Individual Voluntary Arrangement

An IVA (Individual Voluntary Arrangement) is a legally binding agreement between you and your creditors to pay back your debts over a period of time.

If most creditors agree to your IVA proposal and it is accepted, you must agree to make regular payment contributions to an insolvency practitioner who will administer the IVA for both you and your creditors, and they will fairly divide your payment contributions between your creditors.

An IVA can give you more control of your assets than bankruptcy.

Key features:

• It is affordable. Your monthly IVA repayments will depend on your specific income and outgoings, meaning it will be an amount you can afford each month.
• After successful completion of your IVA, any remaining debt is written off.
• Protected Legally – If your IVA application is approved, creditors can take no further action, and all interest and charges are frozen.
• Fees charged are deducted from the monthly IVA payment you make over the agreed term of the IVA.
• Your expenditure will be reviewed at the start and annually to ensure your payment remains affordable.
• There are guidelines on the expenditure of a person who enters an IVA.

Considerations:

•  Creditors do not have to agree to an IVA proposal, so your application is not guaranteed to be accepted.
• It affects your credit file for six years.
• Your information will be held on the public insolvency register
• There are costs involved with an IVA. However, costs are deducted from the contributions you make. These will be fully explained to you and detailed fully in your IVA proposal
• If you own a property, you may be asked to release equity from the value to pay off debts. A remortgage may attract higher rates of interest, or if no remortgage is available, an IVA may be extended by 12 months.
• If your IVA fails, it may result in Bankruptcy.
• If you earn additional income, then a percentage of this may need to be paid into the IVA.
• Only unsecured debts can be included within the IVA.
• Borrowing any amount over £500 can only be done with the express permission of the Insolvency Practitioner.

Eligibility Check

Debt Relief Order

A Debt Relief Order (DRO) is a way of dealing with your debts if you can’t afford to pay them. It means you don’t have to pay certain debts for a specified period (usually 12 months).

At the end of the DRO period, the debts included in it will be written off (‘discharged’), and you won’t have to pay them.

If you obtained any debts through fraud, you must restart paying them when the DRO has ended.

If your circumstances change to pay some or all of your debts, your DRO may be revoked so you can arrange to pay your creditors (the people or companies you owe money to).

To be eligible for a DRO, you must meet these criteria:

• you owe £50,000 or less
• do not have enough money left at the end of the month to make your debt repayments
• you’ve lived or worked in England or Wales in the last 3 years
• have savings or valuable items worth less than £2,000 in total
• own a vehicle worth less than £4,000 (if you were to sell it today)
• are not currently bankrupt, have an interim order or an individual voluntary arrangement
• you’ve not had a DRO in the last 6 years

You won’t be eligible if you are involved in bankruptcy proceedings or any other formal insolvency procedure. However, if one of your creditors has asked a court to make you bankrupt, you may ask the creditor for permission to apply for a DRO instead.

Key features:

• Your debts will be written off at the end of the DRO. There are a few exceptions, as explained opposite.
• None of the creditors listed in the DRO application can take further action against you without the court’s permission.
• It allows you to make a fresh start after 1 year.
• You do not need to pay for a DRO – there’s no application fee.
• You will keep your assets and a vehicle as detailed above.
• The approved intermediary ensures that you are given appropriate advice and that you fit the criteria for a DRO.

Considerations:

• Your DRO is entered on a public register.
• You can’t have a DRO if you have an existing bankruptcy order, an IVA, are subject to bankruptcy restrictions, or you have had a DRO in the last 6 years.
• You won’t be able to have a DRO if you own a house, even if it has no equity (value).
• You will remain liable to pay certain debts – in particular student loans, fines and some debts arising from family proceedings.
  Your employment may be affected.
• Your DRO could be revoked (withdrawn) if you don’t co-operate with the official receiver during the year your DRO is in force.
• You can’t act as a director of a company or be involved in its management unless the court agrees.
• You will be committing an offence if you get credit of £500 or more without disclosing that you are subject to a DRO.
• You may have a debt relief restrictions order* made against you for 2 to 15 years if you acted irresponsibly, recklessly or dishonestly.

You must not break any of the restrictions

• You must not break any of the DRO restrictions and may be prosecuted if you do so.
• If you break them, the restrictions can be extended for 2 to 15 years. This extension is called a Debt Relief Restrictions Order (DRRO).

Your creditors can ask the Insolvency Service to investigate and get Debt Relief Restrictions Order (DRRO) against you if they believe:

• you made your debt situation worse before you applied for your DRO.
• you have acted dishonestly.

Eligibility Check

Debt Management Plan

A Debt Management Plan is an informal repayment agreement between you and your creditors to pay your debts.

