- All the creditors need to agree to their individual arrangement for this plan to be effective
- Interest & charges are not guaranteed to be frozen
- Your credit rating is affected as your monthly payments are not contractual
- Debt management plans can affect your credit file for a minimum of 6 years, as in most cases you will have defaulted on the original credit agreement terms once you enter into the arrangement
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Take action today, feel better tomorrow…
Anybody can get into debt, but not everybody takes the right steps to take back control. We’ve made it as easy as 1… 2… 3.
Enter a few basic details
Provide us with a little bit of information about your financial situation.
Speak to a debt advisor
Our friendly advisors will talk you through your available options.
Choose your preferred option
Have a think about your options and take a path that is right for you.
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If your unsecured debt has reached a point where it’s no longer manageable, don’t worry. You’re not alone, and there are multiple solutions that you may be eligible for.
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Compare Different Solutions
Debt Management Plan
A Debt Management Plan is an informal repayment agreement between you and your creditors to pay all of your debts.
Debt management plans are an alternative debt solution to formal arrangements, such as an Individual Voluntary Arrangement or Bankruptcy and available to residents in the United Kingdom.
Debt management plans are normally used under these circumstances:
- You can only afford to pay a small amount to creditors each month
- You have problems with debt but will have the ability to make repayments within several months
- You can organise a payment plan with your creditors yourself, use a licensed Debt Management Company (fees are charged) or via the free sector
- Payments are made regularly to the company
- The company divides the money between all your creditors
Pros
- You only pay one affordable payment to the DMP company
- The payment is flexible depending on your circumstances, it can increase or decrease
- Payments can be reduced & interest rates can be frozen by creditors, however, they are not obliged to do this
- Some charities & organisations provide this service free of charge (you can contact the Money Advice Service for more information)
- Avoids the need for a Formal Insolvency Procedure
Cons
IVA
An IVA (Individual Voluntary Arrangement) is a legally binding agreement between you and your creditors to pay back your debts over a period of time.
You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors.
The fees charged are taken from the affordable monthly payment you make over the agreed term of the IVA
An IVA can give you more control of your assets than bankruptcy.
Pros
- One realistic and affordable payment over a set period of time
- After successful completion of your IVA unaffordable debt is written off
- Protected Legally – After your IVA has been approved, no further action can be taken by creditors and all interest and charges are frozen
- The fees charged are taken from the affordable monthly payment you make over the agreed term of the IVA.
- Interest and charges will stop
- Support from our team who can help you through the journey
- Your expenditure will be reviewed at the start and annually to ensure your payment remains affordable
- There are restrictions on the expenditure of a person who enters into an IVA
Cons
- Creditors don’t have to agree to an IVA proposal so it’s not guaranteed
- It affects your credit file for six years
- Your information will be held on the public insolvency register
- There are costs involved with an IVA, which are outlined in our Fees and Key information section. However, costs are deducted from the contributions you make. These will be fully explained to you and detailed fully in your IVA proposal
- If you own a property/properties, you may be asked to release equity from the value to pay off debts. A remortgage may attract higher rates of interest or, if no remortgage is available, an IVA may be extended by 12 months
- If your IVA fails, it may result in Bankruptcy
- If you earn additional income then a percentage of this may need to be paid into the IVA
- Only unsecured debts included within the individual voluntary arrangement may be discharged at the end of the period and unsecured debts not included remain outstanding
- Borrowing any amount over £500 can only be done with the express permission of the Insolvency Practitioner
Administration Order
An administration order is a repayment plan arranged by the County Court.
Administration orders are only available in England, Wales and Northern Ireland. If you live in Scotland there are other options available to help you deal with your debts.
An administration order is legally binding on your creditors and gives you protection from them.
The creditors included in the order can’t contact you for payment or add any more interest or charges to your debts once the administration order has been approved.
To apply for an administration order you need to have:
- less than £5,000 debt in total
- received at least one court judgment
Pros
- There is no upfront cost to you
- You make just one monthly payment into court
- Your home is not at risk
Cons
- The debt must be below £5,000
- You may have to sell valuable possessions
- Your details are recorded on a Public Register
- Your credit rating will be adversely effected
- The order will be listed on a public insolvency register
Debt Relief Order
Debt Relief Orders (DRO) is a formal debt solution designed for people with little or no assets and low income.
