Archive for Debt Advice Category
Some facts about bankruptcy
Bankruptcy is not an easy subject to discuss and that can make it difficult to understand. At Payplan we are often asked about bankruptcy and, although we do not specifically deal with it on behalf of our clients, we want to highlight what it entails.
Some of the key questions we are asked are:
What is bankruptcy?
What are the possible impacts/outcomes of being bankrupt?
Who is involved?
How long does it last?
I’m thinking of bankruptcy what about my partner?
What is bankruptcy?
Bankruptcy is a type of insolvency, whereby a debtor cannot pay their debts as they fall due. In the United Kingdom (UK) the term only applies to individuals; administration or liquidation is the term applied to companies or organisations. It can be self-petitioned or can be imposed by the creditor/s directly (this being a large cost to the creditor in both money and time it is not very common). Bankruptcy does have a cost involved; expect to pay about £700 to start bankruptcy proceedings. In certain circumstances court fees can be exempt, therefore reducing the cost. Be aware of companies who can offer to arrange bankruptcy as there may be fees involved, which would increase the cost.
What are the possible impacts/outcomes of being bankrupt?
Firstly, it is important to seek advice before making the decision to go down the bankruptcy route. Bankruptcy might not be the best option and is certainly not the only option that can be taken to tackle debt. The truth is that bankruptcy differs dependent on personal circumstances. The Citizens Advice Bureau can give advice and may have a trained advisor to discuss your circumstances face-to-face.
Once the bankruptcy order has been completed, you can usually make a fresh start. This can be within 12 months and again is dependent on your circumstances. The debts you owe are usually written off, but student loan debts are exempt from bankruptcy proceedings. With the appointment of an Official Receiver (the court appointed person in charge of your bankruptcy) you will no longer have to deal with your creditors directly. Creditors normally stop other types of court action too.
With bankruptcy, details are entered on to the Insolvency Register a public record that can be accessed on the internet. Only in a few circumstances, like self-employment, do details of bankruptcy get published in local newspapers.
Remember to seek advice about bankruptcy before you make the decision, there are many other impacts according to your own situation e.g. homeowner status.
Who is involved?
Usually the debtor will instigate the bankruptcy proceedings, this means completing a Debtor’s Bankruptcy Petition and a Statement of Affairs – containing disclosure of assets and personal information including details of current bank/build society accounts. Once this has been approved by the courts (it can be rejected and an alternative debt solution suggested) an Official Receiver or a licensed Insolvency Practitioner is appointed to act as the trustee. Your existing creditors will be contacted by the trustee. During bankruptcy you cannot apply for any further credit without declaring you are an un-discharged bankrupt to the creditor. If you were to omit any creditor in error this is still included in the bankruptcy.
How long does it last?
Dependent on the level of co-operation with the Official Receiver this could affect the time you are considered to be bankrupt. Discharge will happen within a year with full co-operation. Sometimes the trustee will feel the bankrupt has enough disposable income to pay some into an Income Payment Arrangement (IPA) for 36 months.
I’m thinking of bankruptcy what about my partner?
Do you have a partner or someone else whom you have a joint debt with? Are you concerned what could happen to them? As long as you do not have any joint debts your partner or family will not be affected. However, if you do have joint debts your creditors can pursue the other party or parties under what is known as Joint & Several liability.
In conclusion;
Payplan can advise if bankruptcy or a Debt Relief Order (DRO) is the most appropriate solution; however we do not specifically manage the bankruptcy as a debt solution in the same way that we would an Individual Voluntary Arrangement (IVA) or Debt Management Plan (DMP).
How to get free help with your council tax arrears.
One of the main priorities within your budget should be council tax. However, we all understand that when times get hard it can be difficult to keep up with all your required payments. Once you have fallen into arrears with your council tax it can be difficult to get back on track.
There are many things you can do to repay your arrears and the first thing should be to contact your local council to inform them of the reasons why you have fallen behind with payments and try and come to an agreement to repay them at a rate affordable to you.
Secondly you could visit your local Citizens Advice Bureau as they have trained advisors who will be able to discuss a variety of different options.
