Financial difficulties can affect anyone. Knowing the options available for resolving debt-related problems is essential when they arise. In the United Kingdom, debt relief solutions cater to different financial situations and needs. This article aims to explore three used debt relief procedures in the UK: Individual Voluntary Arrangement (IVA), Debt Relief Order (DRO) and Bankruptcy. We will delve into each option’s aspects, eligibility criteria and implications to provide informed guidance on your financial future.
Individual Voluntary Arrangement or IVA.
An Individual Voluntary Arrangement (IVA) is a binding agreement between you and your creditors designed to assist you in repaying your debts over a fixed period, typically five to six years. IVAs are a choice for individuals burdened with substantial unsecured debts such as credit card bills, personal loans and overdrafts.
Key Features of an IVA.
You collaborate with an insolvency practitioner (IP) who evaluates your financial situation, helps devise a repayment plan and negotiates with your creditors.
After covering living expenses, monthly payments are usually determined based on what you can afford.
The interest and charges on your debts are put on hold. Your creditors cannot take any legal action or contact you for repayment while under an Individual Voluntary Arrangement (IVA). Once the agreed-upon period is over, any remaining debt included in the IVA is usually forgiven.
Eligibility criteria for an IVA.
- You should have debts of at least £6,000.
- It’s essential to have an income to make monthly payments.
- You must be a resident of England, Wales or Northern Ireland.
Implications of having an IVA.
Your credit rating will be negative. The IVA will be recorded on your credit report for six years.
While under the IVA, you won’t be able to take on credit without approval from your Insolvency Practitioner (IP).
Certain professions in law or finance may be affected by having an IVA.
Skolų nurašymo orderis
A DRO is insolvency designed for individuals with few assets and relatively small debts. It offers a start to those unlikely to repay their debts within a reasonable timeframe.
Here are some key features of a DRO.
During the DRO period of 12 months, you don’t need to make regular payments to your creditors. Most debts not secured and included in the Debt Relief Order (DRO) will be forgiven at the end of the 12 months. During this time, creditors cannot act against you or contact you for repayment. DROs are relatively affordable compared to procedures related to insolvency.
Eligibility Criteria for a DRO.
- Your debts must be under £30,000.
- Your disposable income should be less than £75 per month.
- You should have assets and savings.
- You must reside in England, Wales, or Northern Ireland.
Implications of a DRO.
Your credit rating will be negatively impacted for six years, making it difficult to obtain credit. Some professions and roles may be affected by having a DRO.
Bankruptcy is an insolvency procedure usually considered a last resort for individuals facing overwhelming debt situations. It involves selling all your assets, including your home, to repay your creditors if necessary. Any remaining debt is typically forgiven. It provides relief from dealings with creditor pressures.
To file for bankruptcy, there is no minimum debt threshold. It would be best if you had a connection to the UK through residency or owning property there. It can be initiated voluntarily and imposed by creditors.
Like other debt relief solutions, it may influence certain professions and roles, affect your credit rating, and impact your ability to access credit for a considerable period.
Below is a table that outlines the distinctions between Individual Voluntary Arrangements (IVAs), Debt Relief Orders (DROs), and bankruptcy.
|£ 6 000
|£ 30 000 or less
|£ 5 000
|Must be able to afford to make monthly repayments
|Must own assets worth less then £ 2 000
|Assets will be sold to repay creditors
|Negative impact on credit rating for 6 years
|Negative impact on credit rating for 6 years
|Negative impact on credit rating for 10 years
Determining the suitable insolvency procedure for your situation depends on your unique circumstances. If you’re uncertain about which option to choose, seeking guidance from a debt advisor or insolvency practitioner is crucial. We invite you to contact IB Service if you still have questions or want to start the process and use our mediation service. We will explain the cooperation process in detail for initiating an application for an insolvency specialist.