Debt-tips.com is written primarily for readers in the U.S. For those readers who reside in the U.K. we are offering the following article on debt options in the U.K. Here are your debt relief options in the UK:
DMP (DEBT MANAGEMENT PLAN)
A debt management plan (DMP) in the UK helps individuals to manage their outstanding debts, when they are unable to maintain their payments to their creditors. A DMP consists of an agreement between you and your lenders to make a set monthly payment. The debt management plan firm, usually called ‘providers’, negotiate with your creditors and manage the payments on your behalf. Your monthly payment is based on your disposable income. Payments are then distributed between all your creditors by your ‘providers’.
When your DMP is being set up, your creditors could agree to freeze any interest charges. However, they don’t have to agree to this. And they don’t have to agree to your DMP all. If they don’t agree, they can also continue to contact you, ask for payment – or even take you to court and declare you bankrupt. DMP applies only for ‘unsecured debt’ such as credit cards or personal loans but do not cover ‘unsecured debt’ like a mortgage, for example. The debt management plan firm usually charges you a fee for their service, while other non-profit organizations like debt charities provide their services free of charge.
Debt consolidation gives the opportunity to cover all or part of your outstanding debts with a single loan. In debt consolidation you take a new loan to pay off several existing debts. Debt consolidation in the UK applies only for unsecured debt; it can be a good way of taking control over your finances.
Consolidation loans can be tax deductible, however in some cases you need to put your property as guaranteed - that means a risk of losing your home. Make sure you understand fully the interest rates and possible penalties when asking for debt consolidation.
INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA)
In the United Kingdom an IVA is a formal agreement between you and your creditors to pay off your debts. With the help of an Insolvency Practitioner you will set up a proposal to your creditors and an agreement will be set upon. Your arrangement will last at least five years, at the end of which time your debt will be cleared and you will no longer be making any more payments for the unsecured debt included in your IVA application.
During an IVA You make regular payments to an authorized debt specialist called an ‘insolvency practitioner’ or (IP). They share this money out between your creditors as agreed in your IVA. There is no maximum or minimum level of debt and no maximum or minimum level of repayments, except what is acceptable to your creditors. Your IVA usually ends when the agreed amount has been repaid. Costs for an IVA are included within your monthly payment. The interesting side on an IVA is that all your remaining debt will be written off at the five year mark.
Bankruptcy in the UK applies only for individual persons and not business entities. Bankruptcy is considered the last resort if you cannot pay your creditors. When you label yourself bankrupt you tell to your creditors that you are unable to pay your debt. Either you or a creditor can make the bankruptcy order. Once the petition is filed there are fees that have to be paid to the courts. You will be assigned a Petitioner who will gather all the information needed such as your assets and income, a list of Creditors and how much you owe each one. You make all of your payments to your Petitioner not to the creditor.
In a bankruptcy all your assets like properties could be sold to pay back your creditors. Going bankrupt is not free; Court fees are involved in the process. Your credit score will be severely damaged by this solution.
This is a guest post from iva123.co.uk which offers easy to understand information and opinions on an IVA.
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