DEBT MANAGEMENT PLAN

Sometimes known as a DMP, find out more information here

A Debt Management Plan (DMP) allows you to pay off your unsecured debt at a rate that is affordable to you.   The amount you pay back each month is worked out after taking into consideration all your monthly outgoings including all priority costs.  Please refer to our other information heading below to best understand what debts can and cannot be in included and also what priority bills are.    A DMP may be suitable when you cannot afford your contractual payments to your creditors.  Once a payment is made to Debt Correct, we will forward your pro rata payment to your creditors within 5 working business days.   Debt Correct does not charge any cancellation fees if you wish to terminate the plan at any time.  For full conditions please refer to our T&C’s.

Please find below an outline of the Risks/ Disadvantages, Costs and Advantages of entering into a Debt Management Plan (DMP):

COSTS

Please find below an example of the cost of a typical plan:

Total Debt included in the plan   Agreed monthly disposable income.  Debt Correct management fee

           £4372.86                                                     £121.00                                                    £39.00


£4,372.86 divided by £82 (121 – 39) = 54 months (4 years, 6 months)

Total Cost 54 months x £121 = £6,534.00 (This includes fees of £2,106.00)

Please understand the above figures are based on an estimate.  This is due to factors both within Debt Corrects control and not.  Debt Correct may choose to higher or lower its fee’s at any time.  Creditors may or may not reduce or stop interest.  

ADVANTAGES

DMP’s are flexible and payment can be both lowered and raised (following a full financial review).

One affordable monthly payment

This is a private arrangement between you and your creditors and will not show up on any public registers (this is particularly useful to certain professions were other solution are not suitable)

You are not tied into a contract; This is an informal arrangement.

RISK/DISADVANTAGES

As you are making lower payments to creditors this could mean it takes longer to clear your debts

Your creditors may still contact you and some creditor may still issue default notices.

As you are not making the full payment to your creditors this may have a negative effect on your credit rating and may affect your ability to borrow money in the future.  This could last up to 6 years after all debts are cleared or from when you start to meet your contractual creditor obligations.

Your creditors may continue to contact you

Most creditors if they accept the plan will agree to lower or stop interest being added to you account(s).  However there is no guarantee that this will happen and this may result in your balances rising.  Creditors may also continue with any current or potential recovery action.

OTHER INFORMATION

It is important to keep up any repayments on what are considered priority bills.  An example of which would be your gas or electricity bill.  If you stopped paying them you could find yourself without these services. 


Please find below a list of priority bills

Mortgage or Secured loan(s)            Rent                                        Council Tax             Child Maintenance

Magistrates Court fines                     TV Licence                              Gas                           Electric 

County Court Judgements                 Water rates                           Telephone              County Court Judgements

Please find below a list of debts/commitments that can and cannot be included in a DMP


Can be included:

Unsecured Loans     Credit Cards    Store Cards     Overdrafts   Catalogues

 Arrears not attached to current property or provider.

Cannot be included:

Secured loans           Hire Purchase (HP)    Current Utilities providers   Child Maintenance 

Guarantor loans       TAX or VAT arrears    CCJ’s                                         Student loans

TV License arrears    Court fines                  Social fund loans                    Mortgage arrears

Rent arrears.

Please note, it is possible for you to get free debt advice from a charitable organisation. Using free agencies could result in you being debt free sooner.

 

INDIVIDUAL VOLUNTARY ARRANGEMENT

Sometimes known as an IVA, find out more information here

An IVA is a legally binding agreement between you and your creditor(s).   The payment terms are over 60 months or 72 months.  Towards the end of the 60 month term you will be asked to settle any remaining balances in full.  This can be done by a third party or if not possible, you may be asked to remortgage your property.   If remortgaging is not possible then the plan will be extended to 72 months.  After this period any outstanding debt is written off.  An IVA must be affordable to you.  This is worked out taking into consideration all of your essential commitments and expenditure.  Only unsecured debts can be included in an IVA.  Please see our other information heading below for a more detailed breakdown of which debts can and cannot be included. 


