Debt & Financial Advice

1. How much do you owe?
   List your debts. Work out when payments fall. Identify the priority debts.
   
   
2. How much do you earn?
   Work out how much money you have coming in. Are you claiming all the benefits you are entitled to? Are you paying too much tax?
   
   
3. What do you spend?
   List your essential and less essential spending. Compare it with your incomings. What do you have left over to offer to creditors?
   
   
4. Nothing left over?
   Are there any areas in which you can cut down your spending? Is there any way in which you could earn extra money?
   
   
5. Talk to your creditors.
   Send them a financial statement showing your income and outgoings. Explain your offer to pay off your debt.

• Increase your borrowings to pay existing creditors.
  Not normally a sensible option. If you are borrowing to the hilt now, adding more credit will only make it worse.
  
  However, in certain cases and particularly where you have a large amount of equity in your property, it may be advantageous to take out a secured loan with which to pay off your creditors. We will advise you as to whether this is the best solution for you.
  
  
• Go bankrupt.
  This may seem like an extreme option but it is a course of action you may want to consider. There are certain circumstances (not many) when bankruptcy is the best option. We can discuss the implications of bankruptcy with you and advise you if we feel it is in your best interest.
  
  
• Enter into an informal agreement with your creditors.
  It may be tempting to think that you can approach your creditors yourself and try and negotiate a deal with them. There are organizations that will even provide standard letters for you to send to your creditors.
  No doubt they will listen and will possibly offer to reduce your payments for a limited time. But remember that an informal arrangement is exactly what it states and can be cancelled by any one of your creditors at any time (or by you for that matter - which is why creditors are often unwilling to enter this type of arrangement).
  
  
• Approach a Debt Management Company.
  You are probably aware that there are many Debt Management Companies who will negotiate an informal debt management plan for you.
  
  BUT BE CAREFUL: Remember that you are still only entering into an informal arrangement and the same rule as above applies. It is also quite possible for creditors to initially agree a reduced payment but then change their mind, perhaps because of a change of personnel or company policy. There are no guarantees and the time over which you pay back can be open ended. Remember too, you usually have to pay back the full amount and interest is often added at the end.
  
  The result is you could be making your monthly repayments for a very long time and during this period you will have a very poor credit rating.
  

You will appreciate that your creditors will want, and are entitled, to receive as much as you can afford. This is where we can come to your rescue. We will prepare a statement of your affairs which in due course is presented to your creditors. The proposal will offer them a monthly amount, to be paid back for a finite number of years. This monthly payment is determined by the amount you can afford rather than the amount that you owe because the proposal is based on your income and expenditure. The payment period is normally for five years. Only in special circumstances is it less than five years, and rarely more.

This solution, therefore offers them a settlement which would be far more beneficial to them than making you bankrupt. They also know that, because it is legally binding, they are guaranteed to receive the agreed amount.

You, too, benefit because you pay back only a proportion of your debt and you know in advance exactly how much you will pay and for how long.

At the end of the IVA period, it is deemed that you have made a 'full and final settlement of your debts' which sets you back on the road of life with a clean sheet. Any negative credit ratings you may have can then be removed.

To sum up:

• In most cases, your total debt repayable will be greatly reduced with the balance being written off by your creditors.
• Your repayments will be for a finite period of time (normally five years).
• You will know in advance of formalizing the arrangement exactly how much you will pay each month.
• All interest charges are cancelled, so the spiral of debt is immediately halted.
• All legal action is frozen and all demands, letters and telephone calls from your creditors will cease.
• Repayments are simplified by a single monthly payment regardless of how many creditors you have. You can even pay by direct debit if you wish