Once the IVA has been removed from your credit report you can start rebuilding your credit score. Here is how to improve your credit score after an IVA.
Before you can start rebuilding your finances, you must ensure that you have successfully completed your IVA. When you first enter the IVA, your Insolvency Practitioner will inform you of how many monthly payments you must make. Towards the end of your IVA you may also be asked to remortgage your home and use the money to pay off some of your debts.
When you come to the end of your IVA, your Insolvency Practitioner will check that all payments have been made on time. If there are any missed payments, the IVA may be extended. But if everything is up to date, you just need to make your final payment.
When your IVA is completed, it should be automatically removed from your credit reports and you will also be removed from the insolvency register. Bear in mind that it can take a few months for records to be updated. Check your credit score after a month or two to make sure that the IVA has been marked as completed. If it has not, get in touch with the credit agency and send them a copy of the IVA completion certificate and they will rectify the mistake.
The first step to rebuilding your credit profile is to make sure that all bill payments are made on time and your credit score should slowly start to improve. When possible, you may want to consider borrowing small amounts of unsecured debt, as long as you can repay it on time. This serves as an indicator that you are a reliable borrower. After being on an IVA you will have grown used to living within a budget. It is recommended that any future debt repayments are manageable and the payment sustainable for you to avoid struggling with your finances.
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When deciding if an IVA is the right debt solution for you, it is important to consider your personal circumstances and priorities. Different debt solutions bring with them different qualifying criteria and obligations from you, should you enter into them. An IVA works by you making manageable payments towards your debts over a set period (typically 5 years), with any remaining included debt being written off upon completion of the arrangement.
This guide will take you through some of the scenarios where an IVA could be the best solution.
1. You owe debts to multiple creditors
An IVA is typically suited for people that owe debts to multiple creditors. If you only owe money to a single creditor, you should contact them and ask about a more suitable repayment plan. A single debt is a lot easier to deal with and you can often come to some arrangement with your creditors without having to enter into a formal debt solution like an IVA.
However, if you have multiple unsecured debts with different creditors, your situation is more complicated. Managing lots of different repayments is difficult and this is often how people lose control of their budget. An IVA will not only help you write off a portion of that debt, but it also allows you to make one single payment, which is then distributed amongst your creditors on your behalf. This makes it far easier to manage debts to multiple creditors.
2. You can afford monthly debt repayments
Before you enter into an IVA, your Insolvency Practitioner will assess your finances. Your income and essential expenditure will be reviewed to create a budget. This will then determine an affordable monthly repayment that you are able to make to all of your debts through the IVA.
However, it’s important to consider your situation before you enter into an IVA. If you have a reliable source of income and you are confident that you can make the repayments on time each month, it is a good choice. An important factor when considering an IVA is that both you and the Insolvency Practitioner believe that the arrangement will be sustainable.
3. You owe more than £6,000 of unsecured debt
An IVA is designed for people that are unable to pay their unsecured debts within a reasonable timeframe (typically 6 years). If you owe a relatively small amount of money, you may be able to manage the situation with improved budgeting and informal agreements with your creditors. Fees are payable within an IVA, although these form part of your affordable monthly repayment. This means that creditors may not be inclined to agree to an IVA where your budget shows that you could potentially pay them back in full over a similar time period outside of an IVA where fees would not apply.
4. You work in the correct job
In most cases, an IVA will not impact on your employment. However, there are some notable exceptions that you should be aware of. Certain jobs do not allow you to have an IVA. These are often jobs that involve handling money or being responsible for finances in some capacity. Examples can include jobs in:
Accountancy
Other financial services
Law
In some cases, jobs in other industries may not allow you to have an IVA. It is important to check your contract, or speak to your employer in whatever industry you are in before entering into an IVA if you are unsure.
5. You don’t want to directly deal with your creditors
Many people find that one of the most stressful things about being in debt is the constant contact from creditors. If you owe money to a lot of people and you are getting a lot of phone calls and letters demanding payment, it can take a real toll on your life. Often people fail to deal with their debt properly because they don’t want to face all of their creditors and try to negotiate with them.
An IVA is ideal if you are in this situation because you do not have to deal directly with them. Your Insolvency Practitioner will help you draft an offer for your creditors and take it to them on your behalf. If there are any disputes about the offer, they will negotiate with creditors for you. All payments will be made to your Insolvency Practitioner too, and they will distribute them amongst your creditors.
As soon as you enter into the IVA, you have legal protection and your creditors are no longer allowed to contact you for payment. Your Insolvency Practitioner becomes a liaison between you and your creditors. If dealing with creditors is becoming a major source of stress for you, an IVA could be the solution that you are looking for.