An IVA may be suitable when you cannot make your contractual commitments to your creditors.  For  more information including payments to your creditors and any cancellation fee’s we are more than happy to put you in contact with the IVA point of contact to discuss in more detail.

Please find below an outline of the Risk/Disadvantages Cost and Advantages of entering into an IVA.   Please also be aware Debt Correct do not administer IVA’s but work closely with other licensed companies so as to offer this to our clients.  Debt Correct may receive a fee for introducing you to an IVA Administrator, if you subsequently complete an IVA.

COST

It is difficult to give an accurate costing of an IVA .  As previously stated, Debt Correct do not administer IVA’s but do work closely with licensed companies to offer this service. Setting up an IVA can typically cost between £1000 to £2000 depending on the level of debt and which creditors you owe.   These fees are known as “nominees fee’s”.    You will also be charged a “supervisors fee” (typical 15% of your disposable income).  The “nominee’s fees” are taken at the start of the arrangement and are spread over the beginning of the Arrangement until paid in full.  You will then have the supervisor’s fees applied to any payments.    You will not be asked to pay more than your agreed disposable amount each month.    Typical IVA’s are payable over 60 or 72 months.  Towards the end of 60 month term you may be asked to look into settling the remainder of any outstanding balance.  This could include being asked to remortgage your property, if applicable.   If this is the solution you choose, then your IVA provider will discuss this in more detail and a full breakdown of all cost incurred.

ADVANTAGES

One affordable monthly payment

Potentially you could write off some of your debts

Creditors will not contact you whilst in an IVA

Lump sums can be paid in at any time

RISKS/DISADVANTAGES

If there is equity in your home, you may be asked to remortgage (remortgaging may result in higher rates of interest being charged)

If you are unable to remortgage then the arrangement can be extended by a further 12 months (from 60 months to 72 months)

Your IVA is recorded on a public register and available to the public

This may affect your credit rating and your ability to borrow money in the future.   On completion of your IVA your ability to gain credit may be affected for a further 6 years.

You may be limited borrowing no more £500 whilst in the IVA (without written approval from the IVA supervisor)

If you do not keep up with the repayment, then your creditors can contact you to recover any monies still owed this may include back dating any interest.

Failure to keep up repayments may also result in your creditor requesting that the supervisor of your IVA to petitions for bankruptcy.

Your creditors may not approve the IVA

OTHER INFORMATION

It is important to keep up on any repayments on what are considered priority bills.  An example of which would be your gas or electricity bills.  If you stopped paying them, you could find yourself without these services. 


Please find below a list of priority bills:

Mortgage or Secured loan(s)         Rent                                        Council Tax             Child Maintenance

Magistrates Court fines                     TV Licence                              Gas                           Electric  

County Court Judgements                 Water Rates                           Telephone              County Court Judgements


Please find below a list of debts/commitments that can and cannot be included in an IVA:

Can be included:

Unsecured Loans     Credit Cards    Store Cards     Overdrafts   Catalogues   Arrears not attached to current property or provider.

Cannot be included:

Secured loans           Hire Purchase (HP)    Current Utilities providers   Child Maintenance 

Guarantor loans       TAX or VAT arrears    CCJ’s                                         Student loans

TV License arrears    Court fines                  Social fund loans                    Mortgage arrears

Rent arrears

 

DEBT RELIEF ORDER

Sometimes known as a DRO, find out more information here

A Debt relief order is a debt solution suited to people with little income and few assets.  A debt relief order can help you to write off debt that you’re unable to repay in a reasonable amount of time. A DRO is a legally binding agreement between a customer and their creditors which could see your debt cleared off in 12 months. There are strict qualifying criteria you must meet in order to apply for a debt relief order.

