FAQs
Which is the best solution for me?
This depends on your personal circumstances, including the amount of your debt, whether you are earning or not, whether you own a property with any significant equity in it, whether you have joint debts with a partner and other factors. At Professional Debt Solutions you can be sure that we will take all factors into consideration and arrive at the best possible solution for you.
I have over £20,000 of debt. Can you help me?
Yes we can. How we can help you will depend on your individual situation but assuming you are working then solutions such as an IVA, a Debt Management Plan or possibly a secured loan/re-mortgage may be possible. It really does depend on your financial and personal circumstances. We will ask the appropriate questions and hopefully give you a couple of options. The choice is then up to you.
Should I release the equity in my property to clear my unsecured debts?
Again this depends on your personal circumstances. If by doing this your monthly repayments are reduced to something you can afford, then it is something you may wish to consider. However you must think about the future and whether you will always be able to afford such payments e.g. are you thinking of starting a family? How safe is your job? Your property will be at risk if you fail to keep up payments on the secured debt you have taken out.
Do creditors have to accept an IVA proposal?
No they don't. We would discuss the possibility of an IVA with them, to gague how likely they are to accept it. We would not suggest that you consider submitting a proposal unless we thought your creditors would be inclined to approve it.
Are IVA's better than Debt Management Plans?
It depends on your personal situation. Debt Management Plans work better for lower levels of debt, and may be better if your debt situation is temporary and may improve. Only by asking appropriate questions can we determine the best solution for you.
Will I be able to take out any new loans or credit cards?
No. In the event you enter into an IVA or Debt Management Plan, you will be paying over a fixed amount each month, and there will be no allowance made when calculating this for any new loan repayments. Your credit rating will be poor in any event, so you would find it difficult obtaining a loan anyway.
Will we lose our home?
If you or your partner is made bankrupt, the Trustee in Bankruptcy will treat their share of the equity in the home like any other asset. In most bankruptcies, this is the only asset available to the Trustee. Depending on the amount of equity it may be possible for the solvent partner or another third party, e.g a parent, friend or relative, to buy your share from the Trustee. If your share is under £5000, the Trustee will usually accept a smaller sum as after sale expenses and legal fees are taken there would be nothing left anyway.
If you or your partner enters into an Individual Voluntary Arrangement, you may have to include an offer of part of your share of the equity in your proposal, but this is usually left until the end of the agreed period, normally five years. This means that you would have to either sell up, remortgage or as in the case of bankruptcy, find a third party to buy your share.
If you have enough equity in your home to cover your debts, you are not bankrupt and you do not qualify for an Individual Voluntary Arrangement. If you cannot remortgage your home, you should expect to have to sell it and move to a cheaper property.
Bankrupts are forbidden to obtain any credit over £250.
How long does an IVA or Bankruptcy last?
A normal bankruptcy lasts for 1 year, and in some cases you can be discharged in less than this, if the Trustee considers that he has dealt with your affairs as best he can and you have assisted him in doing this and that there are no adverse factors in your bankruptcy. These would include things like trying to conceal assets from him, having recklessly run up debts and gone deliberately bankrupt, making fraudulent loan applications etc. In these cases, bankruptcy restriction orders can last for up to 15 years. However, you may be made to pay contributions from your earnings for up to 3 years towards your debts.
A normal IVA lasts for 5 years, but can be proposed for any term you think your creditors will accept.
Why would I go into an IVA and pay for 5 years when I might only have to pay a bankruptcy Income Payments Order for 3 years?
In many cases, if you are made bankrupt, you cannot keep your job or profession, for example solicitors and accountants cannot practise if bankrupt. People employed in banks and other financial institutions may not be able to move either in their own company or to another in the same industry.
There is still a stigma attached to bankruptcy and it is publicly announced in your local press. If you have any significant equity or other assets, they will be taken off you by your Trustee, and the first 15% of the money they realise will be taken by the Government as a levy to help fund the Insolvency Department, even before the Trustee, who is normally a partner/employee in a private firm of accountants or solicitors, takes his fees. It is very common in bankruptcy for no-one other than the Government and the Trustee to receive anything from the realisation of assets.
IVAs are registered on the Courts Service website but are not publicly announced. You will normally be able to retain your job and stay in your home for the duration of the Arrangement, even if it has to be sold at the end of it. Many people with school age children find this an important aspect of an IVA.
An IVA should be considered an alternative to bankruptcy and there is no doubt that creditors prefer them as they normally get a better return on their debts than they would in a bankruptcy.
Can I do a joint IVA with my partner, as we both have debts?
No, as implied by the name an IVA is for an individual. Both partners would have to do their own IVAs , but the cost of this would be cheaper than two unrelated IVAs as much of the work relating to notifying creditors and holding meetings could be done together.
Why do some companies claim to be able to write off 95% of my debts?
In very limited circumstances, when the only alternative is bankruptcy, an IVA can be arranged which writes off more than 75% of debts. This might occur when there is only one major creditor who would receive absolutely nothing at all in a bankruptcy.
Why don’t you charge a fee for your advice?
In common with almost every company in the debt advice industry, we are paid fees by either Insolvency Practitioners or finance companies. In the case of Insolvency Practitioners supervising an Individual Voluntary Arrangement, this fee will be included in the total repayments you make to them – it does not increase the amount you have to repay. In the case of finance companies, we do not introduce clients to companies that add the fees to your loan. Our fees simply replace the advertising costs they would incur finding clients themselves.