If you need some advice about whether an IVA is right for you, and what other debt solutions are available to you, get in touch with Swift Debt Help today and speak to a member of our expert team.
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An IVA (Individual Voluntary Arrangement) is an effective debt solution for many people and it may allow you to write off a portion of your debts. Although there is no limit on the amount of debt that can be included, only certain types of debt can be included in an IVA – here are 12 that can.
1. Catalogues
Catalogues are used by many people as a convenient way of purchasing goods and spreading costs over a period of time. Catalogue debts tend to have high interest rates, so many people find themselves unable to pay. Your catalogue debts can be included in an IVA, however you should stop purchasing items in this way in order to manage your monthly budget going forward.
2. Credit cards
If you’re struggling with credit card debt you may have previously managed this through transferring balances on to other cards and trying to keep your minimum repayment as low as possible. For many people there comes a point where credit card repayments, especially when coupled with other streams of lending, become unmanageable within their monthly budget. Credit card debts are another common unsecured debt that you can write off with an IVA.
3. Personal loans
For many people struggling with debt, an unsecured loan repayment can feel difficult to pay as it is one fixed monthly repayment, with little flexibility. It can often be larger than other debt repayments that you are faced with each month, particularly if you’ve used this to consolidate other debts from the past. Unsecured personal loans are included in an IVA.
4. Overdrafts
Overdrafts are commonly used as a convenient way to access funds to meet monthly repayments on credit or bills. People struggling with their finances often find it difficult, or impossible, to get themselves out of their overdraft. In this situation people are often at risk of incurring additional penalty charges by accidentally going over their overdraft limit which only makes their problem worse. Overdrafts are included in an IVA. It is advisable to change banks to a provider to which you don’t owe money before entering into an IVA – any accounts to which you owe money will be frozen when you declare insolvency.
5. Gas and electricity debt
It’s quite common for people struggling with debts to build up arrears with their utility providers. These are unsecured debts, so they are also included in an IVA. This can include debts from a previous property as well as your current home. It is important to remember that you will be responsible for making payment to your ongoing usage after entering an IVA, the monthly repayments for your utility bills will be taken into account when carrying out your budget assessment.
6. Water arrears
The rules surrounding water arrears are the same as gas and electricity debt. You can include any existing debts in your IVA, and your ongoing monthly payments will be included in your monthly budget so you should find paying future payments manageable.
7. Council tax arrears
Council tax arrears are considered a priority debt because penalties for not paying them can be severe. In rare cases, you could even be put in prison for refusing to pay. These debts can be included in an IVA and if you are unable to pay, it is important that you seek debt advice as soon as possible.
8. Payday loans
Payday loans should be utilised when you need emergency access to funds, and the balance will be repaid on your next payday. However, this is often not the case, and when this becomes a debt you need to pay on a monthly basis it can be very expensive as they have high interest rates. If you only make the minimum payments, the debt will continue to increase. As with other unsecured loans, payday loans can also be included in an IVA.
9. Store cards
A store card can seem like an attractive way of paying for your instore purchases, particularly where there are discounts being offered, or when you might not have the cash available at the time of purchase. Much like with catalogue debts, this type of borrowing can become difficult to manage if you have many balances spread across multiple creditors. The interest rates can often be high.
10. Income tax and National Insurance arrears
Self-employed people struggling with debt often find it difficult to pay their end of year tax and National Insurance bills, alongside managing the repayment demands of their other creditors.
If you are self-employed (or have previously been self-employed) historic debts from HMRC, along with your expected debt for the current tax year will be included as a debt in your IVA along with other unsecured creditors.
11. Tax credits
If you claim tax credits, there is a chance that you can be overpaid. This happens when there are mistakes with the information that the DWP holds about you or your financial circumstances change. Overpayments can be deducted from future tax credits or taken out of your paycheck. These debts can usually be included in your IVA.
12. Guarantor Loans
If you have struggled to find mainstream credit, then a more accessible option is to take a guarantor loan; where you nominate a friend or family member to guarantee the loan repayments in the event that you are unable to meet them. As an unsecured debt, they are also included in an IVA however the Lender will be entitled to pursue the guarantor for any unpaid balance.
Need more IVA advice? Contact us today
At Swift Debt Help, we can give you guidance when applying for an IVA and answer any questions you may have about what debts can be included. We can also discuss alternative options with you.
Fill out the contact form, send us an email, or give us a call and we can help you deal with your debt problem today.
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Remortgaging your home can be an effective way to help deal with your debts. If you are unable to pay your debts, there are a number of options available to you including formal debt solutions, but you should consider remortgaging if you have enough equity in your home.
