Personal Rescue and Recovery
When we use the term “personal” this will apply to an individual person and will also include a sole trader who is not trading through a limited company. If you have traded using a limited company or in a partnership see the corporate information pages.
“We will help put you back on the road to financial receovery whenever this is possible.”
There are times when, as an individual, the pressure of debt can make you feel that it is impossible to solve your financial problems.
However, if you tackle your debts early enough it is possible to rescue the situation and put yourself back on the road to recovery. Our advice is always aimed at ensuring the best outcome for you as an individual without prejudicing your creditors.
Individual Voluntary Arrangement
Debt Management Plan
Refinancing
Individual Voluntary Arrangement
An Individual Voluntary Arrangement, more commonly known as an “IVA”, is essentially a formal deal between an individual and their creditors to pay back part or all of their debts over a period of time, in order to avoid bankruptcy or save a sole trader business from failing.
On the agreement of an IVA, previous payments to creditors don’t have to be made and all the creditors are frozen. Contributions are then made from an individual’s now spare income or a sole trader’s profits which are used to repay the IVA creditors.
An IVA is particularly useful for an individual who risks losing their professional qualifications or practicing licence if they are made bankrupt, e.g. solicitor, banker, fireman etc. You will be expected to make a full and honest disclosure of your assets and liabilities when putting together proposals for an IVA. It is a criminal offence to try and obtain an IVA without full disclosure.
It is also worth noting that even if you are bankrupt you may still be able to obtain an IVA and if so, you can get the bankruptcy annulled and wiped off your credit record.
We have extensive experience in drafting IVA proposals and will be happy to explain the procedure and formulate any proposals for you.
Debt Management Plan
A Debt Management Plan (“DMP”) is a similar procedure to an Individual Voluntary Arrangement, although it is conducted on a less formal basis. A plan for repaying your creditors is drawn up with the help of a specialist to provide a structured and monitored schedule for the payment of unsecured debts. It requires the co-operation of your creditors, all of whom must agree to the payment schedule and terms of the plan.
If the plan is agreed, the creditors will suspend their normal payment terms which would mean that your usual monthly payments to them will stop. Instead, the majority of what you would have paid to your creditors will then be paid to the person managing the DMP who will use this money to make regular payments to your creditors on a pro-rata basis.
A DMP should be regarded as a temporary solution to manage reduced payments to creditors until you are in a position to make full payments as usual or to agree some sort of full and final settlement with creditors. A DMP is a reasonable temporary solution for someone just dealing with credit cards, loans etc. It is not normally appropriate for a sole trader running a business.
We will be happy to advise you on whether or not you would be able to benefit from a DMP.
Refinancing
By consolidating your debts into one single debt and spreading the payment of this over a longer period, this will often result in a lower monthly payment having to be made. You may also pay less interest as a consolidation loan can often be at a lower interest rate than previous credit (e.g. credit cards), although it will take a longer time to pay off. In any case, it will usually relieve the immediate monthly burden on income to quite an extent.
This is a very good method of refinancing your debts if your credit record is still reasonably healthy. However, a word of caution: once the credit cards, loans etc have been repaid, do not be tempted to re-use those sources of credit again otherwise you will again be struggling to repay your debts, but now you will also have an additional ‘consolidation’ debt to deal with as well!
We have many contacts with independent financial advisors we can recommend who will be able to assist you with refinancing.