In order to qualify for a DRO you’ll need to meet the following criteria;

  • You live in England, Wales or Northern Ireland. Or have done business in one of these countries for the last three years

  • Your current qualifying debt balances must not total more than £20,000

  • You must have no more than £50 left over each month after paying your household bills

  • You’re not a homeowner

  • You can’t own assets more than £1,000

  • You can’t own a vehicle that’s worth more than £1,000 (please note vehicles adapted to help you with a physical disability are exempt from this cap.)

  • You must not be subject to any current bankruptcy or IVA proceedings or have already had a DRO approved in the last six years


Please find below an outline of the Risks/Disadvantages, costs and advantages of a Debt Relief Order (DRO):

COSTS

Before your application is submitted the fee of £90 must be paid in full. The fee can be paid in one lump sum or in instalments over a 6 month period. Once your fee has been paid and your application is submitted you can't get your money back, even if the DRO is rejected or revoked.

ADVANTAGES

You don’t pay anything towards your debts for 12 months - and after that they will be written off.

Your creditors can't pursue you for your debts during the 12 month period.

A DRO is a formal debt solution, you don't need to appear in court.

RISKS/DISADVANTAGES

There are tight income, asset and debt restrictions on who can apply for a DRO.

If your circumstances change, you may still be required to repay your creditors.

Your debt relief order will appear on your credit file for six years. This may affect your ability to get credit in the future.

You can't promote, manage, or set up a limited company, without permission from court. Also, you can't act as a company director, without getting permission from court.

Creditor Contact: Your creditors can still contact you to tell you how much you owe but they can't demand payments from you or start any court action. If they do you should tell them you are on a DRO. If any of your creditors persistently call or threaten you with further action you can contact the DRO unit at the Insolvency Service.

Job: A DRO may affect some jobs if the employment contract specifies that you can't be insolvent. This is most likely to be an issue in the finance and legal sectors, but other jobs may also be affected.

Cancellation: The official receiver can terminate the DRO if they discover you intentionally misled them in your original application.

It’s your responsibility to inform the official receiver of changes in your circumstances. It’s an offence to give away or hide assets from the official receiver and you must co-operate with the Insolvency Service if they ask you to provide information.

OTHER INFORMATION

Please find below a list of debts/commitments that can and cannot be included in a DRO.

Can be included:

Loans                                                 Council Tax

Overdrafts                                        Utility and phone bills

Catalogues                                        Benefit overpayments

Credit Cards                                     In-store credit agreements

Rent                                                     Money owed to HM Revenue & Customs            


Debts which can’t be included:

Student loans                                   Social Fund loans

Confiscation orders                         Magistrates’ court fines

Child support and maintenance arrears

 

ADMIN ORDER

Sometimes known as an AO, find out more information here

An Administration Order is a repayment plan set by the County Court. It is a formal and legally-binding agreement between you and your creditors to pay back your debts over a period of time. It is suitable for people with a county court or High Court judgment against them and you can’t pay in full. There are strict qualifying criteria you must meet in order to apply for an AO.

In order to qualify for an AO you’ll need to meet the following criteria;

  • You live in England, Wales or Northern Ireland

  • Debts that are no more than £5000 in total, including interest and charges

  • Have a county court (CCJ) or High Court judgment against you, which you can’t pay in full

  • Owe money to at least 2 creditors

  • Prove you can afford regular repayments, e.g. give details of your income.


Please find below an outline of the Risks/Disadvantages, costs and advantages of a Administration Order (AO).

COSTS

There's no upfront fee. The court keeps 10% of your monthly payment to cover their costs. Example; if you owe £5,000 the total fee can’t be more than £500.

ADVANTAGES

As an AO is legally binding, the creditors included in the order can’t contact you for payment or add anymore interest or charges to your debts once the administration order has been approved.

You make one monthly payment to your local court. The court will divide this money between your creditors.

RISKS/DISADVANTAGES

An administration order will appear on your credit file for six years from the date of the order. It also appears on the public Register of Judgments for six years. During this time you’ll find it much harder to take out any further credit.