By remortgaging your property you can release equity, which can then be used to clear your debts. These are some of the key benefits of remortgaging to clear debts.
1. You could save money by paying less interest
Unsecured debts including credit cards, overdrafts, personal loans, and utility bill debts can all be cleared by remortgaging your home. The interest rates on unsecured debts tend to be higher than secured debts because they are not guaranteed by an asset, like your home. So, if you remortgage your home and use the money to pay off those debts, you could save a lot of money on interest.
2. You can remortgage for a better rate
If you are unable to release cash by way of a remortgage, it may still be worth considering this as an option. Mortgage interest rates fluctuate a lot, so you may be able to get a better rate than you did when you first bought your home. This could allow you to make savings on your monthly mortgage payments, giving you more funds available each month to make your unsecured debt repayments.
However, you are not guaranteed to get a better rate because the deals you are offered are dependent on a number of factors. Lenders will consider your credit score, the value of the property, and how much you want to borrow. If you are in a difficult financial situation already, you may struggle to get a better rate when remortgaging.
3. You can borrow a larger amount if necessary
If you have large debts, you may be able to borrow a larger amount to clear them. The amount that you can borrow is calculated based on the loan-to-value (LTV) ratio. For example on a 90% LTV, this means that the total amount you can borrow against a house that is worth £100,000, is £90,000. If you have paid off a portion of your mortgage already, or your home has increased in value, you may be able to borrow a larger amount.
4. It’s an alternative to a formal insolvency solution
Formal insolvency solutions like bankruptcy or an IVA can help when you are unable to pay your debts. A portion of the debt can be written off and you will make regular payments to clear the rest. Remortgaging is an alternative to formal insolvency solutions and it does not have the same negative impact on your credit score.
If you have a lot of debts and you are unsure how to deal with them, Swift Debt Help can give you the support you need. Get in touch today and we can discuss whether remortgaging or other formal debt solutions are right for you.
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We all need to get away on holiday from time to time, but our finances don’t always agree. Whether you’re going abroad or staying in the UK, the costs quickly add up. If your budget is already stretched, you may think that you can’t afford a holiday this year, but that might not be the case.
With a few simple changes to your spending habits and your holiday plans, you can make it a lot more affordable. Here are 8 tips on saving money for your summer holiday.
1. Set a budget
Having a strict budget in place is the most important thing you can do to save for your next holiday. Setting a clear budget to manage your spending will help you cut out waste, and that extra money can go straight into your holiday fund.
You also need to set a budget for your holiday. This gives you a saving target to aim for, so you can work out exactly how much you need to save each month to afford the holiday. Be realistic when setting your budget so you can set money aside without missing any bill payments.
2. Consider an all-inclusive holiday
All-inclusive holidays can be a great option when you are on a tight budget. Your flights, accommodation, and most of your food and drink are paid for upfront, usually at a discount rate as they are a package deal. If you tend to overspend while on holiday, all-inclusive deals make it much easier to stick to a budget because you don’t need to buy much while you are there. Many all-inclusive packages also offer free places for young children.
3. Think about when you book
Booking your holiday too late can cost you more. Although last-minute deals can save money if you are flexible enough, you may get a better deal if you book early. Booking early gives you more choice about which dates you travel on, so you can book the cheapest ones before they fill up. You also have more time to save when you start as early as possible.
4. Clear your cookies on online booking sites
Cookies are small pieces of text that are sent by websites that you visit and stored on your computer. They contain information about what pages you looked at and other details about your activities on the website. When you revisit the same website, it will be changed to make your experience smoother and more useful. For example, this is how you get personalised recommendations when you visit a website because it has stored information about which products you looked at before.
When you view flights or hotels online, a record of that search is saved in your cookies. Next time you visit the site, it remembers that you have already looked at this page before. Some people believe that this has an impact in inflating the price of the available flights in your subsequent visits. Whilst it isn’t 100% clear whether or not this is the case, the theory is that by clearing your cookies before re-visiting online booking sites, you might get a lower price.
5. Make sure you are flexible with dates
Being flexible with dates and times can be very helpful if you want to save money on your holiday. Certain dates will be more expensive than others (school holidays, for example), and flight costs also vary depending on the time of day that you fly. If you are travelling with your family, you are limited to the school holidays, but you can still save money if you travel in the final weeks of the holidays. You could also consider a holiday during the half term rather than the summer holidays.
Flying late at night or very early in the morning is usually cheaper too. Although this does make travel arrangements more difficult, it may be worth it if you can save a lot of money.
6. Save £3 a day
Saving money can be quite daunting, but it’s more manageable when you break it down into small goals. The idea of saving £1,095 in a year sounds like a lot, but £3 a day is not that difficult. Think about some of the small purchases you make every day that you can cut out and you’ll soon be able to save money each day to put in your holiday fund.
