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Debt

If you face problems with debts, there are many organisations offering independent advice over the phone or face to face. Do not ignore debts. For free confidential advice contact:

• Debt Advice Foundation
0800 043 40 50
Monday - Friday 8:00 a.m. - 8:00 p.m. & Saturday 9:00 a.m. - 5:00 p.m.
• National Debtline
0808 808 4000
Monday - Friday 9:00 a.m. - 9:00 p.m. & Saturday 9:30 a.m. - 1:00 p.m.

Different options to deal with debts
There are many different ways to deal with and repay your debts. You can get free advice online or face-to-face on what restrictions and responsibilities you have to agree to and how different repayment options affect things like:
• your credit rating
• your home - for example, if it is still at risk of being sold to pay your debts
• what action your creditors can take to recover their money - for example, taking you to court to make you bankrupt.
If you’re finding that your debts are getting too much to deal with you may want to consider one of the following options:

Informal Arrangments (IA)
An IA is one option to help you deal with your debts. It is when you contact the people you owe money to and ask them to agree to accept regular lower repayments towards all or part of your debts. The only down side is that your creditors don’t have to accept your IA and can cancel it at anytime.

You are responsible for making all the agreed repayments and notifiying your creditors about your finances. If your financial situation changes or gets worse, for example, you lose your job, you can try to negotiate another arrangement. If your circumstances get better, your creditors may expect you to increase your repayments.

Individual voluntary arrangements (IVA's)
An IVA is an agreement between you and the people you owe money to, to pay all or part of your debts. You’d make regular payments to an authorised debt specialist called an ‘insolvency practitioner’ (IP). They share this money out between your creditors as agreed in your IVA. While your IVA is being set up, your IP may be able to get your case to the court to issue an order to stop your creditors taking further action against you.

An IP will charge a fee for dealing with your creditors and managing your IVA. For example, you might have to pay a ‘setup fee’ and extra fees for every time you make a monthly payment.

Make sure you understand the full costs of your IVA before asking an IP to work on your behalf. If you need more help, you can get free advice from an organisation like your local Citizens Advice or the National Debtline.

Debt management companies (DMC's)
Debt Management Companies offer help if you're in debt. They deal and negotiate with your creditors on your behalf to try to reduce the payments you are making overall. You would then make one payment to the DMC, which spreads it between your creditors.

There are usually fees to pay for the use of their services, so you may have less money from your available income to settle your debts. However, organisations like the National Debtline and Consumer Credit Counselling Service offer free debt management plans.

Administration Orders
An Administration Order can help you deal with your debts if they are £5,000 or less and if you can afford to make regular payments to your creditors. You have to apply for an Administration Order through your local county court and there are costs and conditions you need to meet.

Bankruptcy
Bankrputcy is a last resort, when you cannot pay your debts at all and have tried all options to sort out your repayments and debts. When you are made bankrupt, a person called a ‘trustee’ is appointed to take control of the things you own such as your home, spare income and so on and sell or use them to help pay your debts. Your financial situation will be investigated and you have to agree to certain conditions and restrictions, for example, you can’t borrow more than £500 without telling the lender you are bankrupt.

Debt relief orders
Debt relief orders may help you deal with certain types of debt if you owe less than £15,000, have little spare income and don’t own your home. You have to apply for a DRO through an authorised debt specialist.

Fast-track voluntary arrangements
If you have been made bankrupt, a fast-track voluntary arrangement (FTVA) may be a way to cancel the bankruptcy and deal with your debts and finances.

You have to apply for an FTVA through an officer of the bankruptcy court called the ‘Official Receiver’ and your creditors have to agree to it. There are costs involved and conditions you need to meet. For example, you must have assets (property, shares etc) that are easily saleable. 

Consolidating your debts
Consolidating debt is when you take out a single new loan to pay off several existing debts. You should get independent impartial advice before taking out a loan and make sure it's the right way to deal with your problems. 

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