Frequently asked questions
We've helped thousands of people to escape their debt worries. And many people often ask about the same things. So here are some of the questions that we get asked most frequently.
1. I feel like I'm in a hopeless situation, can you really help?
2. Is an Individual Voluntary Arrangement (IVA) the best answer for me?
3. How much can I afford to pay each month?
4. I'm interested in an IVA. How does it work?
5. It's difficult for me to get time off work. Do I have to travel to meet you?
6. How much do my creditors want from me?
7. Do my creditors have to accept my IVA proposal?
8. If the IVA is rejected, how much do I owe you?
9. Will the IVA settle all my unsecured debts?
10. What if I come into some money whilst in the IVA?
11. Will I ever be able to get credit again?
1. I feel like I'm in a hopeless situation, can you really help?
Debt becomes a problem when you are unable to settle your credit commitments on time.
In most scenarios the seriousness of your debt problem is determined by the amount of debt you owe. However, this isn't always the case and getting free advice by talking to an unbiased and professional debt expert, such as ourselves, is crucial in solving the problem.
The worst thing you can do is ignore the situation and hope it gets better. So the sooner you call us the quicker you could find yourself Debt Free.
In the main there are 4 solutions to resolve your debt problem: another loan, debt management, bankruptcy and an IVA.
Often the obvious answer to an unsecured debt problem is a re-mortgage or other loan. Depending on your unique financial position, and your credit rating, either a re-mortgage or consolidation loan could be the answer that you are looking for. Always speak to a professional expert considering further borrowing to make sure it is right for you and that you can afford it.
When borrowing, always remember that your debts increase. This is a fact of life and there is no escaping from it.
If further borrowing is not the solution for you, or you cannot obtain a loan, or you recognise that you have a debt problem and need to sort your debts out rather than borrowing more money, then the 3 remaining options are as follows:What you can do if your Debts are less than £5,000
If your debts amount to less than £5,000 to a minimum of two creditors, of which one creditor has acquired a County Court Judgment, you are allowed to claim for a County Court administration order. Upon considering your income and expenditure, the Court will decide what you can repay on a monthly basis, and 10% will be deducted from your payment as a fee. Your debts will be repaid in full, but if you cooperate with the stipulations, then your creditors won't be able to take any other actions against you and debt collection actions will be stopped. For further in depth information on County Court administration orders, click on the below web address:
http://www.courtservice.gov.uk/cms/media/n270_e.pdf
What you can do if your debts are between £5,000 and £15,000
A debt management plan is a possible solution for unsecured debts ranging between £5,000 and £15,000. 'Debt Management' isn't legally binding on you, the debt manager, and your creditors making it an informal process. As such you have no legal protection against your creditors.
The debt manager offers a reduced monthly payment to your creditors, for which they typically charge a fee of circa 20% of your payment. Although this can diminish some of the creditor pressure, it should only be taken in cases where other options are either unavailable or inappropriate, because of the serious disadvantages, as outlined below.
• The debt management plan only finishes once all your unsecured debts are fully repaid. This could take a very long time. Agreements often continue for tens of years.
• Only a minority of creditors will suspend interest and charges. So interest will keep adding up and if your monthly payments can't offset the interest, your debt will grow making the process never ending.
• Additional expenses are added to the debt, such as the debt manager's fees and interest and charges, which increases the time period of your repayment plan even further.
Therefore a debt management plan must be approached with caution and considered solely as a short-term solution.
What you can do if you have debts over £15,000
For individuals in more serious debt there are 2 standard solutions: Bankruptcy and an IVA.
The choice facing most people with bad debt used to be to declare themselves bankrupt or continue to struggle with growing debt repayments. Fortunately IVAs are now common place as well. .
• Bankruptcy will free you from insurmountable debts, but any assets you have in your name can be sold and the profits shared amongst your creditors.
The procedure for bankruptcy is as follows:
A Court will order that your assets and liabilities be delivered to The Official Receiver, who will then investigate your financial position and report back to your creditors.
If you own assets, such as equity in your house, a Trustee can be delegated to actualise their value and distribute these as a dividend to your creditors. Your Bankruptcy Order is also advertised in your local paper, so it's a good idea to prepare yourself for family, friends and colleagues learning of your bankruptcy.
Your bank accounts will likely be suspended, if not closed, and you should anticipate difficulty in re-establishing a new bank account. Being bankrupt puts restrictions on you for: (a) obtaining credit of over £500 and (b) you cannot fulfil a managerial or director position in a limited company.
Visit the below web site for more details on bankruptcy: www.insolvency.gov.uk
An 'Individual Voluntary Arrangement' (IVA) is an agreement between you and your creditors that is legally binding and gives you the opportunity to protect important assets, such as your home.
ONLY Licensed Insolvency Practitioners are authorised to make a proposal to all your unsecured creditors and implement an IVA. On the basis that 75% (by value) of your creditors are in favour of the offer, your IVA can proceed.