Sometimes a Judge may leave out some debts. This is most likely to happen with debts such as council tax arrears or criminal fines.

To alter the payment or cancel the administration order. You may need to go to a hearing to arrange this.

Change in Circumstances: You can write to the court and ask to alter the payment or cancel the administration order. You may need to go to a hearing to arrange this.

Creditor Objection: A creditor can object to being in the order and ask the court to leave them out. If this happens, the court will call a hearing to decide whether it’s fair to leave the debt in the order.

Missed Payments: The court can ask your employer to take money from your wages- known as an ‘attachment of earnings order’, or the order may be cancelled.

OTHER INFORMATION

The law does not specifically exclude any particular debt from an AO and when you apply for an AO, you must list all your debts in the application. However, any creditor can object to being included. It is up to the district judge to decide if any debts are left out. If you have mortgage or rent arrears, it is advisable to ask for these to be left out of the AO.

Where there is a joint debt each person is responsible for paying back the full amount. You can't take out an administration jointly with the other person who shares your debt. If you include a joint debt in an administration order, the other person could still be chased by the creditor for the debt, unless they also apply for a separate administration order.

 

DEBT CONSOLIDATION LOAN

A type of loan that could be more affordable to you, find out more information here

A debt consolidation loan can be taken out to pay debts such as credit cards and store cards, catalogues and personal loans. Although your debts won't disappear, if you can afford the new loan repayments, merging them into one personal loan could reduce your monthly outgoings and help you better manage your outgoings because you will only have to make one monthly payment rather than several monthly payments to cover your debts. This can make it easier for you to manage your finances and, in theory, makes keeping up with your payments simpler. 

QUALIFYING CRITERIA

This depends on your credit score and the lender you approach.

Please find below an outline of the Risks/Disadvantages, Costs and Advantages of taking out a debt consolidation loan.

COSTS

This depends on the lender you approach.

ADVANTAGES

Taking out a debt consolidation loan means that you will only have to make one monthly payment rather than several monthly payments to cover your debts. This can make it easier for you to manage your finances and, in theory, makes keeping up with your payments simpler.

RISKS/DISADVANTAGES

Debt consolidation is not the best solution for everyone, you must consider whether you are likely to pass the credit worthiness assessment when applying for a consolidation loan; it may be in your best interest to consider other debt solutions first.

Taking out a debt consolidation loan could leave you in a worse financial situation than you are currently in. It is important to remember that your credit rating may already be affected, due to making reduced payments to your creditors. You will usually find that the only way you can borrow more money is at a higher interest rate. If you have to borrow money at a higher interest rate you will pay more money back over the lifetime (or term) of the loan. Also if you end up with a higher interest rate: If, for example, you are transferring credit card debts across to a consolidation loan, you could end up paying more interest than if you moved these balances to a balance transfer credit card offering a 0% introductory period on balance periods for several months. Another risk involved with this solution is early repayment penalties: Some lenders will charge you a fee if you wish to pay off an existing loan before the end of its fixed term. Check your terms and conditions for details on how expensive such charges are.

OTHER INFORMATION

There are lots of different loans to choose from if you are looking to consolidate debts, so always do plenty of research before applying for one to make sure you secure the best possible deal. A good comparison site to use is moneysupermarket.com.

 

BANKRUPTCY

A form of insolvency, find out more information here

If your income is low Bankruptcy can help rid you of your debt that would otherwise take years to clear, it is a legal process where your debts are usually written off, and your finances will be overseen for a year by an official receiver from the government insolvency service. After you’ve been declared bankrupt, your creditors will write off your unsecured debts. This allows you to make a fresh start. Bankruptcy usually lasts for 12 months and you’ll have many financial restrictions during this period. When your bankruptcy ends, you’ll be ‘discharged’ from it.

Qualification Criteria:

There are no maximum or minimum debt levels you must have to go bankrupt. However, it is important to consider the advantages, disadvantages, costs and risks before making any decision regarding bankruptcy.

