A Rough Guide To Debt Solutions

 Filed for Bankruptcy.

 The number of personal insolvencies that had been filed in courtrooms in England and Wales had increased to 134,053. This figure represents 31.1 per ten thousand of the total adult population in England and Wales. This increase in the number of people who filed for bankruptcy has also generated an increase in the number of people seeking debt solutions. For example, according to figures released by the government in early 2010, the number of people requesting Individual Voluntary Arrangements has increased to 47,461. Other popular debt solutions include, debt management plans, debt relief orders (DRO), Fiduciary Deeds (this debt management solution is exclusive to Scotland) and, in the worst case, bankruptcy.

Debt management plans are a debt solution aimed at people with low levels of debt. Unlike many other debt management solutions, it does not consist of a legally binding agreement. In this case, the debt management company will negotiate an agreement on behalf of the debtor. This type of agreement also ensures that the debtor does not receive direct requests for payment of the debts listed in the plan. The main objective of a debt management plan is to reduce the debtor's expenses so that they can have better control over their finances. In addition, any interest charges will be frozen to allow payment of the debts included in the debt management plan.

The Individual Voluntary Agreement (IVA) is another popular solution for debt management. An IVA consists of a legally binding agreement between the debtor and its creditors. This type of agreement is decided between the insolvency practitioner and the creditors. Once an agreement is reached, the insolvency professional will decide how the funds paid to VAT are redistributed among the creditors. However, to apply for this agreement, there are some strict rules that the debtor must meet to apply for VAT.

•   The debtor must owe at least £ 15,000 of unsecured debts to at least three creditors.
• The debtor or his partner must have a regular source of income that comes from employment.

   Even though the debtor must meet these strict requirements, there are many advantages to opting for a VAT instead of a bankruptcy procedure.

•  The debtor is retained to trade
• The debtor can still apply for credit
• The debtor's assets will not be assumed by a third party (for example, the debtor does not have to sell his house)
•  If there is a change in the personal circumstances of the debtor (for example, loss of income or death of the partner), the IP will present a revised version of the offer to the creditors.
  

  Debt Relief Order:

The most recent debt management solution is the Debt Relief Order (DRO) that was introduced in April 2009. However, its availability remains limited to 43,000 in 2010 compared to 21,000 in 2009. A DRO generally lasts 12 months, during which the debts shown in the order are frozen. That means that the creditors will not be able to take any action for the payment of the debt. However, the debt relief Order is regulated by some strict rules:

• The debtor must not be able to pay his debts
• The unsecured debts of the debtor must not exceed £ 15,000
• The total gross assets of the debtor must not exceed £ 300
• The debtor must not participate in any other form of insolvency proceedings, such as VAT or bankruptcy proceedings.
• The disposable income after the deduction of the normal household bills should not exceed £ 50

When the debtor can not pay any of the debts owed to his creditors, he may be subject to a Bankruptcy Order. During this period, all interest charges are frozen and a trustee will take control of the debtor's assets to monitor their finances.

•  The bankruptcy order is a sentence that is pronounced by a court of law.
•    If the debtor can make payments on his debts, then he will have to make a monthly payment for a determined period of three years.
• The creditors will be paid for the sale of the debtor's valuable assets. 
•  A full investigation of the debtor's financial affairs will be conducted.

It seems that most debt solutions consist of a legally binding agreement that aims to freeze interest charges.