Unlike a Debt Management Plan, the IVA is funded by your creditors. At the end of your IVA, normally 5 years, any debts that have not been repaid, typically upto 75%, are written off.
2. Is an Individual Voluntary Arrangement (IVA) the best answer for me?
- Do you have at least £15,000 of unsecured debt owed to a minimum of 3 creditors?
- Do you have Disposable Income?
- Can you afford to pay at least £200 per month to an IVA for 5 years
- Are you determined to avoid bankruptcy?
An IVA is a repayment plan and you need to make payments to it. Therefore you need to be employed and have residual income to make these payments. This is often called disposable income, i.e. after you have paid to meet your living expenses, what do you have left to pay your unsecured creditors. This is covered in more detail in question 3.
|
PLUS |
Amount (A) |
MINUS |
Amount (B) |
Disposable income = (A) minus (B) |
|
+ Your wage / Pension |
- Your cost of living i.e. food, clothing etc |
|
||
|
+ Other INCOME i.e. benefits |
- Your SECURED loan payments i.e. Mortgage |
|
||
|
|
- Your PRIORITY payments i.e. Electricity, Rent. |
|
||
|
Totals |
|
An Accuma IVA is free of charge because your creditors cover the costs.
The proposal, implementation and management of an IVA is time consuming and expensive. As these costs are covered by your creditors, they reduce the amount that is eventually repaid to them.
These costs do not reduce for smaller debt levels. And if the debt is below £15,000, the cost of the IVA is too high and therefore the returns to your creditors to low to make the IVA economically viable. Additionally, if your monthly repayment is less than £200, the running costs of the IVA would take up such a large proportion of your payment that the return to your creditors would be to low for them to approve an IVA.
Because an IVA potentially avoids all the unfavourable elements of bankruptcy (stigma and restrictions) it is logical for your creditors to expect improved returns from your IVA instead of forcing you into bankruptcy.
Your Insolvency Practitioner, acting as Supervisor, is obliged to petition for your bankruptcy if you fail to meet the terms of your IVA (i.e. make all the monthly payments). You would have wasted much time and effort, on your behalf and ours, and contributions paid up until the time of failure will be retained for your creditors.
Do not enter an IVA unless you are absolutely sure you can comply with the repayment terms and are committed to avoiding bankruptcy.
3. How much can I afford to pay each month?
To determine how much you can afford to pay into your IVA each month, firstly, list all your income and expenditures as demonstrated below. Obviously this example is not a list of all potential incomes and expenditures, it is just an example.
Include all your sources of income (Benefits, maintenance etc) and under expenditure, it's essential to include all priority payments (i.e. utility bills, rent) and any other secured lending (i.e. mortgage) that you incur each month. But make sure that you exclude any unsecured debt repayments.
| Income | Expenditure | |||
|
Your take home pay (inc. overtime) |
£1,300 | Mortgage/rent | £700 | |
| Partner's take home pay | £600 | Council tax | £70 | |
| Other income (Benefits, maintenance etc) | £100 | Water/Gas/Oil/Electricity/Phones | £80 | |
| Food and other household | £350 | |||
| Car expenses | £90 | |||
| Car finance | £100 | |||
| Public transport | £20 | |||
| Clothing | £150 | |||
| TV Licence/rental/Sky | £30 | |||
| Insurances (Home, life, health) | £12 | |||
| Pension contributions | £40 | |||
| Total household income | £2,000 | Total household expenditure | £1,642 | |
| Monthly Disposable Income | £358 |
The above example would show that you have a monthly disposable income of £358 per month which you could reasonably be expected to enter into your IVA to settle your unsecured debts.
4. I'm interested in an IVA, how does it work?
Accuma Insolvency Practitioners Ltd, part of Accuma group Plc, is one of the largest personal insolvency practices in the UK and we are highly skilled in helping to resolve debt problems for people just like you.
We start with a thorough financial fact find into your individual situation and evaluate your income and expenditure to decide on the amount you are able to pay into your IVA each month.
Furthermore, we identify the circumstances that caused your current financial hardships.
If your creditors are pursuing any legal action against you, we are able to protect you from your creditors by acquiring a Court Order while your IVA is being set up.
We then prepare a detailed IVA proposal, on your behalf, which is distributed to your creditors, offering your monthly disposable income that you will repay into the IVA. At this time, one of our Licensed Insolvency Practitioners will take on the role of 'Nominee' (i.e. nominating you for an IVA). Only Licensed Insolvency Practitioners are authorised to nominate you for an IVA.
The authorised individual arranges a meeting of your creditors to be held so they can vote on the proposal. This is typically coordinated by telephone as all your creditors will have been given your IVA proposal prior to the meeting so they can understand why an IVA is appropriate for you, and the best option for them.
At the creditor meeting, the votes are counted to calculate if the essential majority of those creditors who voted for approval has been obtained. At this point, it is possible that your creditors may have introduced changes to be included in your proposal.
