Debt, beware the creeping enemy

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Debt-beware-the-creeping-enemy-300x168[1]When you mention debt problems to most people they have an image of destitute families who are on the breadline, merely scraping by with just enough money to feed the children. For generations we have being subjected to the belief that people who experience debt problems are those that come from a low income and low social standing background. This could not be further from the truth as debt has no standards and most certainly does not discriminate any one particular group in favour of another.

Vigilance is required

The fact is debt can affect each and every one of us. No-one has an absolute barrier to this type of problem. One of the most worrying aspects about money concerns is that debt creeps up unexpectedly, little by little, day by day; debt generally takes hold of our finances in small unperceivable bits. Obviously one significant occurrence such as a business going bankrupt or a large uninsured loss can cause debt problems but most people achieve this status without any warning.

It is important to keep a general eye on all aspects of your personal accounts from your bank balance, incomes, savings and estates to your regular direct debits, payments, insurances and any other outgoings. You should always be on the look-out for general trends of rising debts through overspending versus income levels. If your outgoings are always more than your incomes you should stand back and assess why this is the case and make sure that this trend isn’t one that cannot be reversed.

Seek help

If you find yourself out of your depth with your finances it makes ultimate sense to seek the help of a debt advisor who can offer professional help in targeting where the money flow is going wrong. As an independent advisor they will be able to cast their eyes over your accounts and see from another point of view where the problems arise and where changes can be made to rectify problematic cash flow. Their ability to see things from a different perspective is essential in making sure that any changes that are required can assessed and recommended as an option on the road to financial stability.

Identifying the problem

It may seem like a simple equation, where you are in the lucky position of earning more than you spend but we live in a world of instant gratification with the facility to access credit in a matter of minutes. Mix these properties with the ever increasing demands of life to keep up with the latest trends or fashions and we have an all too common recipe for disaster. This is when people need debt help and need to find where to get that help.

Identifying where the problem lies and highlighting why and how the money is being spent can be a difficult step but no matter how awkward or even embarrassing this process is it is necessary to get it started and be clear about the purpose. This is another benefit of contracting an external debt advisor as they will have not issue with clarifying the situation, calling it what it is and proposing the best solution.

It’s worth it in the end

You may imagine that your life will be turned upside down when you instigate the necessary changes to rectify reverse your financial difficulties but most people find that with the right help and direction it is an achievable task. Everyone’s situation is different and specific to them so take the time to source the help that can make sense of your particular personal finances, you’ll be glad you did.

Why an IVA is such a popular debt solution

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Why an IVA is such a popular debt solutionAn Individual Voluntary Arrangement (IVA) involves an agreement made between a debtor and a financier whereby the debtor commits to paying all or part of the money owed within a certain period. The borrower makes a single monthly payment to an Insolvency Practitioner (IP) who then distributes the money equally among all lenders. When you opt to deal with a debt problem through and IVA therefore, you have to engage an Insolvency Practitioner.

For the individual payments to be decided on an assessment of your assets, income, and expenditure is done after which normal expenses such as mortgages, utilities, tax, and food are deducted. The remaining amount is the contribution you are required make towards the IVA each month. Note however, IVAs can only help you sort out unsecured debts. If you have a secured loan, you must continue with the payments as usual.

Is an IVA better than bankruptcy?

For people who are deep in debt, filing for bankruptcy is a common option. However, depending on your circumstances, there are times when an IVA may be a better alternative. When you go bankrupt, your assets or business may be taken over by creditors to help recover some of the money. Thus, if you own a home, business, or other assets, choosing an IVA over bankruptcy can help you retain them and keep you safe from the social impact as well.

Still, for things to run smoothly, you have to work with a debt expert. It is only through an IP’s services that you can protect your possessions against creditors. As they negotiate on your behalf, IPs will try to make sure that your property is excluded from the IVA. The services of an IP are also important when it comes to determining the suitability of an IVA as a solution. They will take time to evaluate your situation, and then advice you if an IVA will be the best way out.

Benefits and drawbacks of an IVA

One of the key benefits of an IVA is that it allows you to pay affordable sums of money for a period of about five to six years. Once this time is over, the outstanding balance (if any) is written off and you are legally considered debt-free – creditors cannot hold you liable anymore.