7. Weigh your luggage beforehand
Airlines charge different fees depending on who you fly with and you can sometimes get caught out at the airport if your luggage is too heavy. You can avoid this if you weigh the luggage before you leave to make sure that you have not exceeded the weight limit. You can buy a set of suitcase scales to keep at home so you can avoid any additional charges in the future.
8. Ensure you get travel insurance
Travel insurance is a must but many people skip it because they are trying to cut costs. However, if something goes wrong while you are away you could be stuck with big medical bills or other fees to pay. You don’t have protection if your holiday is cancelled either, so you may lose all of the money.
A travel insurance policy can be inexpensive and it can save you a lot of money in difficult situations. Before you take out a policy, check whether you already have one included with other financial services. Many bank accounts, for example, offer some coverage for travel. However, double-check what level of coverage you get because it may not be extensive enough. If you do take out another travel insurance policy, use a comparison site to find the most affordable deals.
These simple tips will help you save money and cut the costs of travel, so you can easily afford an amazing holiday. However, you may find yourself in a position where you are unable to save money because of mounting debts.
At Swift Debt Help, we can give you the advice you need to get your finances back on track. Get in touch today and we will discuss different debt relief options with you so you can regain control of your debts.
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Declaring bankruptcy may be your only option if you have mounting debts that you are unable to pay. However, bankruptcy is not something you should rush into because it has long term effects on your life and your finances. Here are five things you should know before declaring bankruptcy.
1. Bankruptcy can have an impact on your assets
When you declare bankruptcy, you are required to make a reasonable effort to pay back your debts, and this often includes using your assets. Things that are considered essentials, like clothes, furniture, and cooking appliances are protected. However, other belongings will be passed on to the Official Receiver, the person that deals with your bankruptcy. These will then be sold to raise money to pay your debts.
Items that you are allowed to keep include:
Clothes
Furniture
Household appliances
Tools required for your job
A car that you need for work or other basic needs (if you are disabled, for example)
There are some exemptions and if certain assets on this list are valued very highly, they can still be sold. For example, you may be forced to sell your car and you will be given £1,250 to buy a cheaper replacement, with the rest of the money being paid towards your debts.
Jointly owned assets can also be affected. If they are sold, the money will be split between the Official Receiver and the person that has a shared interest in the asset.
Depending on your situation, you may have to move home when you declare bankruptcy. If you rent your home, you will not be affected and your landlord will not be informed. But if you own your home, you may be required to sell it to raise money to pay your debts. In some cases, you can prevent this.
The official receiver has three years to decide what to do with your home. If they have not taken steps to sell it in that time, your interest in it is restored and you can keep your home.
It is important that you consider how your assets will be impacted before you declare bankruptcy.
2. If you own a business, bankruptcy will have an impact
When you declare bankruptcy, there are specific rules related to the running of a business. For the 12-month period of your bankruptcy, you are forbidden from acting as the director of a limited company or managing it in any way without the permission of the court. The company itself can continue to operate but you will need to appoint somebody else to manage it for you.
If you are self-employed and registered as a sole trader, the rules are different. You will be able to continue operating as normal, but if you run a business under a name that’s different to the one in which you were made bankrupt, you must tell everyone you do business with the name under which you were made bankrupt.
Bankruptcy will also be recorded on your credit reports for six years. This can seriously impact your ability to get credit in the future, which can be a big problem for businesses.
Business owners might want to explore other options like an Individual Voluntary Arrangement to avoid the restrictions on their ability to run their company.
3. Your bank accounts could be frozen
The Official Receiver takes control of all of your assets, including your bank account, when you declare bankruptcy. This often means that your bank accounts are frozen and you cannot withdraw any money. If you have money in your account that is required to meet your essential living costs, the Official Receiver will arrange with the bank to release those funds to you. The bank will then decide if you can continue using your account.
4. Bankruptcy doesn’t cover all of your debts
Writing off debt is one of the major benefits of bankruptcy but not all debts are covered. You must understand exactly which debts are not covered because you will still be liable for them, even if you file for bankruptcy. Debts not covered include:
Secured debts
Child maintenance debts
Student loans
Court fines
5. Take the right steps before declaring bankruptcy
There are some key steps you must take when declaring bankruptcy to minimise the impact.
Ensure bankruptcy is the right debt solution for you
Bankruptcy is not always the right debt management solution. Look into options such as Debt Management Plans (DMP), Debt Relief Orders (DRO) or Individual Voluntary Arrangements (IVA) before declaring bankruptcy. You may be able to limit the impact on your credit reports and avoid financial restrictions by finding a different debt solution.
