A debt management plan (DMP) is a good debt solution for many people. If you are trying to decide whether you need one, you may want to know how bad the effect will be on your credit file, and how long it will be before your credit rating recovers. There isn't a simple answer however: DMPs are used in a lot of different situations; because they are "informal" arrangements creditors don't … [Read more...]
What happens to your possessions in bankruptcy eg car, lawnmower
I have collected a selection of questions here are about things that may or may not be taken by the Official Receiver if you go bankrupt. I may not have mentioned your exact situation, but the answers here try explain how the Official Receiver makes decisions, so you can work out what is likely to happen. The bankruptcy application says "It is very unlikely that items you need for your … [Read more...]
Can I leave a debt out of a DRO?
People sometimes want to leave a debt out of a Debt Relief Order (DRO). A DRO is a form of insolvency with very strict criteria - it is explained in detail here, including looking at the pros and cons. You can't normally choose to leave a debt out, but this article looks at when this is possible and what happens if a debt is left out by accident. The DRO limits described in this article are … [Read more...]
Is a DRO better than a DMP or bankruptcy?
Choosing between a Debt Relief Order (DRO) and other debt solutions is often a pretty easy choice! Let's look at when a DRO is a good option for you and what the alternatives might be. Debt Relief Orders DROs are a form of insolvency in England, Wales and Northern Ireland. For an overview of DROs, read What is a Debt Relief Order? For more details, see the Guide to DROs. They are meant for … [Read more...]
Will debt collectors stop calling after a Debt Relief Order?
One of the biggest advantages of a Debt Relief Order (DRO) is that it is a formal, legal debt solution. It prevents your creditors taking any further action against you for debts that are included in your DRO: you can't be taken to court for a CCJ (or a Liability Order for council tax arrears); if you already have a CCJ, the creditor can't send the bailiffs in - and debt collectors should … [Read more...]
What taxes are included in bankruptcy?
A reader has asked which year's income taxes are included in bankruptcy? HMRC used to have a special status as a preferred creditor, but since 2003 tax debts are treated the same as other debts and are wiped out by bankruptcy. There are however a few complications, so this article looks at all the different types of taxes and what happens to each of them when you go bankrupt. In particular, there … [Read more...]
Inheriting money when bankrupt
A reader has asked if my recent article on redundancy payments and bankruptcy also applies to inheriting money or assets when you are bankrupt. The answer is "Yes", but there are a few extra points to consider. The date of death is the key date You become entitled to an inheritance as soon as the person has died, so it legally forms one of your assets from this point. There are three cases … [Read more...]
Will the OR take my redundancy money?
A reader has asked: I have been offered redundancy. I would like to retrain for a more interesting job, but I still have nearly a year of IPA payments to make, so will the Official Receiver take all my redundancy pay? It depends on your discharge date The answer to the question depends on whether the last day of employment is before or after the date of discharge from bankruptcy. There are … [Read more...]
Should you accept DFD’s proposed IVA variation?
A reader has sent me copies of the documentation that Debt Free Direct (DFD) are asking him to sign to change the terms of his IVA. It includes: a Deed of Assignment, which relates to PPI reclaims, and a Variation in IVA conditions to adopt the 2014 Protocol. DFD has over 24,000 IVAs outstanding so this could be a common problem. *** UPDATE - DFD have replied with detailed comments … [Read more...]
Keep a spending diary – or get an app to do it for you!
If you feel your money just vanishes or you are worried your budget isn't realistic, tracking your spending will give you the facts you need to take control. Without knowing what you actually spend, all too often plans to cut back are just good intentions that don't work in practice. Why you need a spending diary Many people have little idea about what they spend - it feels as though their … [Read more...]
2014 – change to IVA protocol
A few words have been changed in the 2014 IVA Protocol. This post looks at the addition of secured loans in the equity release section - what are its implications and do you need to be concerned about it? For a more general overview of IVAs and their advantages and disadvantages, see this page. Update - July 2016 - there are a lot of changes in the new version which has just been published - … [Read more...]
Can you stop using a credit card? There’s only one way to find out!
If you are serious about paying off your debt, stopping using your credit cards and catalogues is the key first step to take. Until your debt stops increasing, you can't make a realistic plan to clear your current debt. As the saying goes, if you want to get out of a hole, then stop digging. But how hard will it be? Four common excuses for not giving it a go Do you recognise any of … [Read more...]
Informal or formal arrangement with my creditors?
What is the difference between a formal and an informal arrangement with my creditors? a reader asked. This post looks at what the alternatives are and how to decide which is better for you. If you pull on a pair of jeans and a T-shirt, then it's easy enough to add a jumper if it gets chilly or switch to old trainers if your new shoes are rubbing. But you need to plan formal dress more … [Read more...]
Should I use DLA / PIP money to pay debts?
Disability benefits such as Disability Living Allowance (DLA), Personal Independence payment (PIP) and Attendance Allowance (AA) are meant to cover the extra costs you get because of the disability. So is it right to use this extra money to pay off debts? Can your creditors make you do this? That may sound a bit abstract, but it leads to a very practical question - if you need a Debt Management … [Read more...]
When to send a Prove It letter about a debt
If you get a letter saying you owe money on a debt you don’t recognise, or which you thought you had paid off, you need to challenge the creditor to prove that you do owe the money. Sometimes debt collectors have simply got the wrong person. This is sometimes called a mis-trace. This is what the Financial Ombudsman says about mis-traces: We would ask a debt collector to provide evidence to … [Read more...]
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