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IVA or Debt Relief Order: Which Is Right For Me?

Written by Alex Swindells on . Posted in Debt help, IVA.

IVA or Debt Relief Order -If you’re in debt and are struggling to find a way to repay your creditors, then there are several formal, legally binding debt solutions that could help you to clear your debts in a more manageable way. You may have heard of an IVA or a DRO but are wondering exactly what each of these debt solutions are. So, we have put together a brief summary of each debt solution below.

What is an IVA?

An IVA (Individual Voluntary Arrangement) is a legally binding agreement that can be arranged by an Insolvency Practitioner to help you repay your creditors in an affordable way. Before the payment plan is arranged and put forward to your creditors, your income and expenditure will be assessed by your IP. This is to ensure that you have enough money each month to pay for necessities, such as your rent/mortgage, bills, and food. Once an affordable amount for the payment plan is decided, and if it’s accepted by your creditors, then you’ll have to pay the agreed amount each month and stick to the agreed terms. 

What is a DRO?

A DRO (Debt Relief Order) allows your debt, and any interest owed, to be put on hold for twelve months. After this time, if you continue to meet the eligibility criteria, then any included debt will be written off. A DRO is an alternative to bankruptcy if you have limited assets and affordability. 

Which is better? IVA or Debt Relief Order?

Now you understand what an IVA and a DRO is, you are probably wondering which would be the best debt solution for you. Below, we have put together a list of some of the pros and cons, which will hopefully help you decide on whether or not an IVA would suit your financial situation, or if a DRO would be the right solution to help you out of your debt.

IVA Pros and Cons

IVA Pros:

✓ Write off unaffordable debt. At the end of your IVA, any outstanding debt will be written off.

✓ You only pay what you can afford. The payment is tailored to your circumstances. As previously mentioned, your IP will assess your income and expenditure to ensure you’ll have enough money for necessities. 

✓ You will no longer be harassed by creditors and/or bailiffs for payment. As long as you stick to your IVA agreed terms, legal action, such as CCJs, cannot be taken against you.

✓ Business owners can continue to trade. 

✓ An IVA is an option for homeowners.

✓ Interest and charges will be frozen. As long as you stick to your agreed terms, your creditors will not be able to add on any extra charges.

IVA Cons:

X There’s still the risk of bankruptcy if the IVA fails. 

X An IVA could affect employment. This does depend on the sector you work in, or are considering working in. For example, working in the financial sector, there may be certain conditions in place regarding IVAs.

X It will negatively impact your credit rating. An IVA will stay on your credit file for six years, which will affect your ability to apply for loans, car finance, or a mortgage.

X You have to follow a strict budget. 

X An IVA isn’t private. It will be registered on the Insolvency Register, which anyone can access

X If you are a homeowner, you may need to release equity from your home to pay off some debts.

DRO Pros and Cons

DRO Pros:

✓ Any future interest and charges will be frozen on any debt you owe. 

✓ Your creditors will no longer be able to take legal action against you.

✓ Your DRO will only last twelve months after which any debts will be written off.

✓ This debt solution is one of the fastest ways to clear your debts.

✓ No monthly payment

DRO Cons:

X To be considered for a DRO, you must meet certain criteria, such as your debts must not exceed £30,000 and you must reside in England, Wales or Northern Ireland. Also, your surplus income must not exceed £75 per month.

X Homeowners are not allowed to apply for a DRO.

X A DRO isn’t private. It will be registered on the Insolvency Register, which anyone can access.

X If your situation changes, and you no longer meet the DRO criteria during the 12 month period, the DRO will be revoked. 

X It will negatively impact your credit rating. A DRO will stay on your credit file for six years, which will affect your ability to apply for loans, car finance, or a mortgage.

So, an IVA vs a Debt Relief Order: which is the right debt solution for you? Hopefully this list of some of the pros and cons for each will have helped you to decide. However, If you’d still like further information on IVAs or DROs, please contact us, and we’d be happy to answer any questions you may have.

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May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

IVA Protection

What Protection Does An IVA Offer?

Written by Alex Swindells on . Posted in IVA.

An IVA (Individual Voluntary Arrangement) is a legal agreement that can be arranged with your creditors in order to pay back some or all of your debt. If your application for an IVA is successful, then the agreed payment plan will be set up for you to pay off your debt over a period of time (typically five years) through monthly payments. Once the IVA is in place, your creditors will have to stick to the agreement. 

