{"id":11103,"date":"2011-09-20T16:19:45","date_gmt":"2011-09-20T15:19:45","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=11103"},"modified":"2019-08-06T16:27:49","modified_gmt":"2019-08-06T15:27:49","slug":"addressing-debts","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/addressing-debts\/","title":{"rendered":"Addressing Debts"},"content":{"rendered":"\n

Oscar Wilde\u2019s humorous claim that a man who pays his bills on time is soon forgotten is probably just as true today as it was in his lifetime. Wilde also stated tongue in cheek that it was only by not paying one\u2019s bills that one could hope to live in the memory of the commercial classes. <\/p>\n\n\n\n\n\n\n\n

Today unfortunately many people are engulfed in a morass of personal debt and cannot see any way out of their financial troubles. They seek a solution to their situation that incorporates a degree of debt forgiveness by their creditors and also hope that that solution will not be a millstone around their necks in terms of their future credit worthiness. In other words they hope that their creditors will formally \u2018forget\u2019 about their historic defaults in repaying their debts.<\/p>\n\n\n\n

\"Couple<\/figure>\n\n\n\n

The massive increase in personal indebtedness has led to a \ncorresponding increase in the numbers of insolvent persons looking for \nways to address their debts. Most such persons will choose to enter into\n an Individual Voluntary Arrangements (IVA) or to opt for Bankruptcy \n(BCY) or will enter a Debt Management Plan (DMP). A crucial factor in \neither an IVA or BCY is that a portion of the debts are written off i.e.\n some of the debts are \u2018forgiven\u2019.<\/p>\n\n\n\n

In an IVA, creditors accept repayment of a portion of the debts and in return agree to forgive the remainder. Typically most IVAs offer a yield to creditors of between 20% and 50% of the debt with the amount being left unpaid and therefore forgiven usually falling between 80% and 50%.<\/p>\n\n\n\n

In BCY, even less debt of the total debt is usually repaid and frequently creditors may receive nothing at all from the estate of the bankrupt person after trustee and other fees are paid. In many BCY cases debts are almost totally forgiven although that does not mean that the debtor gets off scot-free. The substantial costs of bankruptcy often totally consume any payments the bankrupt has to make to the trustee. Such BCY payments by the debtor usually consist of an income payments order (IPO) or an income payments agreement (IPA). The difference between an IPA and an IPO is that the IPA is agreed voluntarily between the trustee and the debtor, whereas the trustee obtains an IPO from the court when agreement on the amount to be paid cannot be agreed voluntarily with the debtor. Of course the trustee is also likely to enforce the sale of any assets the debtor may have such as the family home or may alternatively seek to realize any equity in such assets by other means.<\/p>\n\n\n\n

In a DMP however, there is usually no debt forgiveness. The DMP lasts as long as it takes for the debtor to repay all of the debts in full. Thus the duration of a DMP can be quite long with some DMPs running to over ten years. The only semblance of debt forgiveness in a DMP is if all or some of the creditors agree to suspend or freeze interest and penalties for the duration of the DMP or for some limited period. Such a suspension or freezing of interest and penalties is by no means guaranteed and when it is agreed, it is provided solely at the discretion of each individual creditor.<\/p>\n\n\n\n

While creditors may forgive debts to some extent, particularly when \nthey have little or no alternative choice, they tend not to forget. For \nexample, when you enter into an IVA all unsecured accounts automatically\n go into default, given that you have ceased to comply with the terms \nand conditions of the relevant credit agreements. Some of your accounts \nmay already have been in default prior to that time. All defaults are \nrecorded on your credit files which are maintained by credit reference \nagencies such as Experian and Equifax. Access to and publication of such\n personal financial data relating to insolvent individuals is not \nprohibited by the Data Protection Act. The business of the credit \nreference agencies is to retrieve the data, record it on your credit \nfile and sell it to interested parties who must hold a consumer credit \nlicense to be entitled to access the information. The record of such \ndefaults remains on your credit file for six years from the time that \nthe default originally occurred. If you enter into an IVA, default data \nwill not be removed from your credit file for six years, even if you \nsuccessfully complete your IVA and obtain a Certification of Completion \n(of your IVA) from your supervisor. The six years \u2018clock\u2019 begins ticking\n from the time the default on each debt is originally recorded.<\/p>\n\n\n\n

This is the price you pay for your creditors not forgetting about \nyour debts, long after they have forgiven them, so to speak. In \nconsidering any request for credit facilities, whether during the life \nof your IVA or following its successful completion, creditors will \nnaturally check on your credit history via your credit file. You may be \nrefused credit by some lenders if your credit file still carries records\n of your defaults. If you are granted credit, you may have to pay \npremium interest rates. If you were to seek to take out a mortgage for \nexample, any lender willing to lend to you would be likely to seek a \nhigher deposit than if you had a clean credit history and you could be \nquoted interest rates as much as 6% to 8% greater than high street \nrates. On the positive side, you will normally find it easier to access \ncredit after completing an IVA than you would if you had just been \ndischarged from bankruptcy.<\/p>\n\n\n\n

No matter which solution you pursue to deal with your personal \nindebtedness, it probably will take less time to get your creditors to \nforgive some or all of your debts that it will take to get them to \nforget your defaults and to erase those records from your credit \nhistory.<\/p>\n","protected":false},"excerpt":{"rendered":"

The massive increase in personal indebtedness has led to a corresponding increase in the numbers of insolvent persons looking for ways to address their debts. <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[6],"tags":[],"class_list":["post-11103","post","type-post","status-publish","format-standard","hentry","category-general-debt-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11103","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=11103"}],"version-history":[{"count":1,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11103\/revisions"}],"predecessor-version":[{"id":11113,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/11103\/revisions\/11113"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=11103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=11103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=11103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}