DEBT ADVICE

Advice

There can be a number of reasons why people find themselves being unable to afford the monthly repayments on their current credit commitments – separation, redundancy or reduced working hours, escalating interest rates, ill health etc.

It is important to face up to the reality of your situation and seek professional help at the earliest opportunity. In our experience the sooner a problem is identified the easier it is to find a solution. But don’t despair! If you are currently facing court action and default notices we can still help.

Debt can be handled in a number of ways. In certain circumstances a debt consolidation exercise may be most appropriate. In others a debt management programme may be the answer. For debts in excess of £15000 an IVA may be considered, and in extreme cases bankruptcy can sometimes be the best solution.

The important thing to remember is to make sure that you pay your mortgage and any other secured creditors as your first priority and your council tax and utility bills as the second priority. However, this does not mean you should ignore your unsecured creditors. Most lenders are more sympathetic if you tell them your problems as soon as you start to experience difficulties rather than after you have missed two or three payments. By writing to them at the outset you should be able to agree an affordable reduced payment for a short period or renegotiate the debt in its entirety if this is more appropriate. If a short term reduction in payments is not going to provide the solution then you need to talk to us.

Debt Management Programme

A debt management programme is normally set up by a specialist company who administer it on your behalf. You agree an affordable monthly payment which you pay by standing order or direct debit to your debt management company. They then distribute this to your creditors. It is important to be selective about the company you use for your debt management programme as their charges can vary dramatically. We never use a company that demands an upfront payment from you. For further information and advice please phone us or fill in the enquiry form.

The Financial Services Authority does not regulate Debt Management

IVA

There is an alternative to bankruptcy called an 'individual voluntary arrangement' (IVA). This is a formal arrangement to pay an agreed amount of your debts over a fixed period. IVAs can be set up in a number of different ways, either as a monthly instalment plan over a fixed term (normally five years), or a short term arrangement if you have a lump sum to put forward. Some IVAs are a mixture of both. An IVA is not an option if you have saleable assets (such as property) that would realise sufficient funds to repay your debts in full.

An IVA may be a suitable option for you if you have money available every month to pay towards your debts and/or a lump sum or assets that could be included. You would normally need to have the following:

• at least 3 debts totalling £15,000 or more;
• two or more creditors, and;
• be able to pay at least £200 per month to your creditors.

An IVA is administered by an Insolvency Practitioner (IP) who will make an initial assessment of your circumstances and, if appropriate, will then draw up and agree a proposal with you for submission to your creditors. The process is then as follows:

• The IP sends the IVA proposal to your creditors and arranges a formal meeting called a 'creditors meeting', giving the creditors at least 14 days notice.
• Check with the IP and make sure that all your creditors have been contacted. If creditors have no notice of the meeting they do not have to stick to the terms of the IVA and can pursue you for their debt separately.
• At the meeting creditors have to vote on whether to accept the IVA. Often creditors send their vote to the IP and don't actually come to the meeting.

If 75% of your creditors 'by value' who actually vote agree to the IVA then the rest are bound by the IVA even if they voted against it or did not vote at all. 'By value' means the creditors to whom you owe 75% worth of debt not the number of creditors you have. So if the creditors to whom you owe the highest amount vote against the proposal then the IVA may not go through.

• Sometimes creditors will haggle about the terms of the IVA and ask you to agree to pay more every month or include assets you do not want to lose. They may ask you to make payments over a longer period.

Once the IVA is agreed your IP will supervise the arrangements and make sure you make the payments. If a creditor comes to light after the IVA has been agreed, they can claim the amount they would have received as if they had been included in the IVA at the start.

If you are a home owner, your IP will normally want to include a special section within your IVA proposal called an 'equity clause'. This means that during the IVA (normally in year 3 or 4) you would be expected to apply for a secured loan or re-mortgage to pay back some of the debts. If you cannot do this, your IP may want you to sell your home instead. However if your IVA follows the IVA protocol, there is some protection. The protocol says that if you are unable to get a re-mortgage or secured loan, you should keep paying instalments under the IVA for an extra 12 months rather than selling your home.

If you are able to re-mortgage or get a secured loan then the repayments should be affordable, and you should be left with at least 15% of the equity in your property.

If you are unable to maintain the payments on your IVA there is a risk that you may be made bankrupt, which could result in you losing your home.

Please phone us or fill in our enquiry form.

Mortgage Arrears

If you are in arrears with your mortgage or know that you will be unable to make your next mortgage payment it is important that you contact your lender immediately to explain your circumstances and agree an affordable monthly payment or request a payment holiday.

We can negotiate with your lender on your behalf and help you to manage your income and prioritise your debts.

Please phone us or fill in our enquiry form.

Repossession

Lenders really do see repossession as a last resort. By communicating with your lender and keeping to an agreed payment plan you are unlikely to face repossession proceedings. However, for those that are issued with court papers for repossession it is imperative that you attend the hearing. It is essential to obtain advice prior to attending so that you can at least come away from the court with a ‘deferred possession order’ (where you have made an offer of payment that is acceptable to the court so that the lender can only apply for repossession again if you fail to keep to the agreement).

We can help you prepare for a court hearing by putting you in touch with a charitable organisation that specialises in these matters as well as with your local Citizens Advice Bureau. We can also assist with preparation of a Budget Planner and give advice as to what you should offer as a monthly payment. We do not charge for these services.

If you require assistance please phone us or complete the enquiry form.

NEED ADVICE?

If you need advice on arranging a mortgage please either call us free on 0800 542 7720 or complete the enquiry form so that one of our fully qualified advisers can call you at a convenient time to discuss your requirements in detail. We can, if required, arrange home visits anywhere in the country.

Click here to read more