It is extremely important within the current climate and worsening economic conditions that consumers are forearmed with detailed information on their options and rights. Should they find that their situation becomes intolerable as a result of circumstances beyond their control the right advice and options are essential. Debt can seem like a bottomless black hole that no matter how hard the consumer tries to extricate themselves from they only seem to tread water. People get into debt for a number of reasons, rarely because of frivolous living but because circumstances change such as loss of income through job changes, divorce or separation, illness and other life changing events, and of course ‘The credit crunch’. Most clients of First Mortgage Trust make contact after attempting to keep up their credit repayments for a long period, but without success.
Bankruptcy: A first time bankrupt with debts will generally receive their final discharge one year after the date of the bankruptcy order. There is the possibility the bankruptcy discharge period will be under a year in a small number of cases. If you refuse to agree or acknowledge Bankruptcy proceedings a Bankruptcy Order can still be filed against you. In the case of disputing a creditor’s claim, a good course of action is to try and agree to an out-of-court settlement prior to the hearing of the Bankruptcy petition. Attempting to settle after the order is made to the court can be a complicated process and expensive. A bankruptcy can be initiated by either a debtor or creditor petition. The creditor needs to be owed a minimum of £750, a debtor petitions for their own bankruptcy.An Official Receiver will require a comprehensive list of all your assets and details of what you owe and to which creditors.
IVA (Individual Voluntary Arrangement): However there can be a social stigma associated with bankruptcy and they cannot be kept private because they are always advertised publicly. An IVA is a private agreement with your creditors. There is no professional disqualification with an IVA, If you are made bankrupt, then you are not allowed to be involved in promoting, forming or managing a company without the permission of the court. If an IVA is set up professional and/or employment status will not be affected. Furthermore, you can carry on running your own business and acting as a director even if you have an IVA along with the fact that Costs of an IVA are typically lower than bankruptcy. Once you have completed your IVA according to the specified terms then you are deemed to be debt free.
Debt Management Plan: A DMP is an informal debt solution for anyone who has unsecured debts that they can’t afford to repay including credit and store cards. The agreement with creditors is designed to reduce the amount paid each month so life continues on an affordable budget. A DMP requires you to have disposable income and owe money to more than one creditor. Payments are made to creditors on a pro-rata basis. It is advisable to remember that it will be difficult obtaining further credit before the DMP is completed. There is normally a debt threshold with further criteria that 3 or more creditors are owed.