Comparing Debt Solutions

Still confused? We’ve got a comparison of solutions that may potentially help you. This details some of the key points and considerations that you’ll need to think about before you decide about what’s right for you. While this is a basic guide the information featured is not an exhaustive list of the benefits and considerations of each product.

We would always recommend seeking financial advice from a licensed and regulated company. The Money Advice Service is an impartial service set up by the Government. They provide free debt counselling, debt adjustment and credit information services. Visit Money Advice Service

How it helps

Affordability – We look at your income and expenditure then negotiate with creditors to make sure your future payments will be affordable.

 

Payment schedule to suit you – This can be monthly, weekly or fortnightly.

 

 

Possibility of interest and charges being frozen –We negotiate to freeze charges and interest. This is down to the creditor to decide and is not guaranteed for all instances.

What you need to consider

Affect to your credit score – Entering into a plan can have an adverse impact on your credit rating.

 

Your repayment schedule may increase – Your repayment term could increase over a longer period if you enter into a DMP. The result being you could pay back more than you originally owe.

 

Creditors may not accept a DMP proposal – Creditors aren’t obliged to accept a DMP proposal.  As a result they can still chase payment.

 

Debts that don’t qualify – You will still have to make payments on the debts which don’t qualify for this solution.

Conditions

Only unsecured debts can be included, though some exclusions apply such as CCJ’s.

 

A DMP managed through Harrington Brooks requires customers to afford a minimum payment of £80 per month towards their debts.

 

The minimum debt level required is £1000 with a minimum repayment term of 12 months.

 

The total debt managed through a DMP will need to be paid off. None of the debt will be written off.

 

Fees apply.

How it helps

Writes off a proportion of debts – Upon successful completion of the IVA, any remaining debts included within the arrangement will be written off.

Creditor contact significantly reduced – Creditors should only send yearly statements and notification of any business changes once they have been notified of acceptance of the IVA.

Interest and charges are frozen – Once your IVA has been accepted creditor interest and charges are frozen and creditors are unable to take legal action.

HRMC & VAT – Unsecured debts owed to HMRC may be included within an IVA

What you need to consider

Savings and windfalls  – You are required to release all savings and/or windfalls (such as inheritance, lottery win) for the benefit of creditors.

Formal insolvency  – An IVA is a formal insolvency. You may withdraw any time prior to approval, however once accepted you and your creditors are bound by the terms of the arrangement.

Credit Rating – Entering into an IVA may adversely affect your credit rating.

Homeowners may be required to release equity – In the final year of an IVA you may be required to release a proportion of equity in your home through a re-mortgage. If it is not possible to obtain a remortgage the arrangement may be extended by up to 12 months.

Details of your IVA are made public – Details of your IVA are held on a public register.

You will be required to make payments – You will be required to make payments to your IVA, typically for a period of five years.

Some debts cannot be included within an IVA – There are some types of debts that cannot be included within an IVA and you will therefore be required to make payments to those outside the arrangement. E.G social fund loans, some student loans and secured debts.

Conditions

In order to qualify for an IVA you must owe unsecured debts of £5,000 or more.

You must have two or more creditors.

You must be able to afford a minimum payment of £70 per month.

Fees apply.

How it helps

Writes off a proportion of debts – Once you have been declared bankrupt any debts included within the bankruptcy will be written off. You may be required to make payments to the bankruptcy for up to 3 years.

Creditor contact stops – Eligible creditors will no longer contact you once you have been declared bankrupt.

What you need to consider

Savings and windfalls – You are required to release all savings and/or windfalls (such as inheritance, lottery win) for the benefit of creditors.

Homeowners may be required to sell property – Should there be a reasonable amount of equity available you may be required to sell the property for the benefit of creditors.

Credit rating – Bankruptcy will adversely affect your credit rating for a period of at least six years.

Details of bankruptcy are made public – Details of your bankruptcy are held on a public register.

May affect employment- Some financial providers and employers may not employ individuals who are bankrupt.

May affect public positions – You cannot act as a director of a limited company, school governor or Member of Parliament.

You may be required to make payments – You may be subject to an Income Payments Order. This requires you to make payments to your bankruptcy for a period up to three years.

Some debts cannot be included in bankruptcy – There are some types of debts that cannot be included and you will therefore be required to make payments to those outside the bankruptcy. E.G social fund loans, some student loans, secured debts.

Conditions

In order to petition for your own bankruptcy you must owe unsecured debts of £750 or more.

Fees apply – If you wish to petition for your own bankruptcy there is a fee of £550 (from 21st July 2016) payable to the Official Receiver, plus an adjudicator fee of £130. If a creditor petitions for your bankruptcy, they will pay the costs.

 

How it helps

Debts written off – After 12 months all debts included within the DRO will be written off.

Creditor contact stops – Eligible creditors are unable to contact you in the 12 months following successful application for a DRO.

Repayments towards debts stop – You will not be required to make payments towards the DRO, other than the application fee.

N.B Please note that if you no longer qualify for a DRO during the 12 month period following application  due to change in circumstance, it may be revoked .

What you need to consider

Excludes homeowners – Homeowners do not qualify for a DRO.

Details of a DRO are made public – Details of your DRO are held on a public register.

May affect employment – Some financial providers and employers may not employ individuals who are subject to a DRO.

Some debts cannot be included in DRO – There are some types of debts that cannot be included and you will therefore be required to make payments to those outside the DRO. E.G social fund loans, some student loans, secured debts.

Conditions

In order to qualify for a DRO your unsecured debt level must not exceed £20,000

Fees apply – You will need to pay the Insolvency Service a one off fee of £90

Your monthly disposable income must not exceed £50.

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