Apply for bankruptcy
The next step is to fill out the necessary paperwork and pay the fee of £680. This can be paid in instalments, if necessary, with a minimum payment of £5. However a bankruptcy order will not be granted until the fee is paid. You will find the forms on the gov.uk website.
Set a budget from your living costs
As part of your bankruptcy application you will need to write a budget based on your essential expenses. When you declare bankruptcy, you will not be permitted to spend anything else as all additional money will go towards your debts.
Cooperate with the official receiver
The Official Receiver is the person that manages your bankruptcy. They will contact you within two weeks of your application to discuss your bankruptcy. They also take control of your assets. You need to work with them while they distribute your money and assets to pay off a portion of your debts.
Pay back your debts and discharge from bankruptcy
Now that everything is in place, you may need to continue paying towards your debts for up to 3 years – this is dependent upon your circumstances and your disposable income after meeting your essential outgoings. As long as you cooperate with the Official Receiver and meet all of your obligations, you should be discharged from bankruptcy after 12 months.
Declaring bankruptcy may be the solution to your debt problems but it is not always the only option. If you need advice about managing your debts, fill out the contact form to get in touch with Swift Debt Help today. We can talk through your different options and help you regain your financial freedom.
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Your credit score can dictate how much money you can borrow, what interest rates you will pay on loans, and even your job prospects in some cases. Unfortunately, if you find yourself in financial difficulty and you miss payments, your credit score will suffer.
If you are concerned about your credit score, here are 6 ways to improve it.
1. Make all outgoing payments on time
One way to improve your credit score is to make all of your outgoing credit payments on time. If you can get into the habit of paying everything on time, it will show lenders that you are reliable and trustworthy.
If you are regularly missing payments, there are a few things you can do to make paying easier. Set up Direct Debits so that the payments are automatically taken from your account, and write a clear budget to make sure that you don’t miss payments.
2. Register on the electoral roll
One of the easiest ways to improve your credit score is to make sure you are registered on the electoral roll. Many people don’t realise that it can actually have a big impact on your credit score. If you are not registered, lenders have a harder time verifying your identity and this could lead to your application being declined.
Registering is easy. You can register online, and all you need to do is follow the on-screen instructions. If you are already registered, check that all of your details are correct and up-to-date. If not, update them as soon as possible.
It only takes a few minutes to register, so this is one of the easiest ways to improve your score.
3. Keep credit card debt below 30%
Your debt utilisation ratio is the amount of credit you are using compared to the amount of credit you have available.
It is best to keep your debt utilisation ratio below 30%. This means that if you have a credit card with a limit of £1000, you should not have debts of more than £300 on that card.
If your debt utilisation ratio is higher, it shows that you are reliant on borrowing to pay expenses or you are irresponsible with your credit cards. This could lead to your credit score being lowered.
It is a common misconception that not having a credit card at all is better for your credit score. Borrowing small amounts and paying them back on time will improve your score, but you must avoid borrowing too much. That’s why credit card debts of around 30% or lower are best for your credit score.
4. Develop your credit history
If you don’t have much of a credit history, it can be difficult to get a loan or a mortgage. This is because lenders don’t have much to go on when they are assessing your application. This is a common issue for young people who have not borrowed money in the past.
There are a few things you can do to develop your credit history and improve your score. Many lenders offer credit cards specifically designed for building credit. Using these on a regular basis and paying the balance off in full will increase your score.
5. Report mistakes on your credit report
If you have ever been refused credit, it’s important to check your credit report. Your credit score can be lowered if there are mistakes on your report. These errors can range from incorrect information about your address or date of birth to missed payments that you have already paid.
If you find an error on your credit report, it is important to report it straight away. You can do this by contacting the company to which the credit relates, and ask them to update their records. You could also contact the credit reference agencies (Experian, Equifax, and Callcredit) directly and raise a dispute, they will then contact the Lender on your behalf. The issue will be investigated and, if appropriate, will be rectified. Your score will then be adjusted accordingly.
6. Ensure your credit file has no fraudulent activity
If you suspect that someone has fraudulently opened a credit account in your name, it is important to take action straight away. This can be done by contacting the police and the credit reference agencies. You should also check your bank and credit card statements regularly for any fraudulent activity.
Fraudsters taking out credit in your name can seriously damage your score, so it must be rectified immediately. Just bear in mind that you may have to prove that you did not apply for the credit if it is not immediately obvious that you are a victim of fraud.
Struggling with your debts?