Please find below an outline of the Risks/Disadvantages, Costs and Advantages of Bankruptcy.

COSTS

Bankruptcy fees vary throughout the UK, in England and Wales you pay a £130 fee to the adjudicator and £550 to the official receiver, a total of £680. You must pay the fees before your application is submitted.

ADVANTAGES

When the bankruptcy order is over you can make a fresh start, in many cases this can be after a year.

The pressure is taken off you because you don’t have to deal with your creditors.

You will receive no further contact from your creditors and creditors have to stop most type of court action to get their money back following a bankruptcy order

All your unsecured debt is usually written off.

RISKS/DISADVANTAGES

The official receiver may order you to make monthly payments to them for 3 years after your bankruptcy, if your income is high and you can afford to do so.

If you own your home, it might have to be sold and the money used towards paying your bankruptcy. Some of your other possessions might have to be sold, for example, your car and any luxury items you own.

Going bankruptcy can affect your immigration status.

Bankruptcy is not confidential and you will appear on a publically-accessible register.

Bank Account: During bankruptcy, your current bank is very unlikely to allow you to keep your account if you have an overdraft or other debts with them. Even if you have no debts with them, most banks will close your account when you go bankrupt and it's likely your account will be frozen for 2-7 days while the official receiver dealing with your bankruptcy checks your transaction history. You’ll normally have to open a new account with a different bank, and your choices may be limited.

Restrictions: will last until you’re discharged, 12 months after you go bankrupt. If the official receiver finds that your bankruptcy happened because you acted irresponsibly or dishonestly, they can extend the length of time that restrictions apply. This is called a bankruptcy restriction undertaking or order, and can last up to 15 years. This might happen if, for example, you committed fraud, tried to hide assets, or ran up debts through gambling or similar.

Credit File: negative impact on your credit file, you may struggle to take out further credit in the future. During your bankruptcy you will be restricted from taking out any further credit. You may find it difficult to take out credit, as bankruptcy will remain on your credit file for six years.

Breaking Restrictions: If your official receiver suspects or finds you breaking these restrictions, they’ll investigate and may need to interview you, or get more information. If you don’t cooperate, they can also ask the court to suspend your discharge from bankruptcy.

Breaking these restrictions can be a criminal offence, and could lead to a fine or imprisonment in extreme cases. You could also get a bankruptcy restriction undertaking or order, which makes the restrictions last longer.

Job: It may have implications for your job- for instance you will not be able to act as a company director. Some professions don’t let people who have been made bankrupt carry on working.

OTHER INFORMATION

Most debts that you have when a bankruptcy order is made will be covered by your bankruptcy. However, not all types of debt are written off.

Debts that aren't automatically written off include the following:

Magistrates court fines

Maintenance payments and child support payments

Student loans

Secured loans and other secured debts, such as debts secured with a charging order

Debts you owe because of the personal injury or death of another person, although you may be able to ask the court to order that you don't have to pay this debt

Social fund loans some benefits and tax credits overpayments.

Debts taken out by fraud, in joint names or business debts that were taken out in partnership.

These people you owe these debts to can still take action to get their money back. This means before you apple for bankruptcy you should work out how you’ll deal with any debts that aren’t covered.

 

PROTECTED TRUST DEED

Sometimes referred to as a PTD, find out more information here

A trust deed is a formal agreement between you and your creditors where you make reduced payments to your debts. A trust deed usually lasts for four years. Once it’s completed, your unsecured debts will normally be written off. Trust deeds are not available if you live in England, Wales or Northern Ireland. In these countries, an individual voluntary arrangement (IVA) is a similar solution, but it’s important to note that it has different benefits, risks and fees associated with it. A trust deed becomes a protected trust deed once your creditors have agreed to the proposal. At least half of your creditors need to accept the proposal for it to go ahead, or creditors representing at least two thirds of your total debt. If a creditor doesn’t respond, it’s assumed that they’ve accepted the offer. If you enter into a trust deed you’ll need to pay a fee to the IP managing it for you. The fees charged for trust deeds can vary, so it’s worth comparing the rates of a few companies. The fee will usually be included in your monthly payment and covers the cost of the administration and running the trust deed. However it’s important to note that some IPs may charge an upfront fee. There are strict qualifying criteria you must meet in order to apply for a PTD.

