So what are your options ?:-
Sometimes bankruptcy is the best option when faced with the burden of overwhelming debt but in order to make that decision, you need to carefully consider what other options are available and what the likely impact will be going forward. Many clients come to us with common misconceptions about bankruptcy and part of our job is to dispel these and make sure you understand the facts. In recent years there have been a number of changes to the process and bankruptcy is now a simpler, less intimidating option.
Bankruptcy wipes the slate clean giving you a fresh start and opportunity to reorganise your financial commitments but the implications must be thoroughly understood. When a Bankruptcy Order is made your affairs are put in the hands of an Official Receiver or other Trustee, whose job is to determine any assets or excess income you may have and whether any funds can be realised, to repay your creditors. There are legal restrictions on what can be taken from you and a bankruptcy order only applies to an individual not a couple so your spouse will not lose their assets. We can explain exactly what to expect from your meeting with the Trustee and help you comply with their requests.
Once the decision has been made, we will assist you to prepare your Petition and Statement of Affairs guiding you through the process, offering knowledgeable support in relation to bank accounts, pensions, investments and other assets. Knowing the facts helps our clients prepare for the bankruptcy process in addition to planning the future and rebuilding their credit status. Bankruptcy Orders usually last for one year but if you have no assets this period is frequently much shorter. We have seen people discharged in as little as three months ready to start again with no debt.
There is always light at the end of the tunnel and we can help you to plan a positive route out of your debt problems no matter how insurmountable they may seem. During what can be a stressful time, we are only ever a phone call away with friendly, practical advice.
The Insolvency Act of 1986 (amended by the Insolvency Act 2000 and the Enterprise Act 2002) introduced a new procedure whereby a debtor could come to an arrangement with his/her creditors to pay his/her debts in full or in part over time [usually 5 years], as an alternative to bankruptcy. This arrangement is known as an Individual Voluntary Arrangement (IVA) and may be entered into either before or after a bankruptcy order has been made.
To qualify you must have two or more creditors [people you owe money to], with a total outstanding debt of over £10,000.
A proposal is produced by a nominee (usually an Insolvency Practitioner), with our assistance, which is then put to all creditors in respect of settlement of your debt. The proposal is based upon your income and expenditure. Most proposals now have a clause covering default of payments stating that the supervisor may then present a bankruptcy petition. Also a proposal may contain a clause in respect of any assets and monies that could be realised at the end of the term of the proposal. Creditors then vote to accept, accept with modifications or decline the proposal.
Once the proposal is accepted you, the debtor, will pay the agreed contributions to the supervisor (normally on a monthly basis). If you fail to pay the agreed funds, the supervisor may circulate to creditors a “certificate of non-compliance” which states that the debtor has defaulted and the arrangement is at an end.
IVAs have slightly less impact on your credit rating, although it is registered.
Similar to the situation of an IVA, however this is not regulated by a supervisor or court. This is simply a proposal that we put to your creditors on your behalf to repay, either in full or partially, over a period of time. Once we have the agreement from all creditors you will make the monthly payments directly to creditors yourself.
An alternative is for a full & final settlement agreement to be negotiated. In most circumstances the funds available to make the payment(s) are obtained from a third party such as a family member or similar. You will need to provide details of your income and expenditure, along with details of any realisable assets in order for the proposal to be produced and offered to your creditors. Once the proposal is accepted by ALL creditors immediate settlement can be made and you can “get on with your life”.
Debt Relief Orders (DROs) are one way to deal with your debts if you owe less than £20,000, don’t have much spare income and don’t own your home.
If you get one:
- your creditors can’t recover their money without the court’s permission
- you’re usually freed (‘discharged’) from your debts after 12 months
Other bodies that can assist you with your debt situations are:-