If you are facing financial difficulty and don’t know where to turn, McAlister & Co’s dedicated team are here to help. As personal insolvency experts, we are one of the top personal insolvency practitioners in the UK and have more than 20 years of experience helping individuals struggling with debt.
If you need advice on how to manage your debt but are feeling nervous about asking for help, rest assured that confidentiality is incredibly important to us and as such, we don’t need personal details to answer your initial questions. Alternatively, you can find a list of the most common personal insolvency FAQs and debt solution queries we get asked by our clients below…
At McAlister & Co, we offer a range of debt solution procedures that can reduce or write off your debt, or just give you some breathing space to help take the pressure off. Each situation is unique, which is why all our personal insolvency solutions are tailored to your individual needs.
Individual voluntary arrangements (IVAs), bankruptcy and debt relief orders (DROs) are all formal arrangements that protect you from legal action by your creditors. As such, once the procedure is in place, the letters and phone calls will stop. However, a debt management plan (DMP) is a more informal agreement, and whilst most creditors and debt collection agencies will stop chasing for payment if you stick to the terms of the plan, there is no legal obligation for them to do so.
Court fines, matrimonial debt such as maintenance payments and student loans are excluded from all debt solutions. Individual voluntary arrangements and debt management plans also exclude secured debt such as a mortgage or a loan that is secured on a car or another asset – which is why it’s important to speak to an insolvency practitioner to choose the best solution and plan of action to suit your needs.
A secured debt is a debt which is secured on an asset, such as mortgages and hire purchase agreements. Unsecured debts include credit cards, store cards, personal loans, and overdraft.
Whether or not you have to go to court will depend on the debt solution you choose. If you are applying to make yourself bankrupt, you will have to attend court, however, it will generally not be a public affair. More often than not, you will meet with a judge in their chambers, or your paperwork will be taken off you to be stamped by the judge. If a creditor is trying to make you bankrupt, however, there is no obligation to appear in court unless you want to dispute the case.
Court attendance also isn’t part of the DRO procedure, and it is very rare that a proposed IVA client would be required to appear at court – but if this did happen, rest assured that we can attend on your behalf. Finally, a DMP is not a formal arrangement, which means a court appearance is not part of the procedure.
For any debt solution, we would advise that you open a new bank account with a bank to which you do not have any outstanding debts. However, bear in mind the banks perform credit checks when you apply to open an account, and sometimes applications can be turned down if you’ve been having financial difficulties and have not been making repayments.
No. It is your name, not your address, that the debt and as such the individual voluntary arrangement, debt management plan or bankruptcy is listed against. Your parents, partner, or any other people in your household will not be affected by your debts.
However, if you hold any debts jointly, you are both jointly and severally liable for that debt. This means that the creditor can demand full repayment of the debt from either person, so if you enter into a debt plan with any joint debts, the creditors can demand full payment from the other person.
Most debt solutions such as bankruptcy and DMPs are based around individuals, but if you have a lot of jointly held debts you could opt for a joint or ‘interlocking’ IVA. However, it’s worth exploring all of the options available to each of you, even if a lot of your debt is in joint names. For example, bankruptcy or a debt management plan might be the more suitable route for one party, whilst an IVA could be the best option for the other.
In most cases, bankruptcy or a debt relief order would be the only debt solutions which would put a sole trader business in jeopardy. As such, an IVA is an appealing alternative to bankruptcy for those with their own business because they can continue trading and the business is usually unaffected.
Personal Insolvency FAQs – Individual Voluntary Arrangements
An individual voluntary arrangement or IVA is a deal between you and your creditors that allows you to repay some of all of your debts over a set period of time.
An IVA could be the right solution for anyone with a regular household income who is struggling to keep up repayments on unsecured debts such as credit card debts and loans. It is also an attractive alternative to bankruptcy for sole traders because entering into an IVA will allow you to carry on trading.