You might be ready to apply for an IVA, but if you’d still like to know how this debt solution can protect you, then consider the following five benefits of having an IVA below.

1. Debts cannot rise

approving an iva

Once an IVA has been approved, your creditors will not be able to add on any interest or extra charges. As long as you keep up with your repayments and follow the terms of your IVA, then your debt will not increase.

2. Your assets are protected

There are a few common questions asked by those who are considering different debt solutions, such as, will I lose my house with an IVA? The short answer is no, unless you have volunteered to sell it to clear some of your debt. Once the IVA has been approved, your unsecured creditors cannot take further legal action to enforce the debt, such as applying for a CCJ (County Court Judgement) or instructing bailiffs to seek possession of your assets.

3. Protection from changing circumstances

During the lifetime of your IVA, it is expected that your situation will more than likely change. For example, if the agreed IVA payments become unaffordable due to a reduction in income, this does not mean that the IVA automatically fails. Your IP (Insolvency Practitioner) will usually be able to grant you a payment reduction (up to a certain level) and you will also have the ability to request more significant changes to the arrangement through what’s known as a Variation Meeting. This provides an opportunity for you to put forward a revised proposal, detailing any changes in circumstance, for your creditors to consider.

4. Protection from bailiffs

court hammer

Your creditors will not be able to take legal action against you once an IVA has been approved, which means, if you stick to the terms of your IVA, you should not have to worry about being approached by bailiffs. However, it usually takes around four weeks for an IVA to be set up, so during this time, you could still be contacted by people trying to collect money to repay debt. If this happens, you should be honest, and explain that you’re in the process of setting up an IVA.  

5. Pay what you can afford 

When setting up an IVA proposal, your IP (Insolvency Practitioner) will arrange a payment plan by, first, taking into account your income and expenditure. This ensures that you’ll only repay your creditors an amount that you can realistically afford which will allow you to have enough to pay your rent/mortgage, bills, and necessities each month. This is followed up by a yearly review whilst the IVA is in place which will, again, take into account your particular circumstances, ensuring that you will not be paying an unaffordable amount.

These are just a few of the ways that an IVA can protect you and, ultimately, help you to find a manageable solution for your debt situation.

If you want to find out if an IVA is a suitable option for you, then please contact us, and we’d be happy to help.

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May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

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5 Helpful Things To Consider When Your IVA Ends

Written by Alex Swindells on . Posted in Debt help, IVA.

When you enter into an Individual Voluntary Arrangement (IVA), you must make monthly payments towards your debts for the agreed term. But what happens once you have made your last payment? Your Insolvency Practitioner will confirm that you have made all of your payments and you will be issued with an IVA completion certificate. You are now debt free and you can move forward with a clean slate. However, an IVA has an impact on your credit score and your financial future, so there are certain things you should consider doing after making your final payment. Here are 5 helpful things to consider when your IVA ends.

1. Keep budgeting

a person working out their monthly bills

It is likely that the reason you entered into an IVA in the first place is because you were unable to manage your debts. Now that you are debt-free, it is important that you avoid getting into the same situation again. You will have been used to managing your finances within a budget whilst on your IVA; maintaining this once your IVA ends will help you manage your money well and improve your finances.

The additional money that was being paid into your IVA can now be put aside for savings and emergencies. By building a savings pot, you protect yourself against financial emergencies and avoid situations where you are forced to borrow the money you cannot afford to repay.

2. Open a high-interest savings account or ISA

saving money after an IVA

Now that you are more financially stable, you should consider putting money away for the future. Opening a high-interest savings account or an ISA is the best way to do this.

The main benefit of an ISA is that you won’t pay tax on the interest that you earn. However, there are limits on how much you can save each year and you may not be able to access the money right away (depending upon the ISA you take). A savings account, on the other hand, can give you more flexibility. Make sure you choose the type of account that suits your needs.

3. Consider further credit

Once you have completed your IVA, the debts that were included will have been settled. You may be wary about taking any further credit as you don’t want to get into a bad debt situation again. However, if you want to improve your credit score, using credit responsibly is a great way to do it. 

Using a credit card regularly, and in the right way, is one of the most effective ways to build credit again. There are a lot of credit cards available. You may not be able to access credit cards with the lowest rates, however as long as you use the credit sparingly, for small purchases, and make the repayments when they are due then the interest you will pay will be minimal. Creditors will then be able to see that you can maintain payments regularly, and this will help to boost your credit score. 

