payment amounts with each of your creditors and distribute the payments on your behalf.

 

We may be able to reduce your balance and/or freeze interest and charges.

 

Telephone calls and threatening letters should gradually decrease as your creditors accept the agreement.

 

A DMP is informal so you can cancel it if you wish. It’s also flexible and can be used as a short term way of regaining control over your debts, or as a longer term solution.

The CONs

 

Your creditors don’t have to accept it.

 

With lower payment amounts, it may take longer to clear your debts and the overall costs could increase.

 

Your creditors may not agree to freeze your interest or charges.

 

A DMP isn’t legally-binding so your creditors could still pursue your debts in other ways.

 

Your ability to obtain credit will still be affected. Any late payments and arrears will stay on your credit file for up to six years.

 

You can’t use a DMP to pay off secured debts such as mortgages and hire purchase agreements.

INDIVIDUAL VOLUNTARY ARRANGEMENT

Pay what you can afford for 60 months and write off the remaining debt

 

An Individual Voluntary Arrangement (IVA) is a legally-binding agreement between you and your unsecured creditors, such as credit card companies and payday loan providers. It may be an option if you owe more than around £5,000 to multiple unsecured creditors and can no longer afford your repayments.

 

With an IVA, you pay your creditors as much as you can afford over a set time period, usually five years. During this time, you’ll have the reassurance of legal protection from your creditors, as they can’t pursue you for the debts listed within the IVA. And when the IVA comes to an end, any remaining debts within it will be written off.

 

If an IVA is suitable for you and you comply with its terms, it can be an effective way of managing your unsecured debts without resorting to bankruptcy. In most cases, you can keep your home and any reasonable assets, such as a car so you get to work. However, you must be willing to enter into a formal agreement with your creditors, and be able to make regular payments from your disposable income.

 

How an IVA works

 

An IVA can only be set up and supervised by a licensed Insolvency Practitioner (IP). We at Debt Correct work with a panel of independent licensed Insolvency Practitioners. Debt Correct may receive a referral fee from the Insolvency Practitioner for this service.

 

  • Your IP will put together a repayment proposal based on your income and outgoings. The proposal must be affordable for you and fair to your creditors.
  • The proposal is then sent to your creditors and your IP arranges a meeting for them to vote on it. This is called a ‘creditors’ meeting’.
  • If at least 75% (by debt value) of your creditors agree to the proposal, then your IVA will be put in place. From this time, you and your creditors are legally-bound by it.
  • You then make monthly payments to your IP, who’ll distribute the money to your creditors. These payments will continue for a set time period, usually five years.
  • If your personal circumstances (especially your income, outgoings or assets) change during the IVA, you must tell your IP. They may be able to vary the IVA terms and change your payment amounts, but your creditors must agree to this.
  • If you comply with the terms of the IVA and make all your payments on time, any remaining unsecured debts within it will be written off when it ends.
  • Debts not included in the IVA may still have to be dealt with by you after a successful completion of a IVA Plan.

The PROs

 

Once your IVA is accepted, interest and charges on your debts are frozen

 

After the IVA has ended, any remaining unsecured debts within it will be written off

 

In most cases, you can keep your home and any necessary vehicles

 

Your creditors are legally-bound not to pursue you if you stick to the terms of the IVA

 

If your circumstances change, your creditors may agree to vary the IVA terms and/or your payment amounts

 

Your IVA is private, so it won’t be published in the papers

 

Business owners can carry on trading

The CONs

 

You must commit to a formal agreement lasting several years

 

If your IVA fails, your creditors could make you bankrupt

 

There are restrictions on the expenditure of a person entering an IVA and you will be unable to get any unsecured credit during the IVA and your credit rating will be adversely affected for up to six years from its start date

 

If you’re a homeowner, you may need to release equity from your homes to pay off debts. A re-mortgage may attract higher interest rates or may not be available and cause payments into the IVA to be extended for a further 12 months

 

If you miss any payments, the IVA may fail or the term may be extended

 

IVAs are listed on the public Insolvency Service Register

 

An IVA could affect your current or future employment

 

Lenders are not obliged to approve a IVA

PROTECTED TRUST DEEDS

Live in Scotland? A Trust Deed could be the best debt solution for you.

 

A Trust Deed or Protected Trust Deed (PTD) is the Scottish version of an Individual Voluntary Arrangement (IVA). Also known as Scottish Trust Deeds, PTDs are only available to people who live in Scotland. Like IVAs, they involve making a formal agreement with your unsecured creditors to repay as much of your debts as you can afford over a set time period, usually four years.

 

We at Debt Correct work with an independent panel of licensed Insolvency Practitioners (IP). Debt Correct may receive a referral fee from the Insolvency Practitioner for this service.

 

Once your PTD is in place, your creditors are legally-bound not to pursue you for any of the debts listed within it. After the PTD has ended, any remaining debts will be written off and you’ll receive a letter of discharge.

 

PTDs can be a good alternative to bankruptcy as you can usually keep your home and other necessary assets such as a car to get to work. However, if you do own a property, you may need to re-mortgage it and/or release some equity to help pay off your debts.