As a guideline, to meet the criteria for an IVA you should have unsecured debts of £15,000 or more, have at least three creditors and be able to pay at least £150 a month into the arrangement. However, to find out if an IVA is the right solution for you, you should always speak to an experienced debt adviser.
Any fees of the IVA are built into the monthly payments, which mean you won’t have to meet any additional costs. These fees include the ‘nominee fee’ for putting together and presenting the IVA proposal as well as the ‘supervisor’s fee’ for overseeing the IVA from start to finish. Your creditors will agree to these fees because they are taken out of the monthly payments before any distributions are made.
An IVA period is typically five years. Whilst it is uncommon for an IVA arrangement to last longer than this, an IVA can be much shorter than the five years if, for example, a friend or family member lends you a lump sum to offer full and final settlements.
One of the main appeals of an IVA is that your home is usually protected, which is not the case with bankruptcy – however you may decide that you would prefer to sell your home and put the proceeds towards repaying your debt. Whatever your decision, as long as you keep up your mortgage repayments, there should be no threat to your home.
However, you must ensure that you keep up with your IVA payments, as a failed IVA can lead to bankruptcy, which may well put your home in danger. Towards the end of your IVA, you may be asked to release some of the equity by remortgaging, but this is subject to affordability and securing a remortgage deal.
In most cases, it is only your creditors who need to know about your financial arrangements. However, an IVA is listed on the Personal Insolvency Register, sometimes called the IVA Register, which is a public register. Anybody is allowed to search this register online, so there is a possibility that people could find out this way, but they would have to be searching out the information in order to do so. It is also likely that your IVA will be made known to credit reference agencies, however other than this, it is up to you who you choose to tell about it.
A standard IVA with all of the paperwork made available promptly can take as little as four weeks to set up, although six weeks is the typical set-up period. However, it can take longer if non-standard proposals need drawing up or if paperwork isn’t available.
Not usually, but the IVA will include any interest and charges once it is set up and once the IVA has been agreed, no additional interest and charges will be applied.
During the setting up period, yes, it is likely that your creditors and debt collection companies will continue to call or write. If this is the case, the best thing to do is to let them know that an IVA is being set up by an insolvency practitioner; this will usually be enough for them to cease contact as they will know to expect notice of the upcoming creditors’ meeting.
Yes, technically there is nothing to stop your creditors from taking more serious action before your IVA has been approved, but this is rare. If it happens, you can apply to the courts for an Interim Order to stop any further action until the creditors’ meeting has been held.
On the rare occasions that an IVA proposal we put forward is rejected, we will discuss the reasons for rejection with the creditors concerned and work to remove the obstacles. However, it is not the end of the road for your IVA if a creditor rejects a proposal and rest assured that we can still communicate with them to resolve the issues. At McAlister & Co, our personal insolvency team are experts in putting together difficult, non-standard IVA proposals and have an exceptional approval rate.
Any changes to your circumstances should be discussed with your IVA supervisor. If you find your circumstances have changed for the worse, leaving you with less money than at the time the IVA proposal was agreed, it is possible to reduce the amount of your monthly payments. However, any changes must be agreed by your creditors and it’s best that a reduction in payments doesn’t happen too quickly after the start of the IVA, as your creditors may question your commitment to the plan.
On the other hand, if your circumstances improve, for example, if you have a pay raise or secure a better paying job, it’s important that you inform your IVA supervisor. In most cases, 50% of the extra income will be expected to be paid towards the IVA. Each IVA includes an annual meeting, whereby your income is reported, so any pay increases etc need to be stated.
Yes, it is possible to cancel your IVA, but it’s not as easy as just deciding you don’t want it anymore. An IVA is a formal, legal agreement and as such, serious consideration should be given to all of its implications beforehand.
If you are struggling to keep up with the terms of your IVA, your insolvency practitioner will be there to support you and give your IVA the best possible chance of success. Remember, the failure of an IVA can lead to bankruptcy, so it’s always best to seek professional advice.