4. Monitor your credit report

Keeping a close eye on your credit report is beneficial to ensure that it is accurate, to keep you aware of your total credit and monitor for improvements. The 3 main agencies that generate credit reports are:

You can access your credit report by contacting these companies directly. Sometimes you are required to sign up for a paid monthly subscription to access your full credit report, however, there are many companies out there that allow you to access a summary of your credit information for free – search online for ‘free credit reporting’ to find one that suits you. 

Once the IVA is completed, your details will be removed from the Individual Insolvency Register after three months. Details of the IVA will be held on your credit file for six years from the date that the IVA starts. If you receive your credit report and your IVA has not been removed yet, you need to contact the credit agency to rectify it. Sometimes, details are not updated properly and the IVA remains on your report when it shouldn’t. If you send them your IVA completion certificate, they will fix the problem for you.

Check the reports for other errors and discrepancies too. For example, debts can be left on your report even though they have been paid off during the IVA. If there is anything that doesn’t look right, query it with the credit reporting agency and get it corrected. Mistakes like this are more common than you think and they can negatively impact your credit report, so always check your credit reports carefully.

5. Register to vote

person placing vote in ballot box

If you are not already registered to vote, you should do it right away because it instantly boosts your credit score. When you register to vote, details like your name and address are recorded on your credit report. Having these updated details makes it easier for the credit reporting agency to identify you and your score will increase as a result.

While this won’t fix your credit score overnight, it is a quick and easy way to boost it a little before you start using long-term strategies to improve your credit. You can register to vote online here and it only takes five minutes.

Need more IVA advice? Contact us today

If you have more questions about what to do at the end of your IVA, or you are struggling with debt and wondering whether it could be the right solution for you, we can offer the IVA help you need. At Swift Debt Help, we have a wealth of experience helping people manage their debt problems and unlock their financial future. Get in touch today and a member of our knowledgeable team will answer any questions you have.

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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.

Piggy bank

How to Improve Your Credit Score After an IVA

Written by Alex Swindells on . Posted in Debt help, IVA.

An Individual Voluntary Arrangement (IVA) will be on your credit reports for six years after the date that it starts.

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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Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

IVA debt help

5 Scenarios Where An IVA Could Be The Best Solution

Written by Alex Swindells on . Posted in Debt help, IVA.

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

owing debt 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

person dealing with finances for a 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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May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Man signing IVA paperwork

12 Debts That Can Be Included in an IVA

Written by Alex Swindells on . Posted in Debt help, IVA.

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

ordering gifts from catalogue

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

hob with gas on

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

tap with running water

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.

Request a Debt Assessment

May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

IVA Documentations

9 IVA Myths That You Should Know About

Written by Alex Swindells on . Posted in IVA.

Applying for an IVA can be the right solution to your debt problems, but it all depends on your specific circumstances. It is important that you fully understand the implications of an IVA when making your decision. There are a number of misconceptions about this debt management solution. Some of these are detailed below, along with some facts to help you to decide if an IVA is right for you.

1. You will not be able to open a bank account

bank account with credit card

Although you may need to make changes to your bank account, that doesn’t mean you cannot open one at all. If you owe money to your bank through loans or overdrafts, they have the right to take money directly from your current account to pay towards the debt. This is called the right to offset. If this is the case, you will need to open a new bank account so your budget is not interrupted by the bank taking money from your account.

When you open a new account, you may not be able to have an overdraft facility as that is a form of credit. This should be discussed with your Insolvency Practitioner.

2. You will be forced to remortgage your property

If you are a homeowner, depending on your circumstances and the level of equity in your home, towards the end of the IVA, you may be expected to attempt to release a portion of equity by way of a remortgage for the benefit of your creditors. 

Upon considering an IVA, any obligations in respect of your property will first be explained and agreed with you before you enter into it. In many cases properties can be excluded from the terms of the arrangement where your circumstances demonstrate that your equity is either of a low value, or unlikely to be released by a remortgage.

In some cases where you are shown to have a significant level of equity, but a remortgage can not be achieved, creditors may agree to a longer IVA in lieu of this equity.

3. All creditors need to agree to the IVA proposal

When you put your application in, your Insolvency Practitioner will help you to write a proposal for your creditors, offering to pay a certain percentage of the debt and asking that the rest be written off. Your creditors will then decide whether they agree or not. But it’s a myth that all of them have to agree to the proposal for the IVA to go forward. 