 

How Protected trust Deeds work

 

A PTD is set up and supervised by a Trustee, who must be a licensed Insolvency Practitioner (IP). A trust deed transfers your rights to the things that you own (assets), to a trustee or IP who can sell them to pay your creditors. Your IP will look at your debts, income and outgoings to work out how much you can realistically afford to pay your creditors each month. They’ll then create a repayment proposal for your creditors to consider.

 

The proposal must be fair and reasonable from your creditors’ viewpoint. If more than half of your creditors in number or those accounting for one third or more of your debt do not agree to the terms of the trust deed, it will not go ahead or be protected.

 

You then make a single payment each month to the Trustee, who distributes it to your creditors. This usually continues for four years, although PTDs can last up to five years. Provided you comply with the terms of the PTD and make all your payments on time, your creditors will discharge any outstanding unsecured debts when it ends.

 

Cooperating with the Trustee

 

Entering into a PTD is voluntary. However, once a Trust Deed is in place, it’s legally binding. This means you must tell the Trustee if there are any changes in your personal circumstances that might affect the PTD. These include any increase or decrease in your income or expenses, a financial windfall, or the sale or gain of any assets.

 

Your Trustee will consider these changes and if necessary, will ask your creditors to vary the terms of your PTD and/or change your payment amounts. However, your creditors don’t have to accept these variations.

The PROs

 

There are no minimum or maximum debt amounts for PTDs.

 

Once your PTD is accepted, interest and charges on your debts are frozen. You’ll make a single, affordable monthly payment.

 

After the PTD has ended, any remaining unsecured debts within it will be written off. This could take just four years.

 

In most cases, you can keep your home and any necessary vehicles.

 

Any pending legal action can be stopped by a PTD. Your creditors can’t take any further action against you, provided you comply with the terms of the PTD.

 

If your circumstances change, your creditors may agree to vary the PTD terms and/or your payment amounts.

The CONs

 

You must commit to a formal agreement lasting four years.

 

If your PTD fails, you could be made bankrupt.

 

There are restrictions on the expenditure of a person entering an PTD and you will be unable to get any unsecured credit during the PTD and your credit rating will be adversely affected for up to six years from its start date

 

If you’re a homeowner, you may need to release equity from your homes to pay off debts. A re-mortgage may attract higher interest rates or may not be available and cause payments into the PTD to be extended for a further 12 months

 

A PTD could affect your current or future employment.

 

PTDs are listed on the public Insolvency Register of Scotland and published in the Edinburgh Gazette.

 

Lenders are not obliged to approve a PTD

DEBT RELIEF ORDER

Low income and no assets? A DRO could be right for you.

 

A Debt Relief Order (DRO) could be a suitable way of dealing with your debts if you don’t own your home, have little or no disposable income and owe less than £20,000 (£15,000 in Northern Ireland). It’s a form of insolvency that can be an alternative to bankruptcy if you can’t pay off your debts and you meet certain, very strict, criteria.

 

Setting up a DRO is an official process that involves the Insolvency Service. An application is submitted to the Official Receiver (OR) by an approved intermediary, which could be a company or an individual adviser. Debt Release Direct is one of just a few debt advice companies listed as an authorised competent authority for DROs, so we can help if a DRO is considered to be a suitable option for you. Debt Release Direct is an independent company to Debt Correct.

 

How DROs work

 

If you’re approved for a DRO, the OR will make an order that effectively ‘freezes’ the debts listed within the DRO for a set time period, usually 12 months. During this time, your creditors can’t pursue you for these debts. However, you’ll need to comply with certain restrictions, such as not obtaining credit of more than £500 without telling the lender about your DRO. Some of these are similar to the restrictions imposed with bankruptcy, e.g. you can’t act as a company director without the court’s permission.

 

If your circumstances haven’t improved when your DRO comes to an end, the debts listed within it will be written off. However, your creditors can apply to the OR to extend your DRO, and/or the restrictions that have been placed on you, beyond the initial 12 month period.

 

During the DRO, you must cooperate with the OR at all times. If your circumstances improve enough for you to start repaying your creditors, they’ll consider whether or not to terminate the order. Should this happen, you’ll have to start repaying your debts.

 

If your circumstances change towards the end of your DRO, the OR can extend it by up to three months. This gives you some breathing space to agree with your creditors how you’ll repay your debts. During this time, you’ll still have legal protection from them. But you’ll also still be under the restrictions placed on you at the start of the DRO.

 

Qualifying for a DRO

 

The Government has set very strict criteria around who can qualify for a DRO. It may be a suitable option if you:

 

  • Can’t repay your debts, but don’t owe more than £20,000 (£15,000 in Northern Ireland)
  • Have £50 or less per month in disposable income
  • Don’t own your home or have any assets worth more than £300 (although you can have a car worth up to £1,000).  Note, in Northern Ireland, your maximum assets are £300
  • Live in England or Wales, or Northern Ireland or have lived or worked in these countries in the last three years
  • Haven’t had a DRO in the last six years and aren’t currently involved in any other legal insolvency process, such as bankruptcy.