If you are looking to improve your credit score as a result of being declined for credit; or you are seeking credit in order to be able to meet your essential outgoings it may be the time to consider other debt repayment options. At Swift Debt Help we can talk to you about debt solutions based on your affordability. It is important to note that most debt restructuring options will be recorded on your credit file, and could have an impact on it. Call us on 0161 843 1516 to find out if another solution could be right for you.
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If you are unable to afford to make the full contractual repayments to your creditors, you can suggest a reduced payment plan. You offer to pay a reduced amount each month until the debts are cleared. If your creditors accept, this makes your debts a lot more manageable. But what happens if creditors do not accept your payment plan?
Speak To Your Creditors
If one or more of your creditors haven’t agreed to accept the monthly amount you have offered, this could be because they believe the offer is too low based on your circumstances. It is beneficial for them to understand your situation in full, so discuss this with them; they may carry out a full review of your income and expenditure. If you can prove to their satisfaction that this is the best offer of repayment that you can make, then they may be more inclined to accept your offer.
Are Creditors Obligated To Accept A Payment Plan?
Your creditors are under no legal obligation to accept a payment plan however they may be willing to engage with customers, and agree a plan, if they have a full understanding of their circumstances. For many individuals, requesting a reduced payment plan is a final step before having to seek alternative debt solutions such as a Debt Relief Order (DRO), Individual Voluntary Arrangement (IVA) or Bankruptcy. A creditor may be keen to accept the offer in order to avoid being subject to one of these procedures through which debt write off is likely to occur. Within a reduced payment plan, your creditors will still ultimately expect to be paid in full.
Even if you are not reasonably able to afford your payments, your creditors can still refuse the payment plan and take further action to collect the debt, like sending bailiffs, for example. By agreeing to a payment plan and accepting lower payments, it takes creditors longer to recoup their investment, so they may be reluctant to do so.
What if a creditor refuses my offer?
If your creditors will not agree to a payment plan, you need to look into other options for dealing with the debt. You could look at utilising a company or charity to negotiate a Debt Management Plan on your behalf. This is similar to what you have been trying to do yourself; however, the company will have experience in dealing with creditors and will take the stress of having to deal with multiple creditors away from you. If your creditors reject the offer of repayment, then further collections activity can continue including the application of fees and charges or legal action.
If you are unable to pay back the debt, you should consider options like an IVA (Individual Voluntary Arrangement), DRO (Debt Relief Order), and Bankruptcy. These are formal debt solutions that, in some cases, allow you to reduce the total amount of debt that you owe. They also give you legal protection against creditors so they cannot continue pursuing you for debt payments.
What should I do if a creditor sends me a default notice?
Being issued with a default notice doesn’t necessarily mean that you will be taken to court. It is a standard document that a creditor must send if you are not meeting your contractual repayments. Legal action is usually a last resort for creditors, so they may still be willing to work with you.
Contact Swift Debt Help for expert advice
If you are having difficulty paying your debts and your creditors are unwilling to accept a payment plan, get in touch today for some expert advice. Our team can take you through alternative debt solution options and find one that works for you.
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Debt Settlement can be an excellent way to clear your debts quickly if you have the funds available. You can offer to pay a reduced amount to your creditors in one lump sum. They will often accept less than you owe because they can get all of the money immediately and close the account. This is a good option if you receive a lump sum from a lottery win or inheritance, for example.
Different creditors may have their own preferred method through which they prefer to receive a Debt Settlement offer. You should contact your creditors to find out how they want you to correspond with them. If your creditors say that they would like to receive your offer in writing, here are some tips on how to write a Debt Settlement proposal letter.
What to consider when writing a proposal letter
Write clearly and professionally – The way that you write your letter is very important. It must be well written and clear, and you also need to be specific about the wording. Be clear that this is an offer of a full and final settlement and if accepted, the creditors agree not to pursue the debt in the future.
Provide account information – Your creditors need details about which account the letter is referring to, so include all account numbers and reference numbers you have that particular debt. These can be found on any letters you have from creditors. If you hold more than one account with a single creditor, let them know. They need to be clear about which debts you are offering to clear.
Give your personal details – Creditors need your personal details to be able to locate your account. Useful details to provide are your address, telephone number, email address and date of birth. If you have recently moved, you should also provide your previous address in case your creditors have not updated their records.
Explain your situation – Providing your creditors with information as to why you want to make an offer may be beneficial to them when considering whether or not to accept it. For example, if you believe you may otherwise be unable to honour the future contractual repayments in full this is likely to encourage them to accept a reduced settlement now.
A statement of your proposed amount – State clearly how much you are offering to repay.
Debt settlement date – You also need to tell creditors when you expect to pay the money you owe. Make sure that this is a reasonable date.
