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Alternatives for debt management
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Alternatives for debt debt management
There are three choices for those who find themselves in situations where their debts are unmanageable. These are Independent Voluntary Agreements (IVAs), Bankruptcy and Debt Relief Orders (DROs). DROs have only recently been introduced and are a form of bankruptcy but on a smaller scale and at a lower cost. We will look at the pros and cons of each alternative.
Independent Voluntary Agreements (IVAs)
An IVA is a legally binding agreement that you make with your creditors. This will allow you to make reduced payments towards your debts for a specified period of time after which your debts will be written off. You will need to use a registered insolvency practitioner in order to set up an IVA.
At least 75% of your creditors (as measured in monetary terms) must agree to the IVA. The amount of money you repay will be an amount that you can afford after paying all you necessary expenses.
One of the major benefits of this arrangement is that you do not lose your home as you might if you filed for Bankruptcy.
Bankruptcy
Bankruptcy is a more serious option than IVAs. Once you go bankrupt you will remain undischarged for a minimum of two years. Not all debts will be covered, for instance amongst other fines, payments owed to the CSA, and Student Loans are not included. Additionally you will need to disclose all your assets. If you own your own home you are quite likely to lose it if it has any equity.
You will also need to have £450 in cash in order to file for bankruptcy.
Debt Relief Orders (DROs)
A DRO only applies to people you have debts under £15,000 and a disposable income of under £50 after accounting for all necessary expenditure. You must also hold assets of less than £300.
In some ways a DRO might be considered to be a mini Bankruptcy. You will need to have £90 in cash in order to file one and it must be set up by an approved intermediary. A DRO is discharged after one year.
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Alternatives for debt debt management
There are three choices for those who find themselves in situations where their debts are unmanageable. These are Independent Voluntary Agreements (IVAs), Bankruptcy and Debt Relief Orders (DROs). DROs have only recently been introduced and are a form of bankruptcy but on a smaller scale and at a lower cost. We will look at the pros and cons of each alternative.
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