And lastly, if you have other debts then you can contact Payplan. We will be able to go through your income and expenditure and we may be able to set up a plan between you and your creditors where you can offer a repayment that is affordable to you.
I’m a Company Director – what’s the best solution for me?
By Nick Payne, Payplan’s Senior Insolvency Practitioner
If you are a Company Director you may be struggling with debt for a variety of reasons; perhaps a major customer has gone under owing you a lot of money or maybe customers are not buying as much as they used to due to the current economic climate.
A recent study of small companies found that one in every four is struggling to pay their debts, so you are not alone. To help support your business you may have taken out personal loans to give your company a cash injection, or the bank may have asked you to personally guarantee their debt which means you will be asked to make the monthly payments if your company does not.
The debt solutions available to you will depend on whether it is viable for your company to continue trading. This will largely depend on whether your company is able to make monthly payments to its debts. If you are unsure it is best to seek advice from a licensed Insolvency Practitioner.
You should seek advice as soon as you think you or your company is going to be in difficulties.
If you wait until payments are missed then it will lead to more interest and charges being added which will increase the amount owed and may also result in creditors taking legal action. Seeking advice early may also avoid bankruptcy. In bankruptcy you can no longer act as a Company Director without leave of the court which may mean your company cannot continue trading.
If your company can meet its debt payments but you have personal debts, you may need to consider a personal solution, such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP). These solutions will allow you to reduce your debt payments to a level you can afford while protecting your home and your company and allowing you to continue trading.
If your company cannot afford to make its full monthly debt repayments but can afford a reduced payment then it may be possible for your company to enter a Company Voluntary Arrangement (CVA). In an IVA or CVA you pay what you can afford, normally over a five year period. After this the remainder of the debts will be written off. Interest and charges would no longer be added to your debts and legal action would be stopped.
If your company is unable to continue trading, then you can put it into liquidation, where the company’s assets are sold to pay its debts and the company is then closed down. Alternatively, one of your creditors may apply to put your company into Liquidation. If you also have personal debts you may need to consider a personal debt solution; by seeking advice early you may not be forced into bankruptcy, but instead you could instead enter an IVA or a DMP which should protect any personal assets.
If you are struggling I would recommend seeking free, confidential no-obligations debt advice at the earliest opportunity. You do not have to proceed with any of the options discussed; however by seeking advice, you will be better informed of the solutions available.
What debts can Payplan help with?
Ask Payplan… What debts can Payplan help with?
Debts come in various forms and sizes! Along with the common unsecured loans and credit cards, you can also get payday loans, log book loans, secured loans, student loans, plus arrears on your rent, mortgage and council tax to name a few. With debt now taking on so many different forms, it is important to understand exactly what can be dealt with in a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA).
This blog is going to explore different types of debt and look at how these can be dealt with.
Unsecured loans: these types of loans can be included in a DMP or an IVA as well as bankruptcy or a Debt Relief Order (DRO). An unsecured loan is where you borrow money and agree to a fixed sum contract where you will pay a set amount over an agreed period of time.
Credit cards: all credit cards can be included in a DMP or an IVA, as well as bankruptcy or DRO. When you borrow on a credit card, you agree to make a minimum payment each month and must pay the total balance off the card. Interest is applied on a monthly basis and will depend on your balance.
Secured loans: these cannot be included in any type of plan and you are responsible for maintaining payments. The required payment for the loan will be included as an item of expenditure in your budget so that you are able to afford the payment. Remember failing to maintain payments towards your secured loan could result in repossession.
Student loans: these cannot be included in any plan. Student loan repayments are deducted directly from your salary, and it is therefore your responsibility to ensure that repayments are maintained.
Payday loans: these are treated in a similar way to unsecured loans and credit cards and can be included in a DMP and an IVA as well as bankruptcy or a DRO.
Log book loans: these have to be treated extremely carefully as your car is at risk. This type of loan is not included in a DMP, an IVA, bankruptcy or a DRO and therefore an expense will be included in your budget to ensure that you are able to maintain payments towards the loan.
Arrears (rent, mortgage, council tax and utility): these cannot be included in any type of plan. However, they are a priority and therefore a payment will be allowed in your budget to ensure you are able to maintain payments.