Source of funds – Let the creditor know where you have obtained the funds to make the settlement. Your creditors may want proof of this before they agree to the proposal.
Pros of writing a debt settlement letter
There are several benefits of writing a debt settlement letter to your creditors and clearing your debts in a lump sum.
Helps you out of financial hardship – If you are unable to pay your monthly repayments, a debt settlement can give you a clean slate. As long as it is accepted, your creditors will get a lump sum and you will no longer be stuck with monthly payments you cannot afford.
Improves your finances – Clearing your debt quickly takes the pressure off and makes it much easier to establish a monthly budget. By dealing with debt right away, you can get your finances back on track.
Pay less than what you owe – You may be able to save a significant amount of money by writing a debt settlement letter to your creditors, if they agree to the offer you have proposed.
Cons of a debt settlement letter
Although it can be a good way out of debt, there are some potential downsides to writing a debt settlement letter that you should consider.
Creditors are not guaranteed to accept – If creditors refuse your proposal, you are in the same position as before.
Negative impact on your credit file – A debt settlement can be marked on your credit reports in a specific way. If your creditors report it as such, future creditors can see that you settled the debt and did not repay it in full. This can affect your credit score and may have an impact on your ability to borrow in the future.
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An IVA is a debt management solution that can allow you to make affordable payments over a fixed period, typically 5 or 6 years. At the end of your IVA, the outstanding balances are written off and you will be debt free. This page will give you an overview of what an IVA is, how it works, and how you can apply for one.
What is an IVA?
An IVA (Individual Voluntary Arrangement) is a legal agreement between you and your creditors. It’s a way of paying back some or all of what you owe over a fixed period, usually 5 years. You pay back a certain percentage of your debt in monthly instalments. Your creditors then write off the rest at the end of the agreed period.
Once your IVA is in place, your creditors can’t take any further action to recover money from you, so you are protected against bailiffs. Interest and charges on the debts will also be frozen.
At the end of the IVA, your debts will be paid off and your creditors cannot chase you for the remaining balance.
How does an IVA work?
An IVA allows you to pay back your debts in affordable, usually monthly, instalments. When you apply for an IVA, you will work with an Insolvency Practitioner and they will start by assessing your finances. Once they have calculated what your disposable income is and what you can realistically afford to pay back (usually over the course of five years), they will help you draft an IVA proposal for your creditors.
This proposal offers to pay back a certain percentage of the debts in monthly instalments. It is then up to your creditors to vote on whether they accept the offer or not. If at least 75% (by value) of voting creditors agree, the IVA is approved and you start making payments to your Insolvency Practitioner. You typically make a single payment each month. Your Insolvency Practitioner is then responsible for making payment to your creditors on your behalf. This is a lot easier to manage than multiple debts that are payable at different times of the month. The fees and associated costs of an IVA are incorporated into your affordable monthly repayment, and they are agreed with your creditors at the time the IVA is approved.
During the IVA, you will be subject to certain restrictions. For example, you cannot borrow more than £500 without permission from your Insolvency Practitioner. You must also agree to keep your Insolvency Practitioner up to date with any changes to your circumstances and understand that it is possible that your repayment could go up or down as a result of this.
As long as you make your IVA repayments on time every month, it will end after the agreed term and the remaining debt will be written off. However, if you miss payments, it can be extended.
What debts are covered by an IVA?
The majority of unsecured debts are covered by an IVA. Debts that are covered include:
Personal loans (including payday loans)
Credit cards
Overdrafts
Utility bill arrears
Council tax arrears
Income tax and national insurance arrears
Although most debts are covered by an IVA, there are some exceptions. Debts that are not covered by an IVA include:
Student loans
Child support arrears
TV licence arrears
Magistrates’ court fines
Social fund loans
Court ordered maintenance arrears
How do I apply for an IVA?
If you want to apply for an IVA, you need to get some expert advice first. In some cases, it can be an effective method for writing off debt and helping you manage your finances but it is not always suitable. Depending on your personal financial situation, you may need to consider alternatives. At Swift Debt Help, we can advise you on whether an IVA is the right choice for you.
The next step, if you decide to go ahead with an IVA, is to contact an Insolvency Practitioner. Your application must be submitted via an Insolvency Practitioner that has been authorised to set up IVA’s. They will talk through your finances with you and assess your situation before creating a proposal with you for your creditors.
What is the IVA application process?
Assessing your finances
The first step in the IVA application process is an assessment of your finances by your Insolvency Practitioner. They will need to see as many details as possible including bank statements, payslips, and bills. They also need information about your assets.
This gives them a full picture of your financial situation and how much disposable income you have available to pay your debts.
