There is nothing to feel left out if you too are having issues to handle your debts in the United Kingdom. Debt load is something that makes you sick from inside and doesn’t allow you to concentrate on your work. Seems you want to write off debt government schemes , as you visit our website.
What Are the Schemes Introduced by Government to Write Off Debt?
There are quite a lot of options available there in the United Kingdom to write off your debts. Such as –
Debt Management Plans or DMPS
Administrative Orders or AO
Individual Voluntary Agreement or IVA
Debt Relief Orders or DROs
Bankruptcy
1: Debt Management Plans or DMPs
Debt Management Plans or DMPs are generally agreements that are signed both by you and to your creditors. Where you agree to pay off all your debts over a certain period of time. Debt Management Plans turn out well for you when your financial condition is not so good and you can only afford a small amount of money as the monthly installment. In addition, Debt Management Plans or DMPs are suitable for you when you are currently having debt issues but there is a hope that you will overcome it in a few months. DMPs are best when it comes to covering all your priority debts.
How Does the Debt Management Plans or DMPs Work?
Here in the Debt Management Plan, you agree to pay the due amount to your creditor through a licensed debt management company in the united kingdom. And obviously the debt management company will charge a certain amount of money as their fee.
Once you and your creditors agree to sign the deal, the debt management company will decide the monthly installments for you. You will make monthly installments to the debt management company and not directly to your creditor.
The total amount that you will pay to the debt management company will be distributed among your creditors. The debt management company will make sure that all your creditors are getting equal amounts of money.
2: Administration Order or AO
Administration Order is often referred to as AO. Administration Order is basically a way to deal with your creditors and get rid of your debt load. When you have got a county court judgment or high court judgments against you and you can not pay the amount in full, you are eligible to apply for an AO or Administration Order in the United Kingdom.
But there are some other criteria’s also that you need to meet in order to apply for the Administration Order. They are listed below-
1: The debt you owe must be less than 5000 pound sterling’s.
2: You must owe money to two or more creditors.
3: You have to prove that you are really eligible to make the monthly installment
4: And the most important criteria of all is that, you must have a county court Judgement or High Court Judgement against you.
If you meet all these criteria’s then you are eligible to apply for an Administration Order.
How Does An Administration Order Work for You?
You only make one monthly payment to the court and that’s it. The court will take the responsibility to distribute the installment among all your creditors equally.
The best part of an Administration Order is that your creditors are no longer able to take any further actions to recover their money as they have signed the agreement with you. Here the court plays a very important part. The County Court here decides how much you need to pay as the monthly installment at the end of each month. The court will determine the monthly installment after analyzing your income statement, assets lists and total debt amount.
Besides that, they will also decide how long this agreement will last . Al these arrangements will be known as Composition Orders in case you fail to make the payments.
In return, obviously the court will charge you with a fee.
Note: The fee can not be more than 10% of your total debt amount. For instance, your total debt amount is 1000 pound sterling’s. So the court will cut 100 pound sterling’s as their fee.
3: Individual Voluntary Arrangement or IVA
Individual Voluntary Arrangement or IVA is a formal and legal agreement between you and your creditors. Here in this agreement you agree to pay off the full amount of money or a part of it according to new terms and conditions. In short this is the agreement where you get to pay off the due amount of money at an affordable rate Here between you and your creditors an insolvency practitioner will get involved. And you will have to make regular payments to the insolvency practitioner.
There are some criteria’s that you need to meet to apply for an IVA in the UK. They are listed below-
1: The total amount of your debts must be 5000 pound sterling’s.
2: The minimum number of your creditors are 2.
3: You are capable of paying the debt according to the new terms and conditions. In an IVA you need to pay off a minimum of 800 pound sterlings in a month.
4: Individual Voluntary Arrangement or IVA should provide a higher rate of return than it is in a banri=uptcy scheme.
5: The last and most important criteria is that you must be staying in England, Wales or Northern Ireland.
How Does an IVA Work?
An insolvency practitioner or IP or manage your IVA. Here the IP plays an important part in working out the repayment plan. The repayment plan is basically determining how much you will pay as the monthly installment and how long the arrangements will last. This insolvency practitioner will talk to your creditors and see if they agree to your IVA or not.
Remember, your IVA will be approved only when 75% of your total creditors will agree to the IVA proposal made by the IP. When your IVA is finally active, you will have to make the monthly payments to the insolvency practitioner and he will take the responsibility to distribute the money song to all your creditors evenly. Remember, an IVA is applicable in Wales, England and Northern Ireland but not in Scotland.
4: Bankruptcy
Bankruptcy can be a good option for you when you are really suffering from a stubborn debt issue. It is a way to write off all your debts or a huge part of it. It is a legal process where you declare yourself bankrupt officially and agree to pay off the due amount of money to your creditors over a certain period of time ( generally1 year ). And after 1 year, if your financial condition does not improve, all your remaining debts will be written off.
There are some criterias that you need to meet in order to become bankrupt. They are listed below-
1: You must reside in England , Wales or Northern Ireland
2: You are capable of paying off the monthly installments. Under the bankruptcy scheme, you will have to pay off 680 pound sterlings per month.
3: You must have few assets or a little equity at home.
4: When there is no hope that your financial condition can get better in future, you can go for the bankruptcy scheme.
How Does Bankruptcy Work?
Bankruptcy is basically a form of insolvency that allows you to pay off your debts in a reasonable amount of time. To apply for the bankruptcy scheme you must declare yourself as bankrupt first. You will have to fill up the online application form for bankruptcy with some important details like your income statement, total assets and total debt amount. All these documents will be analyzed by an official receiver and then he will decide whether to offer you the insolvency scheme or not. You will get to know about it within 2 weeks of submitting the application form.
Here your assets will get involved. If you fail to pay off the money after 1 year, your assets will be utilized to recover the money of your creditors. Bankruptcy enables you to make a fresh start of your life by reducing your debt load and making you free from a big burden.
Write Off Debt With Other Government Schemes in the UK
Besides these above mentioned schemes, you may also take help of Debt Consolidation Loan, Debt Relief Orders or DROs, Trust Deed or Deed of Trust, etc. Make sure you choose the right alternative for yourself as it is very important to choose the right option for you if you really want to write off your debts. For that you may take free expert debt advice in the United Kingdom.
