Comparison of 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

  • Individual Voluntary Arrangement (IVA)
    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 payment
    You will be required to make payments to your IVA, typically for a period of five years.

    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.

  • Debt Management Plan (DMP)
    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.

  • Bankruptcy
    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.

  • Debt Relief Order (DRO)
    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.

  • Protected Trust Deed (PTD)
    How it helps

    Legally binding arrangement

    A Protected Trust Deed (PTD) is a legally binding arrangement between you and your creditors, usually lasting four years.

    An Insolvency Practitioner will help you

    A PTD must be arranged by a licensed Insolvency Practitioner (IP). The IP will help you work out an affordable repayment and make a proposal to your creditors. Once the PTD is approved by your creditors the IP will become your Trustee and oversee your PTD for the 4 years.

    Shared payment for your creditors

    You will be required to make payments for 4 years (this may vary). Creditors will receive a percentage of the payments made into the PTD.

    Debts written off following completion

    Upon successful completion of the PTD, any debts included within the PTD will be written off.

    What you need to consider

    Credit rating will be affected

    A PTD may remain on your credit file for up to six years after your Trust Deed becomes protected (approved). This may make it harder for you to get credit, even after your PTD has completed.

    Some debts cannot be included

    There are some types of debts that cannot be included in a Trust Deed and you will be required to make payments to those outside the PTD. E.g. student loans, magistrate court fines, criminal fines and social fund loans.

    Your job might be affected

    You cannot be a director of a company or hold public office whilst subject to a PTD, and some other roles in the financial or legal sectors may also be affected. It’s best to check with your HR department at work, or a union representative to ask if a PTD may affect your job prior to making a PTD application.

    Conditions

    In order to qualify for a PTD you must owe at least £5,000 (in total) and have debts with two or more creditors.

    A PTD is only available for Scottish residents. If you live in England or Wales, there are other products available.

    When you start a PTD, your Trustee will charge fees for this. These fees include an Initial Trustee fee (for work completed prior to the PTD being protected) and a realisation fee (a percentage of the total amount paid into the PTD). There are other costs, including registration fees and insurances charged, known as disbursements. These fees will be deducted from your PTD payments.

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