At Money Relief we always strive to offer you the best solution for your particular needs. If a Debt Management Plan or an IVA is not suitable for your needs, then we will offer you the appropriate advice as to how you can seek the most suitable debt solution.
Other debt solutions that may be available include:Bankruptcy
Bankruptcy is a formal court procedure which can free you from debts that you cannot pay.
During the bankruptcy order you are known as an undischarged bankrupt. When the bankruptcy comes to an end, usually after 1 year, you are discharged and are released from your debts.
If you apply (petition) for your own bankruptcy, there are no conditions, as such, but you should meet the legal definition of being insolvent. This means that your liabilities (debts) exceed the value of your assets or that you cannot meet your liabilities as and when they are due.
A creditor can apply for your bankruptcy if you owe them at least £750.
You have to submit a petition to the Court. Either an Insolvency Practitioner or the Official Receiver will be appointed to look into your financial affairs covering the period before and after your petition is submitted. The Insolvency Practitioner or the Official Receiver takes control of your assets and may have to dispose of them to make payments to your creditors. See "What affect will Bankruptcy have on my assets?" below.
Once bankruptcy is granted you stop making payments to your creditors (apart from the exceptions below). If you have disposable income you may have to make payments to the court for up to 2 further years which will be used to pay towards your creditors.
Creditors can't take further action against you unless the debt is secured against your home or other property.
At the end of bankruptcy you are discharged and are freed from the debts.
Bankruptcy normally lasts for 1 year. However, if you have surplus income you may be required to make payments out of this for up to 3 years. If you have no disposable income or your income is made up of mainly benefits then you probably won't have to make regular payments.
Student loans, fines and maintenance cannot be included in your bankruptcy. Secured creditors, such as those that have a mortgage or other charge on your home are not included. If you have received any benefit overpayments these will not be included in your bankruptcy if the provider can recover the overpayment from other further benefits you receive during your bankruptcy.
You need to pay the court fee which is £180. You may also have to pay a deposit to the Official Receiver which is £525.
Your job could be affected. Certain occupations cannot be performed if you are bankrupt, for example, accountants, solicitors, members of the armed forces, police etc. If you are in any doubt about whether your job will be affected by Bankruptcy you should ask your Human Resources/Personnel department or check your contract of employment.
If you are a company director you will need to get the court's permission to continue in the role.
If you are self-employed and trade under a name which is different to the name disclosed in your Bankruptcy, you must tell all those you do business with that you are bankrupt.
During bankruptcy you lose control of your assets. Certain items can be kept by you if their value is reasonable and is no more than the cost of a reasonable replacement, but you have to tell the Insolvency Practitioner or Official Receiver and you will be told if you can keep them.
Examples of such assets are:
If you own your own home your interest in the home will form part of your assets which will be controlled by the Official Receiver of Insolvency Practitioner.
Your home may need to be sold to go towards paying your debts, but this would usually only be done if it is the only way to release money to your creditors.
If your spouse or children live with you, it may be possible to delay the sale until the end of first year of bankruptcy.
If your home cannot be sold a charging order may be obtained but only if your share of the equity is worth more than £1,000.
If you do have equity in the property it may be possible for your partner, a friend or relative to buy your share of the equity. This will stop the Official Receiver selling your home.
You need to co-operate with the Official Receiver during your Bankruptcy. If you act dishonestly or irresponsibly before or during the Bankruptcy you could have a Bankruptcy Restrictions Order made against you. This can last up to 15 years and places restrictions against you similar to those in place during the Bankruptcy.
If Bankruptcy is granted it will be entered onto a public register and will be advertised in the London Gazette and possibly in your local paper.
If your income or assets increase you must tell the Official Receiver.
If you would like further information about Bankruptcy then please call us on 0800 1223 037 or download the Insolvency Services' Guide below.
A debt relief order is a simpler style of bankruptcy.
It can only be arranged through an approved intermediary who will check that you meet the conditions for a Debt Relief Order.
You CANNOT have a Debt Relief Order if any of the following apply to you:
If you do meet the conditions, you will complete the required form which is then submitted to the Official Receiver and the Debt Relief Order is granted.
During the Order, the creditors which are listed on your application form cannot take action against you. At the end of the Debt Relief Order you are "discharged" and the debts within your order are written off.
The Order lasts for 1 year and once it has ended your debts are written off.
Student loans, fines and maintenance cannot be included in a Debt Relief Order.
You need to pay the court fee which is £90. You can pay this over 6 months but you can't apply for the Order until you've paid the full £90.
You can still apply for credit, but if you apply for £500 or more you must tell the lender that you are subject to a Debt Relief Order. If you don't you will be committing an offence.
As it is a form of bankruptcy, your job could be affected. Certain occupations cannot be performed if you are bankrupt, for example, accountants, solicitors, members of the armed forces, police etc. If you are in any doubt about whether your job will be affected by a Debt Relief Order you should ask your Human Resources/Personnel department or check your contract of employment.
If you are a company director you will need to get the court's permission to continue in the role.
If you are self-employed and trade under a name which is different to the name disclosed in your Debt Relief Order, you must tell all those you do business with that you are subject to a Debt Relief Order and the name under which it was granted.
You need to co-operate with the Official Receiver during the time the Debt Relief Order is in force. If you don't the order could be withdrawn. Also, if you act dishonestly or irresponsibly before or during the Debt Relief Order you could have a Debt Relief Restrictions Order made against you. This can last for up to 15 years and places restrictions against you similar to those in place during the Debt Relief Order.
If a Debt Relief Order is granted it will be entered onto a public register.
If you need further information about Debt Relief Orders then call us on 0800 1223 037or you can download the Insolvency Services' guide below.
A debt administration order is an order made by the County Court. It does not free you from your debts (unless the court makes an order for this) but it does mean that the creditors named in your administration order cannot take action against you to enforce the debt.
As with most solutions, you have to meet certain conditions to be able to apply for one.
If the Debt Administration Order is granted, you will make regular payments out of your disposable income to the court. The court distributes those payments to your creditors less the court's fee of 10%. The creditors which are listed cannot take action against you to recover the debt unless they have the permission of the court.
There is no set time for a Debt Administration Order, it will continue until the debt is repaid. Therefore, the term of the order will be affected by how much you can pay each week, month, or quarter, which will be decided by the court and set at a level which is reasonable based on your income and expenditure.
You could apply for a Composition Order which specifies the term of the order, for example 3 years.
Any unsecured debts can be included.
There is no court fee to pay to apply for a Debt Administration Order. However, if the order is granted the court keeps 10% of your regular payments. The remaining 90% is then distributed to your creditors.
You can still apply for credit but your credit rating will be affected by a Debt Administration Order.
As the Debt Administration Order is not a form of bankruptcy there usually won’t be an impact on your job but you should check with your Human Resources/Personnel department or check your contract of employment.
Creditors can present objections to the court and ask to be left out of the order.
If you don't keep up repayments then the order can be revoked (which will mean that your creditors can start to take action against you again) or the court may grant an attachment of earnings order.
For residents of Scotland there are a few different solutions available, such as entering a debt payment programme through the Debt Arrangement Scheme, a trust deed (which is the Scottish equivalent to an IVA), the Minimum Asset Process (loosely similar to the Debt Relief Order) or applying for bankruptcy (sequestration).
Information from Scotland’s insolvency services can be found here.
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