In most cases the IVA proposal is accepted at the first creditor meeting. In a minority of cases, however, if more negotiation is needed with your creditors the meeting can be postponed (for up to 2 weeks) to ensure support for your proposal.
When your IVA is accepted all your creditors are bound by it, even those who voted against it.
The Nominee provides a Report to both your creditors and the court where your proposed IVA application has been filed.
Throughout the duration of your IVA, you must comply with the agreed monthly payments to the Insolvency Practitioner, now known as your 'Supervisor'. The supervisor oversees your arrangement until completion, making sure that you adhere to the terms, and is responsible for making dividends payments to your creditors.
Once your IVA is successfully completed, the Supervisor delivers the final report and dividend. A certificate of compliance, which verifies your successful completion of the IVA, is also filed.
5. It's difficult for me to get time off work. Do I have to travel to meet you?
No. In most instances, the majority of our work is done over the telephone. But if your situation is more complicated or you would prefer a one-to-one meeting with a Senior Advisor, then we can easily accommodate you in one of the number of offices we have around the country.
6. How much do my creditors want from me?
There is no predetermined amount or figure that your creditors are forced to or will accept in deciding to agree to your IVA proposal.
In return for you proposing a fair repayment schedule that is affordable to you and is maintainable for the life of your IVA, your creditors will agree to freeze all interest and charges, allowing the outstanding amounts at the end of your IVA to be legally written off by them. Furthermore, all legal action and collection calls and letters will stop.
Every situation is different and your IVA proposal will not be the same as someone else who may have similar amounts of debt as you. What is recognised as fair and acceptable to your creditors is how much you can afford to pay, each month, into your IVA.
We are experts in structuring IVA proposals and have outstanding relationships with creditors, because we produce IVA proposals that creditors find fair and acceptable.
At the same time, we also want to make sure you have a decent standard of living for the duration of the IVA.
7. Do my creditors have to accept my IVA proposal?
For your IVA proposal to be accepted, it has to achieve votes of more than a 75% majority by value from your creditors who actually vote at the creditors meeting.
For instance, if your debts amounted to £30,000, then for IVA approval you would need £22,501 of your creditor votes, if all your creditors voted. Alternatively, if only one of your creditors voted, providing they voted favourably, this would count as 100% in favour and your IVA would be accepted.
Once an IVA is approved all creditors included in your proposal are bound by your IVA, even if they voted against your proposal.
8. If the IVA is rejected, how much do I owe you?
Unlike most other Insolvency Practitioners, we do NOT take upfront fees and let you take the financial risk of your case being rejected and remaining out of pocket. We take the risk of rejection ourselves.
We can do this because we are one of the largest and most experienced companies in the UK specialising in IVAs.
So, if all you can afford is to pay £300 per month into your IVA, then that is all you pay, and every penny of it counts towards your IVA. There are NO monthly management fees to deduct from your payment!
Once you've agreed with us that an IVA is the most reasonable option for you, we will begin to set up your IVA and advise you to stop making payments to your creditors. Instead, the monthly payment that has been agreed with you will be paid into a Client Account as part of your IVA. In the unforeseen circumstance that your IVA proposal is not successful, any payments you have made will be reimbursed minus any obligatory external costs we have had to cover such as, court fees, insurance and registration fees. Normally these fees do not exceed £50.
Your monthly payments into the client account, while your IVA is being established, shows your creditors that you are serious and committed to being able to afford and undertake an IVA. Ultimately these pre-payments will decrease the term of your IVA.
If you change your mind after having agreed upon an IVA as the right option for you, and we have carried out a substantial amount of work, we then have the right, at our discretion, to keep any funds already paid.
9. Will the IVA settle all my unsecured debts?
Yes, as long as all your unsecured creditors are part of the IVA and that you complete your IVA. This procedure is a once and for all settlement of your unsecured debts.
10. What if I come into some money whilst in the IVA?
Normally called a windfall, this could be anything from winning the lottery to an inheritance or large bonus payment.
Because your creditors have agreed to freeze all interest and charges and even write off a large proportion of your debt, it would be unfair if you were to keep this money.
For instance, if you owe £50,000 and enter into an IVA where £25,000 would be written off, and then won a couple of million pounds on the lottery, you would be expected to repay your debts in full.
Your IVA typically includes a 'windfall' clause that requires you to pay the money into your arrangement. If bonus payments or regular overtime are paid to you, depending on their value, you are required to share the benefit on a 50:50 basis with your creditors.
11. Will I ever be able to get credit again?
Yes.
You agree during your IVA term not to obtain further credit, and even when your IVA is completed it is likely to remain on the credit reference databases for a further year making credit difficult to obtain during this period. But, once your IVA runs its full course successfully, your credit rating is likely to be repaired faster than if it fails.
Normally it is easier to obtain credit once your debt problem has been settled. But the last thing you should be thinking about is more credit when contemplating entering into an IVA! Many lenders look at your ability to pay, and successful completion of an IVA, rather than just your credit record.
A successfully completed IVA is an excellent example of a good payment history is.
