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If you are struggling with debt you may be tempted by one of the alternatives listed below, you need to think very carefully before going down any of these routes. There are serious and long term consequences for following these. Always get independent advice(click here for the Citizens Advice Bureau's website) before applying for any of the following :
Bankruptcy
If you have no money left in your budget to pay off your debts, bankruptcy may be an option. This may take the pressure away but it is a last resort and you must seek advice (click here for the Citizens Advice Bureau's website)
There are disadvantages :
- It will cost £495 or more to go bankrupt
- You may have to sell your home or other items you own
- If you have a business it would have to be closed down
- A list of bankrupt people is published on the internet and could be in your local paper
- Some debts such as court fines and student loans are never written off, we will object to rent arrears being included in any bankruptcy order
Administration order
If you have some money left over after you have paid all your essential expenses and your priority debts you may be able to apply to the county court to have all your priority debts in one monthly payment.
Your debts must be less than £5,000 and you must have a county court judgement (CCJ) against you.
There is no fee, the court will take an administration fee every time you make a payment.
If you are considering this action please seek specialist advice from Citizens Advise Bureau. (click here for the Citizens Advice Bureau's website)
Individual voluntary arrangements
If you have enough money left over after paying your priority creditors and essential expenses, you may be able to arrange an individual voluntary arrangement (IVA).
An IVA is a legal agreement with creditors (usually non-priority creditors) to repay you debts either in part or full. The arrangement is negotiated, written up and checked regularly by an independent solicitor or accountant called an insolvency practitioner. Not all the creditors have to agree to an IVA as long as creditors to whom you owe 75% or more of your debt agree.
The costs of setting up an IVA can be high and you may have to pay an upfront fee. If you don’t keep up with the payments you can be made bankrupt.
If you are considering this action please seek specialist advice from Citizens Advise Bureau. (click here for the Citizens Advice Bureau's website)
Debt Relief Order
Debt Relief Orders will be available from the 6th April 2009. These are to provide debt relief in England and Wales. It is meant to be a simplified, quicker and cheaper alternative to bankruptcy for people who meet the following criteria :
- Are unable to pay their debts
- Debts are £15,000 or less
- Disposable income after paying your household expenses is £50.00 a month or less
- Have assets of £300 or less (a vehicle worth less than £1000 is ignored)
- Live in England or Wales
- You must not have had a debt relief order in the last 6 years
- You must not be involved in other insolvency procedures such as bankruptcy, Individual Voluntary Arrangement
A debt relief order will cost £90.00, this must be paid before the application is made. You can pay this amount in instalments at a Payzone or Post Office as long as all the payments are received in a 6 month period.
You do not need to go to court. A specialist adviser who has been authorised to make applications will apply for you.
The order will last for 12 months.
If you are considering this action please seek specialist advice from Citizens Advise Bureau. (click here for the Citizens Advice Bureau's website)
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