Writing a proposal for creditors
Using all of the information that you have given them, your Insolvency Practitioner will help you to create a proposal for your creditors. The proposal will offer to pay back a certain amount of your debt in monthly instalments. The figure will be based on what you can afford to pay each month.
The proposal also outlines what is to be done with your assets. If you own a property you will not be required to sell it, however there may be a requirement to attempt to release equity if you are able to towards the end of the term of the IVA.
As well as the proposal, your Insolvency Practitioner will create a report for the creditors giving detailed information about your finances, details of the IVA and reasons why they believe that an IVA is beneficial for all parties involved.
Creditors make their decision
Once the proposal is ready, your Insolvency Practitioner will invite your creditors to attend a virtual meeting, providing them with an opportunity to review the terms of the proposal before voting on it. You may also attend this meeting if you wish, but this is not necessary.
At least 75% (by value) of voting creditors must vote in favour of the IVA for it to be approved. If you get enough votes, all creditors will be legally bound by the IVA, including those that voted to reject it. The value of the debt that you owe to each creditor determines their influence in the vote. For example, if all your creditors voted, and you owe 50% of your debt to a single creditor, their vote counts as 50% of the overall vote.
In some cases, creditors may ask for changes to be made to the terms of the IVA as a condition of them accepting your proposal. These are known as “modifications”. If this happens, you will be asked to confirm your agreement to the changes before the IVA goes ahead. You do not have to accept any proposed modifications, but it may result in the IVA not being approved if you don’t.
The entire IVA application process usually takes around three weeks. Hopefully, the creditors vote in favour of the IVA and you can start making your monthly payments.
How do I qualify for an IVA?
An Insolvency Practitioner will determine whether an IVA is an appropriate option for you based on your circumstances, but ultimately it is your creditors’ decision whether or not your IVA will be approved. Typically, you must owe over £5000 to at least 2 creditors. Crucially, you must be insolvent, meaning that you are unable to make the monthly repayments on your debts even though you have a regular income.
As long as you meet these criteria, you can start an application for an IVA. However, your Insolvency Practitioner will discuss other options with you as well. Once the proposal has been submitted, it is down to your creditors to decide whether they accept it or not.
What if my IVA is rejected?
If your IVA is rejected, in simple terms your situation remains the same as it did before you put the application in. You still owe money to your creditors and if you stalled contractual repayments to your creditors while you were making your application, you may have additional charges to pay.
You can put another application in, but this is not advisable unless your situation has changed. When an IVA proposal is rejected, the reasons for the rejection are usually provided. So you should bear these in mind when considering another application. If it is still likely to be rejected, it is unlikely your Insolvency Practitioner will agree to put a further proposal forward on your behalf. There are however no restrictions on how many IVA applications you can make, and it is possible to get an IVA approved in the future even if you have had one rejected in the past. The Insolvency Practitioner will always make an assessment as to the likelihood of creditors accepting your proposal, they will advise whether they recommend making another application.
If you aren’t able to get your IVA approved, you may need to consider your alternative options, such as bankruptcy or a debt management plan.
Alternative solutions
There are a number of alternative debt solutions available to you if your IVA is rejected. At Swift Debt Help, we can provide you with useful information on these alternative solutions.
Bankruptcy
Declaring bankruptcy can be an effective way to achieve debt write off. Your non-essential assets and disposable income are used to pay off as much of the debt as possible. Typically you will be automatically discharged from the bankruptcy after a year, however if you are required to make payments out of your income (known as an “Income Payments Agreement” or “Income Payments Order”), then this obligation can remain for up to three years. After the bankruptcy is finished, the remainder of your debts will be written off. You have less protection for your assets than you would with an IVA. It costs £680 to petition for your own bankruptcy.
DRO
A DRO (Debt Relief Order) pauses all of your debt repayments and interest for 12 months. It is only appropriate for individuals with very low disposable income, and has other strict criteria that must also be met in order to qualify. To apply for a DRO you must submit your application via an authorised debt advisor. It involves a one off cost of £90 to have your application considered by the Official Receiver. If a DRO is granted, if your situation has not improved at the end of the 12 months, your debts will be written off.
Debt Management Plan
A Debt Management Plan is an informal debt solution, meaning that it is not legally binding. If you are unable to afford your current repayments, you can negotiate a reduced rate with your creditors. You will not write off any of the debt, but it does make it more manageable. This option could help you avoid some of the negative effects that formal solutions have on your ability to borrow money in the future.
Need further help?
If you are struggling with debts that you cannot pay and you don’t know what to do, get in touch with Swift Debt Help today. Our expert advisors can talk you through IVA’s and other debt management solutions to help you find a way to regain control of your finances.
Request a Debt Assessment
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Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.