A full and final settlement is an arrangement with your creditors whereby they accept a lump sum payment (which is less than the total amount they are owed) in a final settlement of your debt to them. Full and final settlements stand a better chance of being accepted if creditors understand that you can’t afford the monthly repayments to all of your creditors and this situation is unlikely to improve. The lump sum can either come from a friend or family member, or even from the sale of an asset.
Personal Insolvency FAQs – Debt Management Plans
If you have hit a rough patch financially and need to reduce your monthly payments, a debt management plan, also known as a DMP, is a bespoke plan based on what you can afford, not what you owe.
If you are struggling to keep up with monthly repayments and need help navigating your way out of debt, a personalised debt management plan is a solution that could help you to reduce your payments and get back on track.
As with an IVA, all costs for the set up and supervising of a DMP are built into the monthly payments. The set-up fee is equal to a single month’s payment on the plan, and it is standard procedure that the first month’s payment is paid to the insolvency practitioner, with payments to the creditors starting from the second month. The cost of supervising a DMP is 15% of the monthly payments, which again is typically withdrawn from each payment before the remainder is paid to the creditors.
There is no set time period that a DMP can last for. It is most suitable if you’ve hit a temporary sticky patch with your finances and need to reduce your monthly payments until you are in a position to resume your normal repayments.
Yes, as long as you keep up repayments on your mortgage, your house should remain unaffected by a DMP.
In most cases, it is only your creditors who need to know about your financial arrangements. In the process of setting up your DMP, all of your creditors, secured and unsecured, will be given notice of the creditor’s meeting. Other than creditors, it is up to you who you choose to tell about your debt arrangement – and unless you worked for a bank or other creditor to whom you owed money, there would be no reason that your employer would be informed either.
As a DMP is a less formal arrangement, it usually takes about two to three weeks to set up. You can ensure that the set-up is smooth and efficient by returning forms and sending in any statements and other paperwork that has been requested as quickly as possible.
A debt management plan is an informal arrangement between yourself and your creditors and as such, there is no definite regulation regarding the freezing of interest and charges. However, we will certainly do our best to get creditors to agree to freeze interest and charges, as this will mean more of the payment goes to reducing the amount of your debt.
Yes, technically there’s nothing to stop your creditors from taking more serious action before your DMP has gone through, but this is rare. In this situation, we can apply to the courts for an Interim Order to stop any further action.
If your creditors reject the initial DMP offer, it isn’t the end of the line. In this situation, we will request explanations from creditors who have turned down the offer and do everything we can to remove any obstacles.
If your circumstances change and you have less money available to pay your debts than you did at the time the plan was agreed, you should speak to your DMP supervisor. They will renegotiate the amounts with your creditors, or may advise that a different debt solution, such as an IVA, is now more suitable.
On the other hand, if your circumstances change for the better and you can afford to resume normal monthly payments, you should also discuss this with your DMP supervisor who will either bring the plan to a close and inform your creditors or suggest an increase in the monthly payment amount to the plan.
Yes, a debt management plan is designed to be a more informal arrangement, so if your circumstances improve, you can cancel the DMP and return to your normal repayments. If your circumstances haven’t changed, however, you need to think about how you are planning to make the necessary repayments as you would most likely have been accepted onto a DMP because you couldn’t afford your debt.
Personal Insolvency FAQs – Bankruptcy
Bankruptcy could be a suitable solution for you if you owe more than £15,000 in debt (secured and unsecured) and are unable to meet the repayments. It may also be the most appropriate option if you don’t own your own home or have accepted that your property will be sold in order to satisfy your debt.
The fee for the bankruptcy procedure is £700. If a creditor makes you bankrupt, they will have to pay a fee of £700 plus any solicitor’s costs, and you will not pay any fees.
In the UK, bankruptcy is usually discharged after 12 months. However, in rare cases, the Official Receiver can choose to extend the restriction period if there has been an element of misconduct.