Also, this arrangement is legally binding. Hence, even though you are obliged to make certain payments, you are also protected against creditors who may otherwise add more charges, issue Statutory Demands, take court action, or even bankrupt you.

While an IVA can be helpful, it also comes with its own pitfalls. For instance, like bankruptcy, it will affect your credit report, and it may lead to job loss if you work in professions such as an accountant, financial advisor or military officer. This is one of the reasons why getting IVA debt advice is so important.

To be certain about whether or not your occupation will be affected, you can look at the details of your employment contract, or talk to your HR department. It’s worth pointing out that you are more likely to lose a job through filing bankruptcy than IVA though.

All in all, even though IVAs can work for you when you are unable to stay in control of your debts, it is always best to be frugal with your finances because it is only then that you can keep debt problems from arising in the first place.

Finding a Way Out of Debt

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Finding a Way Out of DebtBeing a graduate, I tend to think of myself as a fairly intelligent person and certainly not the sort who would be likely to fall into debt so badly. Unfortunately that’s exactly what happened and I can honestly say that it was the worst time of my life so far. Until you’ve actually experienced the misery and fear it causes, it’s hard to understand just how awful having more debt than you can manage is.

After University, I was fairly lucky in that I got a full time job in my field after only a few months. It wasn’t the best paid job in the world, but there was the chance of further training and the company seemed to do internal promotions quite frequently, which looked good. The job was twenty miles from where we lived and public transport was poor, so I decided to buy a car with a hire purchase agreement. I figured that way I’d be getting a reliable vehicle so I could get to work.

How the problem started

Things began to go wrong when the company started laying off workers due to the recession. With a “first in first out” policy I was soon back signing on, which is when the problems really started. My benefits took ages to sort out, by which time I was well behind with the payments on the car. To make things worse, I’d maxed out my credit cards, couldn’t get my overdraft at the bank extended and was falling behind with the rent. Before I knew it I was in the middle of a serious debt problem and then the phone just wouldn’t stop ringing with demands for money I didn’t have. In the end the car got repossessed because I hadn’t kept up with the payment plan.

I stopped answering my phone, stopped opening the mail and buried my head in the sand. I couldn’t talk to anybody about it and just wanted the whole thing to go away. The only way to resolve it, I thought was to get a job and boy did I try, but it just wasn’t that easy.

How the solution started

I couldn’t sleep for worrying about it all and I began to get quite unwell as there wasn’t any money for proper food. Amazingly, it was the Job Centre that helped me, as they pointed me in the direction of a Food Bank. As well as some welcome supplies, someone there actually listened to me and suggested I go for debt advice. They even let me use their phone to make the initial call. I can honestly say that was a turning point.

The debt advisors were really helpful and didn’t judge. In a few weeks they’d managed to make arrangements with the credit card companies and the bank, as well as getting me back online and focussed so that I could start job searching properly. I’ve since found a job, not my preferred choice of career and not very well paid at all but things have improved and I no longer have to live with the fear of the phone calls from my creditors and the terrifying brown envelopes through the door. I’d recommend using a debt advisor and finding a proper debt solution to anyone experiencing debt problems. It really does make an enormous difference.

Getting help with debt when you need it

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Getting help with debt when you need itThe latest debt statistics show that the average household in the UK owes more than £54,000. When household budgets are squeezed by rising prices, more and more families are finding themselves “maxed-out”, and unable to cope with their level of debt. Before the 2008 crash, credit was easily-obtainable. Since then, as wages have fallen in real terms, and more and more people find themselves in part-time or insecure jobs, it can be all too easy to slip into debt. It may be tempting to ignore the problem, but it won’t go away without action on your part. The key thing is not to borrow any more, and get into further debt. It is best to seek advice, sooner rather than later. You need to:
• Work out how much money you owe
• Work out you monthly or weekly income
• Decide which debts are the most pressing
• Pay off these debts first
• If your debts are less pressing then consider making a voluntary arrangement, to pay off
  debts at a rate you can manage
• Finally, if you are not in a position to pay off your debts, there are other options you can
  consider