In order to qualify for a Protected Trust Deed (PTD) you’ll need to meet the following criteria:

Over £5,000 unsecured debt.

Over £100 disposable income.

COSTS

Fees: We do not charge you for the advice and support we provide before your PTD is set up. There are fees involved in running your PTD. The fees follow the industry standard for PTD and are set by your creditors. You must agree to the level of fees before your PTD is approved. Your Insolvency Practitioner will deduct these fees from your monthly payment, so you don’t have to pay any additional costs.

Credit: If you’re on a PTD, you can’t take out any credit of more than £500 without getting written approval from the Supervisor of your PTD first. Also, it may be extremely difficult to a find a lender who is willing to give you a new mortgage while you’re on a PTD.

Change of Payment: A payment can be reduced by 15% without going to another creditor meeting but it is at discretion of the IP and proof must be provided as to the reason.

ADVANTAGES

With the help of an Insolvency Practitioner (IP) you can make an affordable repayment to your creditors over 4 years. After this time any remaining debt is written off.

Once your trust deed is approved, your creditors won’t chase you for payment or add more interest and charges to your debts, and they can’t take any court action.

While you may have to sell some assets, you’re usually able to keep one vehicle as long as it’s worth less than £3,000 and is essential.

Although a protected trust deed is a formal debt solution, you don't need to appear in court.

RISKS/DISADVANTAGES

An IP normally takes a charge for their service out of your monthly repayment, so it’s important to shop around and find the best one for you.

A trust deed may affect the terms of your employment; you should check your contract or speak to your HR department.

There's the risk of bankruptcy if the trust deed fails.

Your credit rating will be affected for six years, starting from the date the arrangement is agreed.

Equity/Remortgaging: You may be asked to release equity in order to pay your debts. If there’s equity in your home then you’ll need to try to re-mortgage 6 months before your PTD ends. If you are unable to re-mortgage you can make a maximum of 12 extra payments or a 3rd party can offer a sum equivalent to the equity. Please be aware that remortgaging may result in a higher interest rate.

Failure: Should the PTD fail, creditors may back date interest on your debts or may request that the Trustee of your PTD petitions for your bankruptcy.

Change of Circumstances: Should your circumstances change during the term of your PTD, you may ask creditors to review the terms you originally agreed to. During your PTD you'll receive an annual review and if your situation has improved, you may have to increase your payment. You will have to pay any surplus income you have, after your essential living costs are paid, into your trust deed for four years

You must inform the trustee if you’re personal or financial situation changes, for example if you inherit some money, or you lose your job

Redundancy: If a customer is made redundant the IP can decide to give the client a 6-12 month payment break, inside which the client must give an update as soon as they’re re-employed.

 

DEBT ARRANGEMENT SCHEME

Sometimes referred to as a DAS, find out more information here

The Debt Arrangement Scheme (DAS) is a statutory debt management tool overseen by the Scottish Government. It lets you apply for a debt payment programme (DPP) to repay your debts over a reasonable period by making affordable monthly payments.

QUALIFYING CRITERIA

You have lived in Scotland for more than 1 day.

You have money left over once you’ve paid your household bills.

You owe money to one or more creditor.

COSTS

Fees: Once your DPP is approved, 10% of your payment is taken as fees to cover the running costs. The percentage is set in law, and there are no other hidden charges.

2% is paid to the Accountant in Bankruptcy (AiB) and 8% is kept by your payments distributor.

ADVANTAGES

Any interest or charges that are being applied to your debts will normally be frozen.

Your creditors can’t contact you or take any further legal action against you.

If your situation changes you can apply to vary your payment or apply for a six month payment break.