Your creditors are not obliged to vote on your IVA proposal. Of those that do vote, only 75%, by value, must agree to the IVA for it to be approved and legally binding on all of them.

4. You have to tell your employer about an IVA

You only need to tell your employer about your IVA if it is specified in your employment contract. Some jobs, especially those that involve money handling or management, require you to disclose an IVA. This includes things like accountants, bank tellers, and legal services. Otherwise, you are not required to tell them.

Details of your IVA will be on the public insolvency register, but your employer will only see this if they actively go and search for your name.

5. You can’t obtain credit during your IVA

It is a standard condition of an IVA that you cannot obtain credit above £500 without the permission of your Insolvency Practitioner (the Supervisor of your IVA). 

Whilst subject to an IVA you are expected to live within a reasonable budget to ensure that you are able to pay your agreed IVA contribution. Therefore, you should think carefully before obtaining credit of any value as any subsequent repayments of this credit need to be affordable and within your budget. Credit obtained after the approval of your IVA will not be bound by the IVA and you will be responsible for repaying it separately. 

If you feel you need to apply for credit of a value above £500, it is important that you seek the consent of the IVA Supervisor before doing so.

6. An IVA will always be on your credit report

woman looking at credit score on computer

One of the reasons that people are cautious about entering into an IVA is that they think it will be on their credit reports forever and they won’t be able to borrow money in the future. It is true that an IVA is reported on your credit file, but it only stays on your report for 6 years from the date of approval; after that, it will be removed. 

7. Your IVA will fail if you miss a payment

It is important to make regular payments into your IVA, in line with the agreement. But it is a myth that your IVA will automatically fail if you miss one payment. If you are struggling to make the payments, you can speak with your Insolvency Practitioner who can work with you, and if appropriate approve a payment break. This gives you some breathing space to help you fix your financial situation. Typically if you become in arrears with your payments to the equivalent of three months (not including agreed payment breaks), this will be classed as a breach of the terms of the agreement, and your IVA is at risk of failure. Always talk to your IVA provider if you are struggling to make payment.

8. Not all interest charges or fees are frozen

Interest charges and fees make it far more difficult to get out of debt. One of the benefits of a formal arrangement such as an IVA is that interest charges and fees on your debts are frozen. Your creditors reserve the right to re-apply any owed interest and charges back to the debts owed if for any reason, your IVA fails. Once the IVA completes all outstanding balances will be written off.

9. You cannot save money with an IVA

When you take out an IVA, you will work with an IVA provider to produce a budget based on your income and expenditure. Your creditors expect you to offer all of your monthly disposable income towards the IVA. It may be difficult to put any money into savings at that point in time.

If your situation changes for the better during the IVA, one of the key principles of the arrangement is that both you and the creditors feel the benefit of this improvement, so you would get to keep half of any increase in disposable income. You’re free to utilise these funds as you see fit.

Need more IVA advice? Contact us today

If you want more information about the specifics of an IVA, or some advice about whether it is the right option for you, Swift Debt Help can give you some guidance.

Fill out the contact form, email us, or give us a call and a member of our expert team will give you the advice that you need.

Request a Debt Assessment

May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

House key

4 Reasons to Consider a Remortgage to Clear Debt

Written by Alex Swindells on . Posted in Debt help.

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

Man stacking coins on top of each other on table

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

Man collecting keys for a new house from woman with a small model of a house on the table

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

Loan agreement within a folder with calculator and pen on top

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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Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Woman at computer on tablet

5 Things To Know Before Declaring Bankruptcy

Written by Alex Swindells on . Posted in Bankruptcy, Debt help.

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

Hand drawing of man in shirt and tie losing his assets to bankruptcy

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

Drawing of chart a declining chart with an arrow pointing downwards

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

Young woman feeling displeased about debt on her credit card while checking bank account over laptop at home.

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

Pound coins stacked on top of each other on a table

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

Person wearing running shoes taking steps up the stairs

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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May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

Drawing of computer screen that shows 'credit score'

6 Ways To Improve Your Credit Score

Written by Alex Swindells on . Posted in Debt help.

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

man looking at credit check document

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

Drawing of person putting polling card in ballot for election vote

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%

Young concentrated businesswoman in glasses and striped shirt working with papers at home

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

Woman using a credit card whilst on her laptop

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

Woman on phone to bank to report mistakes on 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

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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Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.