Adverse Credit - what is it?
where do you want to be
tomorrow?
- Administration Orders - This is a court order which prevents creditors from taking any enforcement action without permission from the court. The total debts must not exceed £5000 and the debtor makes one monthly payment to the court, which then distributes this pro rate to the creditors. There is no application fee, but the courts do charge costs of 10p in the pound repaid.
- Charitable Organisations - There are some organisations that will help people set up debt repayment programmes. Whilst they may help with managing your payments and giving you some piece of mind they are not a guarantee that creditors will not freeze interest and charges. Be aware that the people you will be talking to are most likely volunteers, and not necessarily experts in debt problems and will have limited resources. You could find yourself doing a lot of the work.
- Individual Voluntary Arrangement (IVA) - This is a legal process initiated in 1986 as part of the insolvency act allowing a person struggling with debt the opportunity to make a formal proposal to their creditors to clear the debt. An IVA demonstrates to creditors that it would be of greater benefit to both sides than having to declare bankruptcy. A meeting is held with the creditors and if the required majority agree, the proposal becomes a legally binding contract. Creditors must then stop all further interest and charges to the debts.
Benefits of an IVA include:
- Guaranteed to be debt free after 60 months
- Wipes up to 75% of all unsecured debts
- One affordable monthly payment
- No additional interest and charges
- Tenants and homeowners able to apply
- Relieves pressure and allows you to regain control
At the end the IVA the debtor is considered debt free, even if the debts are not paid off in full – anything outstanding is written off, leaving the debtor free to start afresh.
- Debt Management Programme (DMP) - This is an informal agreement designed to allow a person struggling with debt to make on affordable monthly repayment through a debt management company. In return for a management fee the company passes the payments to creditors until the debts are cleared. The important service these companies provide is negotiating the freezing of interest and charges and regularly ensure that creditors continue this freeze. They should also ensure that, as long as the repayments are kept up, no legal or recovery actions are taken as well as handling any replies to creditors correspondence.
- Scottish Trust Deed - This is whereby process for individuals living in Scotland can manage their debt by circulating a proposal to all creditors for repayments. Providing no objections come from creditors totalling greater than 1/3 of the total debts the Trust Deed becomes protected and therefore legally binding on all creditors to whom it was circulated.
- Bankruptcy - This is a formal procedure to be used ONLY as a LAST RESORT. The decision to declare yourself bankrupt should not be taken lightly – you should speak to a professional advisor for alternatives before finally taking this option.
- County Court Judgements (CCJ) - This is a judgement that will appear on your credit file as a result of non-payment of a credit commitment. After the creditor has tried to obtain payment without success they may proceed to the County Court. A CCJ will remain on your credit file for 6 years, though you can obtain a Certificate of Satisfaction once it has been paid in full.
