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Debt Advice - Out of control
Don’t panic, there are three options available to you – all forms of
insolvency - which can wipe the slate clean and allow you to make a
fresh start. The law has been relaxed to make it easier for people under
severe financial pressure to get protection from creditors and to resume
their normal life in a fairly short time span, as short as 12 months.
- Bankruptcy is an option. You can
petition for your own bankruptcy – it costs £475, creditors will no
longer be able to pursue you and you could be discharged within 12
months, though the bankruptcy will appear on your credit report for
6 years. In a bankruptcy, a trustee is appointed to sell your assets
(including your home) and to distribute the proceeds evenly to your
creditors, after paying costs. But you will literally wipe the slate
clean, except for Student Loan debts which remain due after
bankruptcy..
- If your debts are less than £5,000
and you have a CCJ, you can apply for an Administration Order. Under
an Administration Order, the court orders that you may make pro-rata
repayments to your creditors, and takes 10p in the pound towards
administration costs. An Administration Order provides the same
protection against creditors as bankruptcy and IVAs and similarly
remains on your credit report for 6 years. You can apply by
completing form N92 which can be obtained from your local court.
- An Individual Voluntary
Arrangement (IVA) is an alternative to bankruptcy. An IVA can be
applied to any level of debt, carries less stigma than bankruptcy
but usually takes much longer to clear – perhaps 3-5 years – and is
reported on your credit file for 6 years. In an IVA, a proposal is
put together by an insolvency practitioner, who is called a Nominee.
That proposal offers to pay creditors a percentage of what is owed.
The proposal is either accepted, rejected or accepted with
modifications at a Meeting of Creditors, which then appoints a
Supervisor to administer the proposed arrangement. IVA proposals
often seek to exclude your home from the assets to be sold, though
creditors can insist that the arrangement is secured by a mortgage
over your home, though this is rare. For debts of less than £16,000,
use a Insolvency Practitioner For debts in excess of £16,000,
contact a Debt Management Company for an IVA. Either will advise
whether an IVA is suitable and suggest either bankruptcy or debt
management if these options are more appropriate for you.
- Go through the points recommended
for Short term problems to
see if you can make more of the money you have.
If you think these options are a bit extreme, check out our
Going Backwards section for
other ways of dealing with debt stress.
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