If you don’t own your own home & have little spare income and debts that are less than £30,000 a Debt Relief Order (DRO) could be a way to deal with your debts.
It is an alternative debt solution to Bankruptcy or an Individual Voluntary Arrangement and available to residents of England, Wales and Northern Ireland.
Pros
- Typically a Debt Relief Order lasts twelve months
- Debt Relief Orders don’t require you to make payments into them
- Creditors are stopped from taking any further action against you
- There is a small fee of £90 for starting a Debt Relief Order that can be paid in instalments
- A Debt Relief Order is relatively simple process to start and can be done through various charity organisations
Cons
- Your credit rating will be affected for six years
- Owning your own property or having assets over £2,000 will stop you entering into a Debt Relief Order
- A Debt Relief Order may be cancelled if you do not comply or if your circumstances change during the the 12 month period, for example if you’re able to make payments towards you debt(s)
- Entering into a DRO will be recorded on a public register
- If you can afford more than £75 after your monthly essentials have been budgeted for then you will not qualify
Bankruptcy
If you are unable to pay your debts you can apply to make yourself bankrupt. Bankruptcy is a formal insolvency route and can have serious financial implications.
Other people can put you into bankruptcy or you can make this choice yourself. It’s something to be carefully considered.
The three ways you can go bankrupt are: you apply for bankruptcy yourself; an application for bankruptcy from a creditor; by the IVA Supervisor if you fail to meet the terms of your IVA.
Pros
- Your Bankruptcy could be discharged within 12 months
- It can free you from the pressure from creditors
- All debts that qualify for bankruptcy are written off
- The stigma of bankruptcy is not what it once was
- The process to make yourself bankrupt is now completed online
Cons
- You lose control of finances and assets, the official receiver or Trustee appointed on your case will decide what happens to your valuable asset and finances. Your information will be held on a public register
- Under certain circumstances, bankruptcy can affect types of employment
- It will affect your credit file for six years
- Putting yourself into bankruptcy will cost £680, this can be paid in monthly instalments however you will not be afforded the protection of bankruptcy until such time as this is paid
- Depending on if you have proven disposable income and employment status, you may have to pay income payments for up to thirty-six months
Breathing Space
Breathing Space is a new debt option that gives you temporary protection from the creditors you owe money to if you’re struggling with debts.
This includes:
- freezing most interest, fees and charges on debts
- pausing most enforcement action and contact from creditors
There are two types of Breathing Space:
- Standard Breathing Space – which you apply for through debt advice, and which lasts for up to 60 days, with a review between days 25 and 35.
- Mental Health Crisis Breathing Space – which is specifically for people in mental health crisis treatment and can only be applied for with an Approved Mental Health Professional (AMPH). It lasts for the duration of your treatment, plus 30 days.
Money Helper is a free and independent service that’s backed by the UK government. For impartial guidance on making financial decisions, click here to visit their website.
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Here at moneyadviceexpert, we keep our eyes on the financial market so that you don’t have to, allowing us to continually bring you the best options for saving money, reducing bills, and getting great deals.
Money Advice Expert is a trading style of Abbotts Insolvency Limited, registered company in England & Wales 12256735 ICO Reference ZA561115 Address Sandfold House, Sandfold Lane, Manchester, M19 3BJ.
Abbotts Insolvency Ltd are an appointed representative of Dee Valley Finance Limited, who are authorised and regulated by the Financial Conduct Authority. Abbotts Insolvency Ltd FCA reg no: 987290
Sarah North is authorised to Act as an Insolvency Practitioner, in the UK, by the Insolvency Practitioners Association.
Abbotts Insolvency provide Individual Voluntary Arrangements (IVA's) and whilst we do not administer any other debt solutions, we will advise of these and refer to an authorised third party if we are unable to assist with an IVA. There is no obligation to proceed with our recommendations. All financial solutions are subject to eligibility and acceptance and depending on your chosen solution, fees may be charged by the service provider – if this is the case Abbotts Insolvency will make you aware of any fees before you proceed. Upon successful referral of your case Abbotts Insolvency may receive a referral fee from the service provider.