The PROs

 

Your creditors are legally bound not to pursue your debts during the DRO

 

If your circumstances don’t improve after 12 months, your debts will be discharged

 

The CONs

 

The eligibility criteria are very strict

 

You’ll have to pay court fees

 

During the DRO, you’ll have to comply with certain restrictions

 

Your creditors can ask the OR to extend the term of your DRO and/or restrictions

 

The DRO will stay on your credit file for at least six years after its start date

BANKRUPTCY & SEQUESTRATION

Bankruptcy is a legal process that could be your best option if your debts are greater than your assets. It’s normally seen as a last resort for overwhelming debt problems, where no other realistic solutions are available. By declaring yourself bankrupt, you could be free from bankruptcy or discharged in just 12 months. It can be a daunting and intimidating process.

 

It’s important to get professional help and advice as soon as possible, so you can make the right decisions.

 

What to consider

 

Bankruptcy might be the best or only way of dealing with your debts if you:

 

  • Have little or no disposable income
  • Have few or no assets
  • Can’t afford to pay back your creditors.

 

However, bankruptcy can have a number of serious implications for your personal and working life. These range from affecting your credit rating to stopping you holding certain public offices and job roles. That’s why it’s so important to explore all your options. You may find that a different solution which puts fewer restrictions on your life and work, such as an Individual Voluntary Arrangement (IVA) Debt Relief Order (DRO) or Debt Management plan (DMP) may be a better choice.

 

The process

 

The Official Receiver (OR) will take control of your estate, including any assets you own, such as property. These could be sold and the money passed to your creditors. Your case will be assessed on your individual circumstances and our experienced advisers will talk to you about which of your assets could be sold. The OR will consider whether you can afford to make any extra payments to your creditors for up to three years after you’re declared bankrupt. When your bankruptcy comes to an end, this is called being ‘discharged’. All your debts will be written off and your creditors can’t pursue you. This could happen after just 12 months. However, you could find it difficult and expensive to get credit in the future.

The PROs

 

You’ll have legal protection from your creditors.

 

You won’t need to pay your creditors directly.

 

At the end of your bankruptcy period (usually 12 months), all your debts will be discharged in full.

 

If you live at home or rent your property, your home won’t be at risk.

The CONs

 

You may lose any valuable assets that you own, such as a house or car.

 

You can’t hold certain public offices or work in certain job roles.

 

Your bankruptcy will be published in the newspapers and in the public Insolvency Register.

 

You might have to make payments to your creditors for up to three years if the court makes an Income Payments Order, either directly or through your employers

 

In some circumstances, the court may make a Bankruptcy Restrictions Order. This will impose certain restrictions on you for to up to 15 years.

MINIMAL ASSET PROCESS (MAP) BANKRUPTCY

A minimal asset process (MAP) bankruptcy gives you a fresh start by writing off debts that you can’t repay within a reasonable time. It’s aimed at people with a low income and not many assets, and is cheaper and more straightforward than sequestration bankruptcy.

 

This solution is only available to people living in Scotland. If you live in England, Wales or Northern Ireland you may be able to apply for a debt relief order, which is a similar solution, but it’s important to note that it has different benefits, risks and fees associated with it.

 

Who can apply for MAP bankruptcy?

 

To apply you must meet the following conditions:

 

  • You live in Scotland
  • You’re on a low income. This can be defined in two ways: Your income is made up solely of income-related benefits such as jobseekers allowance (JSA), or the amount of money you earn covers your essential living costs but you have nothing left over
  • Your debts are more than £1,500 and less than £17,000
  • Your car is worth £3,000 or less
  • Your other assets are worth less than £2,000 in total, with no single item worth more than £1,000
  • You’re not a homeowner
  • You haven’t been bankrupt in the last five years

 

How MAP Bankruptcy Works

 

To apply for MAP you need to pay a fee of £90. The full amount needs to be paid and there are no exemptions or reductions available.

You’ll also need to get advice from an approved money advice organisation such as us. You can’t apply without doing this.

 

We can help you work out if MAP is the best option for you. If it is, we’ll ask you to send us details of your income and debts. We’ll check all your paperwork and provide all the support you need.

 

You should also be aware that with MAP bankruptcy your details will be added to a public register, called the Register of Insolvencies (ROI), for a period of five years.

DEBT ARRANGEMENT SCHEME (DAS)

Is it right for you?

 

Under the Debt Arrangement Scheme (DAS) you can set up a debt payment programme (DPP) which helps you to repay your debts at a rate that’s affordable to you. We don’t charge any fees to set up DPPs.

 

Using DAS to set up a debt payment programme (DPP).

 

As part of the Debt Arrangement Scheme (DAS) a DPP lets you repay your debts by making one affordable monthly payment.

 

This payment is based on the amount of money you have left over once you’ve paid all of your household bills, rather than the amount your creditors are asking you for. During a DPP your creditors shouldn’t contact you or increase your debt in any way.