Debt Advice Centre

Retake Control Of Your Debt

Don't panic, there are four options available to you - all forms of insolvency - which can wipe the slate clean and allow you to make a fresh start. The law has been relaxed to make it easier for people under severe financial pressure to get protection from creditors and to resume their normal life in a fairly short time span, as short as 12 months - these are listed in order of how extreme the situation has become.

Debt Relief Order

• Debt Relief Orders (DROs) were introduced in April 2009, aimed at consumers with a monthly disposable income of less than £50, assets of less than £300 - including any pension fund - and with debts not greater than £15,000. A DRO costs £90. Applications must be made through a recognised intermediary such as the Citizens Advice Bureau. A DRO usually lasts 12 months and the record will remain on your credit file for 6 years.

Individual Voluntary Arrangement

• An Individual Voluntary Arrangement (IVA) is an alternative to bankruptcy. An IVA can be applied to any level of debt, carries less stigma than bankruptcy but usually takes much longer to clear - perhaps 3-5 years - and is reported on your credit file for 6 years. In an IVA, a proposal is put together by an insolvency practitioner, who is called a Nominee. That proposal offers to pay creditors a percentage of what is owed. The proposal is either accepted, rejected or accepted with modifications at a Meeting of Creditors, which then appoints a Supervisor to administer the proposed arrangement. IVA proposals often seek to exclude your home from the assets to be sold, though creditors can insist that the arrangement is secured by a mortgage over your home, though this is rare. For debts of less than £16,000, try Payplan or use a local Insolvency Practitioner - click here to find your nearest. For debts in excess of £16,000, contact Chiltern for IVAs - we have visited and vetted both companies. Either will advise whether an IVA is suitable and suggest either bankruptcy or debt management if these options are more appropriate for you.

Administration Order

• If your debts are less than £5,000 and you have a CCJ, you can apply for an Administration Order. Under an Administration Order, the court orders that you may make pro-rata repayments to your creditors, and takes 10p in the pound towards administration costs. An Administration Order provides the same protection against creditors as bankruptcy and IVAs and similarly remains on your credit report for 6 years. You can apply by completing form N92, also available from your local court.

Bankruptcy

• Bankruptcy is the most severe form of insolvency. You can petition for your own bankruptcy - it costs £700 - made up of a £525 deposit and a court fee of £175. Creditors will no longer be able to pursue you and you could be discharged within 12 months, though the bankruptcy will appear on your credit report for 6 years. In a bankruptcy, a trustee is appointed to sell your assets (including your home) and to distribute the proceeds evenly to your creditors, after paying costs. But you will literally wipe the slate clean, except for Student Loan debts which remain due after bankruptcy.

Alternatives To Insolvency

• If you already have creditors threatening to make you bankrupt, or issuing writs against you, and if you have a mortgage with some equity in the property, it may not be too late for a specialist broker to try to help you. Contact them as soon as you can for the best chance of success.

Too extreme? See alternatives for Moving Forward With Your Debt