Quite obviously, debt is not a predicament that people in England have to deal with exclusively. Serious debt affects people the world over; however, the way in which different countries tackle personal debt does differ. The IVA is commonly known as England’s solution for coping with large debt volumes, however in Scotland for example; they use what is known as a Trust Deed.

What is a Trust Deed?

A Trust Deed performs more or less the same function as an IVA. As with an IVA, a Trust Deed is a legally binding agreement which offers a persons creditors an alternative to them declaring bankruptcy. It allows a person who is heavily indebted to make an offer to their creditors, which is accepted on the basis that it is the maximum amount they can afford to pay back each month for an allotted period.

An IVA usually lasts for duration of 5 years, however Trust Deeds typically end after 3 years. A person can only apply for a Trust Deed if it can be proved that their disposable income is less than that needed to repay their creditor commitments.

Trust Deeds are regulated by the Scottish Bankruptcy Act of 1985 and are viewed as an “informal bankruptcy”, again similar to the IVA. The application can also enter into protected status if all relevant criteria are met. Once the Deed is protected, creditors are unable to pursue any type of legal action and must freeze any further interest and charges.

The Trustee throughout the life of the Trust Deed will be your Insolvency Practitioner. It is also important to realise that Trust Deeds are only available to Scottish citizens.

“Bankruptcy” is a term that can strike fear into the heart of anyone coping with personal debt. However, many thousands of people in the UK are faced with the prospect of bankruptcy every single year. If your debts are insurmountable, and other forms of debt help are beyond your reach, bankruptcy may be your only option. We provide a little information on the subject and try to shed light on some of the myths.

So what exactly is bankruptcy?

In essence, bankruptcy provides any individual (or company) struggling with insurmountable debt a means to wipe the slate clean in order to start over.

As a bankruptee, you will be expected to relinquish all of your assets (including your home) and any possessions of value, in order to pay back (as much as possible) to your creditors. The sum of your assets is divided equally among your creditors (people you owe money to), by an appointed receiver.

You will be required to raise a petition of bankruptcy, which must be presented to the courts by either yourself or your creditors. Once you are declared bankrupt, it is required that your status be published in your local newspaper. At this stage you will no longer have control over any of your assets, as they will fall into the control of your official receiver.

Your official receiver will then liquidate your assets in order to pay any costs associated with your bankruptcy and will split the remainder amongst your creditors. It is also common for the court to order you to pay any additional monies from your salary (after normal cost’s of living) to your receiver.

What are the other implications of bankruptcy?

If you are made bankrupt, you will remain as a bankruptee for 3 years. After that time you will be “discharged” from the agreement and any financial barriers associated to the status are removed. 

However, there are exceptions to the rule. If you have been made bankrupt before, in the past 15 years you will not qualify for a discharge until 5 years have surpassed, you must then apply directly to the courts in order to do so.

If you have presented the petition to the courts yourself and have total unsecured debts of less than £20,000 your bankruptcy level is deemed small, in this instance you may be discharged within 2 years of filing.

After I am discharged, can I start over?

Once the term of bankruptcy has been served and you are discharged from the process, you can finally start to return to normality. However, you will still be liable for any debts associated to family court proceeding such as financial disputes. The record of your bankruptcy will also be recorded for five years on the insolvency register. It is possible to apply for credit if you wish and you will not be required to mention your bankruptcy, unless you are asked.

Are their ways of avoiding bankruptcy altogether?

The only plausible way to avoid bankruptcy is through an IVA. Although the process is conditional, and relies heavily on creditor agreement and your own financial circumstances, the IVA process does offer many benefits over bankruptcy status. Some benefits include the protection of your home and other assets. You are also not required to publicly announce your IVA status as with bankruptcy.

Will the UK’s debt problem ever get better? You’d certainly like to think so wouldn’t you? Apparently, there may be light at the end of the tunnel. According to a recent survey by a leading national statistics house, consumer-spending patterns indicate a slight decrease as far as credit cards are concerned.

Reportedly, UK consumers are “less attracted” to their cards albeit only slightly. The average person spent approximately £1’890 on their card in 2006, faired against £1’950 the previous year.

The decline indicates that consumers are less likely to yield to the high rates of interest offered through their cards and are opting for low cost loans instead. Although, consumers are still sourcing credit, the fact that they are searching for better deals is positive, or at least that’s what we’re led to believe.

Unfortunately, the reason for the decline in credit card spending is not due to consumers becoming more conscientious where credit is concerned, its because the criteria in order to obtain a card, has been tightened. As a result, people are turning to personal loans to fund their purchases.

Although, the cost of interest associated with a personal loan can be considerably less than a card, a loan is usually used for more significant purchases, and is repaid over longer periods of time. A credit card is typically used for smaller purchases, and is repaid a lot sooner, hence reducing the actual time in debt.

The reason credit institutions are rejecting more people for cards are supposedly to cut debt risk factors to themselves and also to the country. What has actually happened is that the rejections are inadvertently causing people to accumulate more debt, over longer periods of time by turning to personal loans.

As a result the debt mountain is growing faster, and is causing more people to source repayment alternatives such as IVA’s and debt management. So is the debt situation getting better? The short term answer, unfortunately is “no”.

Over the next few months the simple IVA or SIVA is likely to be introduced, possibly replacing the standard IVA as we know it today. In preparation of its arrival, we define the major differences between an IVA and this all-new, simpler IVA and ask what it means to you as a potential applicant.