No. During the process of bankruptcy, your assets are ‘realised’, which means that your home and other assets will be sold to raise money to repay your creditors.
The days of this kind of public shouting from the rooftops are, thankfully, over, and the stigma attached to bankruptcy has faded hugely. Bankruptcies are advertised in a daily paper called the London Gazette, which is a publication of official notice, however, it is a little-read paper that very few people have heard of, so it is very unlikely that anybody would find out you were bankrupt in this way.
Bankruptcies can be advertised in local newspapers, but again, this is rare these days with only public interest cases being advertised locally. Bankruptcies are also recorded on the Personal Insolvency Register, which is a public record and searchable by anybody who wishes to do so. As with the London Gazette, somebody would have to go looking for specific information in order to find out that you were bankrupt.
The amount of time it takes to declare yourself bankrupt will depend on how busy your local court is. Many individuals choose to fill in the forms themselves, and then it is simply a case of returning them to the court. You will then be given an appointment to attend court for the bankruptcy to be finalised. This can happen the same day, or it could take a couple of weeks.
If you meet the criteria for bankruptcy, the only reason a judge will not pass it is if they are of the opinion that you haven’t given it enough consideration and that you haven’t explored your other options. Additionally, it is important to remember that the main criteria for being accepted onto any debt solution is that you cannot afford your debt – as such, you will not be approved for bankruptcy if you can afford your repayments but would rather write some of them off.
The amount of time it takes to declare yourself bankrupt will depend on how busy your local court is. Many individuals choose to fill in the forms themselves, and then it is simply a case of returning them to the court. You will then be given an appointment to attend Court for the bankruptcy to be finalised. This can happen the same day, or it could take a couple of weeks.
On the rare occasions that an IVA proposal we put forward is rejected, we will discuss the reasons for rejection with the creditors concerned and work to remove the obstacles. It is not the end of the road for your IVA if a creditor rejects a proposal, we can still communicate with them to resolve the issues.
Our personal insolvency team are experts in putting together difficult, non-standard IVA proposals and have an exceptional approval rate. Much of this is due to the fact that we would never advise you to apply for an IVA if you weren’t suitable. We are committed to giving ‘best advice’, meaning that if an alternative debt solution was better for you, we would advise you accordingly, even if this meant advising you of a debt solution that didn’t give us a fee.
If you receive an unexpected windfall during the bankruptcy period, you must make the Official Receiver, or your bankruptcy trustee aware. It is likely that the money will be taken to repay your creditors and you will be permitted to keep the remaining balance.
Personal Insolvency FAQs – Debt Relief Orders
A debt relief order is intended to help those who have little or no assets and have very little disposable income at the end of each month so therefore cannot afford to make themselves bankrupt. In order to be suitable for a debt relief order, you must not own any property or have assets totalling more than £300. In addition, to be eligible for a debt relief order, you must also be able to prove that you are left with less than £50 of disposable income each month after your normal household expenses have been paid.
As with bankruptcy, a debt relief order for 12 months.
Individuals who own their own homes are not eligible for a debt relief order.
It is entirely up to you who you tell about your debt relief order. DROs are not advertised but are recorded on the Personal Insolvency Register – however, for someone to find this information, they would need to go looking for it.
We would expect a Debt Relief Order to be granted within 10 days of application.
If you meet the criteria for a DRO, the only reason it could be rejected would be if the judge was of the opinion that you hadn’t given your situation enough consideration or sufficiently explored all your other options.
It is important to remember that the main criteria for being accepted onto any debt solution is that you cannot afford your debt. As such, you will not be approved for bankruptcy, a DRO, IVA or DMP if you can afford your repayments, but would rather write some of them off.
If you receive an unexpected windfall during your DRO period, you must make the Official Receiver or your DRO trustee aware. It is likely that the money will be taken to repay your creditors and you will be permitted to keep the remaining balance.