Priority debts:

Debts classed as priority because if their importance and the consequences of losing assets or the use of services include:
• Mortgage and rent arrears
• Electricity and gas bills
• TV licence arrears

Non priority debts include:

Whilst these debts are still important you have more flexibility in relation to the following:
• Money borrowed from family and friends
• Credit cards
• Student loans
• Water rates – your supply cannot be cut off for non-payment

Seeking advice

A debt advisor can help you through the process of freeing yourself from debt. There are many sources of free, financial advice where you should not be asked to pay anything up front. Experienced debt advisors deal with a wide range of debt problems every day and know of all the latest debt solutions available. Your debt advisor will help you to work out a budget and prioritise your debts as well as advise you on the most appropriate debt solution that suits your own circumstances. This may include schemes that allow you to repay your debt at a more affordable rate but over a longer period of time such as a debt management plan.

If you don’t have the resources to pay your debts, your debt advisor may suggest some other options. These include options like a debt relief order, an IVA or as a last resort bankruptcy. There are advantages and disadvantages to these. If you decide to declare yourself bankrupt, you will be unable to apply for credit while the bankruptcy order is applicable, and you will be unable to work in certain professions in. However, once you have received your bankruptcy order, you will be free of debt, and can make a fresh start. Debt relief orders can be applied in certain circumstances, if your debts are less than £15,000, and you are on a low income. They are applicable for the period of 1 year.

Whatever your personal circumstances, your debt advisor will be able to help and give you guidance on what can often seem complex and baffling legalities. The important point to this is not to put off the process of starting to manage and take control of your debt.

How an IVA Sorted my Debt Nightmare

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How an IVA Sorted my Debt NightmareLike many small business owners, I was hit extremely hard by the economic crisis. I thought it prudent to borrow what was actually a significant sum of money to re-tool my small workshop; imagining that such an action would improve sales. In short, I was wrong. Not only did my business continue to lose money, but I owed much more to my lenders than I had in the past. What followed was what I can now only call a downward spiral of events.

From Bad to Worse

I tried to make ends meet without success. I was forced to lay off staff and downsize considerably. Still business did not improve and like many other enterprises, the mountain of debt only seemed to increase. Late payments caused my interest rates to soar. My overdraft balance began to increase dramatically. I had very few options, as my credit had been severely damaged. Therefore, I was unable to secure even a short-term loan to pay off these multiple debts.

Of course, there was also a certain amount of procrastination on my part. I felt ashamed at having made what I thought to be a poor business decision. I found it difficult to speak with my friends in regards to my financial situation and even my wife did not know the full extent of the damage that had already been done. This was quickly made clear when the creditors began calling my home and office.

I began to worry that my personal assets (the house, the car and a small boat) could very well be seized. My credit cards had reached their maximum limit and my bank account was dangerously low on funds. I took the decision to close the business as it just wasn’t generating enough income to cover the costs along with the debt repayments. However because I was trading in my own name a proportion of the debts fell to me personally. I was definitely up against it and didn’t know where to turn. Thankfully, a friend of mine informed me of what is known as an IVA.

The Process and Advantages

I first met with an IVA advisor. He carefully scrutinised my situation and fully assessed my income, assets, expenditures and debts. He also explained to me that bankruptcy was an option (although I did not wish to consider such a position). By examining all of my financial resources, he was able to determine the realistic amount of money each month that I was able to pay to my numerous creditors. He gave me the extra help with debt I needed and drafted a payment proposal that was sent to these firms. After approximately two weeks, all of my creditors had the opportunity to consider the payment proposal and they all agreed to accept it.

I could not believe how my position had changed. Not only was I able to reduce my monthly payments to a single payment that I could actually afford but I was even able to write off a significant amount of my initial debt (nearly half of the total). It was even more reassuring when I learned that my home was protected, although I had to sell the boat, and the harassing phone calls would stop. This IVA allowed me and my family to return to solid ground. I was more easily able to manage my financial difficulty and through my IVA, I am happy to say that I have once again found myself free from the nightmare of uncontrollable debt.

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