RISKS/DISADVANTAGES

10% of your monthly payment is taken as fees to cover the running costs.

Once you’re on a DPP your details will be put onto the DAS register. This is an online register that anyone can access.

A DPP will appear on your credit file for six years and is only available if you live in Scotland.

Failure: If you don’t keep up your payments then the DPP can fail - creditors can add interest and charges to the amounts you owe and if you’re not able to pay your debts they can take legal action against you.

OTHER INFORMATION

Change in Circumstance: If you’re expecting to receive a lump sum of money in the next 12 months, for example from income from the sale of a house, or money given to you by your family, then you must contact your debt advisor to arrange a review.

 

MINIMAL ASSETT PROCESS

Sometimes referred to as a MAP, find out more information here

The minimal asset process (MAP) is a way of applying for bankruptcy which is aimed at people on a low income with very few or no assets. It’s a means of writing off debt that you would struggle to repay within a reasonable time. You must pay a fee of £90 to apply for MAP bankruptcy. There are no exemptions or reductions available. You’ll also need to get advice from an approved money advice organisation such as STEPCHANGE. You won’t be able to apply without doing this first.


QUALIFYING CRITERIA

You must live in Scotland, or have lived in Scotland in the last 12 months.

Your debts are more than £1,500 but 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 gone through sequestration, which is bankruptcy in Scotland, in the last five years.

When it comes to your income, there are two ways you can qualify:

Your income is made up solely of income-related benefits such as jobseekers allowance (JSA).

There’s no money left over from your total earned income once all your essential living costs are paid.


COSTS

Fees: Before your application is submitted the fee of £90 must be paid in full. The fee can be paid in one lump sum or in installments over a 6 month period. Once your fee has been paid and your application is submitted you can't get your money back, even if the MAP is rejected or revoked.


ADVANTAGES


You’ll normally be discharged from your MAP bankruptcy after six months, and most debts will be legally written off at this point.

Once your MAP is approved your creditors won’t chase you for payment or add more interest and charges to your debts, and they can’t take any court action.

It costs £90 to apply for. This is payable to the Accountant in Bankruptcy.

Although MAP bankruptcy is a formal legal process, you won’t need to appear in court.


RISKS/DISADVANTAGES

Your credit rating will be affected for six years, starting from the date your MAP bankruptcy is awarded.

Your bank is likely to close or freeze your bank accounts. It’s likely you’ll only be able to get a basic bank account.

Bankruptcy can lead to disciplinary action or dismissal in some jobs.

Some private landlords may evict tenants if they become bankrupt. Check your tenancy agreement.

Job: MAPs may affect some jobs if the employment contract specifies that you can't be insolvent. This is most likely to be an issue in the finance and legal sectors, but other jobs may also be affected. In our experience this is not common.

Cancellation: The official receiver can terminate the MAP if they discover you intentionally misled them in your original application.

It’s your responsibility to inform the official receiver of changes in your circumstances. It’s an offence to give away or hide assets from the official receiver and you must co-operate with the Insolvency Service if they ask you to provide information.

Not complying with the restrictions (see below) can be deemed as committing an offence, which could lead to a fine or in rare cases imprisonment.


OTHER INFORMATION

Restrictions: You must not,

Take out credit over £500 without telling the lender you’re on a MAP.

Carry on a business under a different name without revealing your previous business was subject to a MAP.

Set up a limited company or act as a company director without permission from a court. 

If you live in private rented housing or you have rent arrears, your landlord may evict you.

Once you’re discharged, after six months on MAP, it will take a further six months to finalise everything. During this period, you’ll still be under certain restrictions, For example: You cannot borrow more than £2,000, either solely or jointly, without telling the lender that you’re bankrupt.

 

SEQUESTRATION

A form of insolvency for Scottish residents, find out more information here

Sequestration is a debt solution available in Scotland that can help you write off debt that would otherwise take many years to clear. Sequestration is a form of insolvency and may be suitable if you can’t pay back your debts in a reasonable time. Sequestration is only available if you live in Scotland, if you live in England, Wales or Northern Ireland, bankruptcy is a similar solution, buts it’s important to note that it has different benefits, risks and fees associated with it. There are strict qualifying criteria you must meet in order to apply for Sequestration.