Debt management plans are an alternative debt solution to formal, legally binding arrangements, such as an Individual Voluntary Arrangement (IVA) or Bankruptcy. They are available to residents in England, Wales, and Northern Ireland.

Debt management plans are typically used under the following circumstances:

• You can afford to pay an amount towards creditors each month, repaying your debts in full within a reasonable timeframe.
• You have problems with debt but will have the ability to make repayments within several months.
• You can organise a payment plan with your creditors yourself, use a licensed debt management company (fees are charged), or use the free sector.
• Payments are made regularly to the company.
• The company divides the money between all your creditors.

Key Features:

• You only pay one affordable payment to the DMP company.
• The payment is flexible depending on your circumstances; it can increase or decrease.
• Payments can be reduced & creditors can freeze interest rates; however, they are not obliged to do this.
• Some charities & organisations provide this service free of charge (you can contact the Money Advice Service for more information).
• Avoids the need for a Formal Insolvency Procedure.

Considerations:

• All the creditors must agree to the arrangement for the Debt Management Plan to be effective.
• Interest & charges are not guaranteed to be frozen.
• Your credit rating is affected as your monthly payments are not contractual.
• Debt management plans can affect your credit file for a minimum of 6 years, as in most cases, you will default on the original credit agreement terms once you enter the arrangement.

Eligibility Check

Administration Order

An Administration Order is a repayment plan arranged by the County Court and is only available in England, Wales, and Northern Ireland.

An Administration Order legally binds your creditors and protects you from them.

The creditors included in the order cannot contact you for payment or add any more interest or charges to your debts once the administration order has been approved.

To apply for an Administration Order, you need to have:

• less than £5,000 debt in total.
• received at least one court judgment.

Key features:

• There is no upfront cost to you.
• You make just one monthly payment to court.
• Your home is not at risk.

Considerations:

• The debt must be below £5,000.
• You may have to sell valuable possessions.
• Your details are recorded on a Public Register.
• Your credit rating will be adversely affected.
• The order will be listed on a public insolvency register.

Eligibility Check

Breathing Space

Breathing Space is a new debt option that gives you temporary protection from the creditors you owe money to if you are struggling with debts.

Key features:

• Freezing most interest and charges on debts.
• Pausing most enforcement action and contact from creditors.

There are two types of Breathing Space:

• Standard Breathing Space – which you apply for through debt advice and lasts up to 60 days, with a review between days 25 and 35.
• Mental Health Crisis Breathing Space – which is specifically for people in mental health crisis treatment and can only be applied for with an Approved Mental Health Professional (AMPH). It lasts for the duration of your treatment, plus 30 days.

Eligibility Check

Homeowner Loans

A homeowner loan (sometimes called a second-charge loan or secured loan) can be used for debt consolidation.

This means taking out one new loan, secured against your home, to repay multiple existing unsecured debts such as credit cards, personal loans, store cards or catalogues. You then make a single monthly repayment on the new loan instead of several separate payments.

Whether a homeowner loan is suitable depends on your individual circumstances, including your income, equity in your property, credit history and ability to afford the repayments. DebtSupportDirect.co.uk and Apply4Loan.co.uk are trading names of Ruby Holdings Limited. Ruby Holdings Limited is a credit broker, not a lender. We can introduce homeowners to credit brokers who may be able to arrange a secured loan – we do not make lending decisions and approval is not guaranteed.

Key features

• One monthly payment that can be easier to manage than multiple debts
• Potentially a lower interest rate than credit cards or other high-cost unsecured borrowing
• Ability to borrow larger amounts than many unsecured loans (subject to equity and affordability)
• Fixed or structured repayments with a clear end date (depending on the product)
• May reduce your overall monthly outgoings if the rate and term are suitable

Considerations

• The loan is secured on your home. If you do not keep up repayments, your home may be repossessed
• Unsecured debts become secured. This changes the risk profile — previously, non-payment of a credit card or personal loan did not put your home at direct risk of repossession
• Extending the repayment term to lower monthly payments usually means you pay more interest overall
• Fees (arrangement, valuation, legal or early repayment charges) can increase the total cost
• You must stop using the accounts you repay. Continuing to spend on cleared credit cards can leave you worse off
• A credit check will be carried out and the new loan will appear on your credit file
• Not everyone will qualify. Lenders assess affordability and creditworthiness
• A homeowner loan is new borrowing, not a formal debt solution. It does not write off debt or freeze interest in the same way as an IVA, DRO or bankruptcy

Important warnings

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.

If you are struggling to meet repayments or are already in arrears, free debt advice is available from organisations such as MoneyHelper, StepChange, National Debtline or Citizens Advice. A formal debt solution may be more suitable than further borrowing in some cases. Always compare the total amount you will repay on any new loan with what you currently owe, and only proceed if you are confident you can afford the repayments for the full term.