When the Government first introduced the IVA in 1986 its primary purpose was to offer business people a viable alternative to bankruptcy. Changes in the economy coupled with increased consumer spending patterns and reliance on credit pushed personal debt through the roof. As a result, the use of the IVA was no longer isolated to business professionals and became increasingly visible among consumers.

Due to the demand for the use of the IVA by private individuals, the government has been forced to rethink the process as a whole and develop an alternative better suited to non-business applicants. The agreed solution is to keep the standard IVA for use among business applicants and introduce a new 2 tier IVA to consumers.

The new process will be known as the SIVA or simple IVA. The main differences are determined in the qualification criteria defined by the individual’s level of debt. To qualify for the 1st tier (SIVA 1), consumers will need to have a total debt of £25,000 or less. SIVA 2 will require consumers to be indebted by more than £25,000 but less than £75,000 (debt Ceiling).

The other notable difference lies within the way in which the proposal is approved. The current IVA scheme stipulates that at least 75 per cent of all creditors vote in favour of the proposal. With SIVA 1 this is no longer a requirement, so long as the individual can be accurately identified as a bankruptcy candidate. With SIVA 2, the voting process will still form the basis of approval, however only 51 per cent (opposed to 75) will need to be in favour.

The exact date as to when the scheme will be officially introduced is unknown, but it is thought that the 3rd quarter of 2007 is a likely prospect.

To summarise, this change in legislation will not directly affect you as far as applying for an IVA is concerned, but is better suited to cater for different levels of debt. Once the scheme is active, you will automatically qualify for the appropriate SIVA stage and the term IVA will by default refer to the new process (For consumers).

Please contact us if you require any further information or advice regarding the SIVA or IVA’s in general

Many people in serious debt tend to worsen their situation, by trying to avoid its presence altogether.

According to new information, a large percentage of debtors would rather “bury their head in the sand” than face up to their problems. Being in serious debt can be a scary time for anyone and the deeper into the pit one descends, the more deluded one becomes towards their finances.

Of course, hiding away from a problem doesn’t make it go away. The reality is that your debts amass much faster, as interest and charges accumulate, making the concept of eventual escape become even less of a possibility.

Debt denial has become a major topic of discussion of late and is a growing trend among UK borrowers. Such acts as hiding bills, avoiding the phone and even denying personal identity is common. However, the implications of doing so can be severe. It is thought that a large percentage of people engaged in an IVA or even bankruptcy, could have avoided the situation entirely if they sought help sooner.

Our personal finances are sacred, and very few people in difficulty can admit it to themselves let alone anybody else. However, it is important to understand, that debt affects a vast proportion of the country and you are never alone and certainly shouldn’t suffer.

If you are experiencing problems managing your finances and need any type of debt help or advice, simply fill in the form on this site.  

“In debt” is a term often used by students to describe their current financial circumstance. The average student debt is increasing and government statistics suggest that by 2010 the majority of students will have amassed debts well above the 20,000-pound mark.

As a result, more young people than ever are declaring themselves insolvent. According to studies there has been an alarming increase in the number of people within the 19-29 year old bracket, entering into IVA agreements. It would appear that many students are opting to use such procedures, as a means to control their sizeable post graduation debt levels.

So why the increase? Many critics believe that personal monetary values have drastically changed. A recent survey amongst young people, confirmed that some teenagers and people in their early twenties had a warped understanding as to how some forms of credit work, in particular credit cards. Alarmingly, a percentage of young people are borrowing against their cards without any idea as the how they we’re going to repay their debt. Even more perplexing, is the fact that a small percentage of people, weren’t even aware that they had to pay it back.

Although this is a small example, it clearly demonstrates a need for the government to re-educate our young on the effects of debt, and how to manage personal finances responsibly before it gets out of hand. Many students live by a “buy now, care later” attitude and it is this lack of understanding that is driving the increase in IVA’s among the younger generations.

On a larger scale, our up and coming generations will play an important part in securing our countries economy, and stabilizing our current debt situation. However, if such trends among young people continue, it is likely to have a seriously negative effect in coming years.

The UK’s leading banking authority is said to be “over the moon” at the prospect of newly introduced rules, devised to govern the promotion of IVA’s.

The trade body has been lobbying for some time in an effort to encourage IVA providers to self govern the way in which they promote their services. The move would ensure that consumers are not “mislead” about potential benefits of an IVA and would help to create a more sensible attitude towards the use of such tools.

Although the number of people entering into such agreements is increasing, many analysts believe consumers are not fully aware as the how the procedure works. Reportedly, a large percentage of consumers view IVA’s as a “magical” solution to end their debt worries.

It is suggested that a handful of providers have been misleading customers through “careless” advertising campaigns and have been penalised as a result. The IVA can be the only option available to some people in serious debt, however it is important that providers can accurately identify such people, and are proactive in their ability to use “best practice” guidelines at the outset. 

As the volume of consumer debt in the UK continues to rise, so to does the number of people entering into IVA’s.

Consumer debt now totals close to 1.5 trillion pounds in the UK. As a result, the IVA market is experiencing unprecedented growth with the number of people partaking in an arrangement increasing by more than 50% in 2006 alone.

Faired against our European counterparts, statistics suggest that the average UK consumer is almost twice as indebted as the average European citizen (Western). With a change in legislation on the horizon, allowing an IVA to proceed on the basis that the majority of creditors vote in favour (opposed to 75%) analysts predict that the stage is set for further growth.

In our current economic climate, there is little sign of consumer debt decreasing in the foreseeable future, and with over 20% of the seriously indebted owing more than £11’000 the IVA is likely to become even more commonplace.