In order to qualify for Sequestration you’ll need to meet the following criteria;

  • Over £3000 debt outstanding.

  • Classed as apparently insolvent, which could mean a creditor has issued a statuary demand or charge for payment.

  • Must have obtained a certificate of sequestration.


Please find below an outline of the Risks/Disadvantages, costs and advantages of Sequestration:

COSTS

Fees: You must pay the fees before you apply.

Bank Account: During sequestration, your current bank is very unlikely to allow you to keep your account if you have an overdraft or other debts with them. Even if you have no debts with them, most banks will close your account when you go become insolvent and it's likely your account will be frozen for 2-7 days while the official receiver dealing with your sequestration checks your transaction history. You’ll normally have to open a new account with a different bank, and your choices may be limited.

Sequestration normally lasts for a year. During this time you can’t borrow any more credit and you must let the Accountant in Bankruptcy (AiB) know if your situation changes. They're the governing body responsible for administering the process of personal bankruptcy in Scotland. You may have to sell valuable assets such as a vehicle, but you can keep the things you need for day-to-day living.

Restrictions: will last until you’re discharged, 12 months after you go into sequestration. If the official receiver finds that your insolvency happened because you acted irresponsibly or dishonestly, they can extend the length of time that restrictions apply. This is called a bankruptcy restriction undertaking or order, and can last up to 15 years. This might happen if, for example, you committed fraud, tried to hide assets, or ran up debts through gambling or similar.

ADVANTAGES

It can be one of the quickest ways to give you a fresh start as you can be debt free in a short amount of time.

All your unsecured debts are usually written off, though you may be required to make a contribution.

You will receive no further contact from your creditors, as bankruptcy is legally binding.

RISKS/DISADVANTAGES

It has serious implications for your future and holds various restrictions during the sequestration, such as:

You may find it difficult to take out credit, as sequestration will remain on your credit file for six years.

Your assets may be sold to release funds for the sequestration.

Some jobs may be affected, especially if you work in the legal or financial sectors.

You must cooperate with the official receiver. This includes handing over all documents and providing accurate information about your income, debts and assets.

Sequestration is not confidential and will appear on a publically-accessible register.

Breaking Restrictions: If your AiB suspects or finds you breaking these restrictions, they’ll investigate and may need to interview you, or get more information. If you don’t cooperate, they can also ask the court to suspend your discharge from bankruptcy.

Breaking these restrictions can be a criminal offence, and could lead to a fine or imprisonment in extreme cases. You could also get a bankruptcy restriction undertaking or order, which makes the restrictions last longer.

Assets: If you have any assets, like a house or car, these may be included in your bankruptcy.

Job: It may have implications for your job- for instance you will not be able to act as a company director.

Credit: You may find it difficult to take out credit, as sequestration will remain on your credit file for six years.

 

©2020 by Debt Correct. Debt Correct are authorised and regulated by the Financial Conduct Authority (FCA). Permission No: 663034. Debt Correct is also licensed by the Information Commissioners Office (ICO). Licence No: ZA277704. To qualify for debt write off in an IVA, you must have a minimum of £6000 of qualifying unsecured debt owed to two or more creditors. A debt write off amount of between 25% and 80% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors. Debt solutions such as IVA, Debt Management, DRO and Bankruptcy will have a negative impact on your credit rating. As part of our free service, we’ll take a look at your financial situation, explain the available options, and then recommend a debt solution which could be suitable for you. If you decide you want to set up a debt solution, we can put you in touch with one of our trusted providers or possibly provide this service direct to you. If you then want to use their services, we get a fee for introducing you, or for the preparatory work we complete, fees are payable if ongoing services are provided by either Debt Correct or our trusted providers.