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DROs could speed up insolvencies

admin — Sun, 03 May 2009 10:47:16 +0000

Some industry officials have expressed concern that the level of insolvencies in the UK could be increased and sped up as a result of a new scheme that has come into play recently.

A DRO or Debt Relief Order provides a fast and cheap alternative to bankruptcy, and some feel that these DROs will result in a sharp rise in insolvency levels in the UK, and that the level of insolvencies could even reach record highs by rising by around 20 percent.

Borrowers that meet the criteria could have their debt written off through these DROs. In order to qualify the borrower will need to have debts of £15,000 or lower, and will have to have assets of no greater than £300 in value, and disposable income of no more than £50 a month after all essential payments have been made. It is thought that much of the rise in insolvencies this year, which many officials have predicted, could be the result of the availability of DROs.

One industry expert said: ‘DROs will bring new people into the insolvency system,’ he said. ‘We are talking about people with very little income, no assets and debts of £15,000 or lower. Until now, they are the sort who would have made token payments on the debt or simply laid low until the six-year limitation on debt enforcement was passed.’

Whilst some people are unable to consider bankruptcy due to the costs involved and other factors, DROs are much cheaper and in some cases could cost nothing, making them a more viable option for many. As part of the process the borrower asks the official receiver to write off their debts, and if all goes well could start afresh in just twelve months.

DROs could speed up insolvencies is a post from: Glitec Loans

Some debts could be written off by debt management firms and charities

admin — Wed, 04 Jun 2008 08:37:27 +0000

New government regulations that have been introduced could result in debt agencies and charities in the UK being able to write off a portion of clients’ debts even in the event that creditors are not happy about the matter. Many people that are struggling with their debts now turn to debt management agencies and charities, and are often put onto a debt management plan, where they pay a set amount each month to the agency, and this is then distributed amongst the creditors on a pro rata basis.

The new regulations will provide these debt management agencies and charities with a number of new rights. They will be able to write off a portion of the client’s debt themselves in some cases, despite any objections from the creditors. In addition to this the agencies and charities will be able to enforce a repayment structure for the remainder of the debt, even if the creditors are not happy with it. At present there are often difficulties encountered when creditors disagree with repayment schedules.

There are also some other changes that have resulted from the new regulations. Where the client owes money to a utility company the company will not be able to cut off their supply whilst the client is part of the debt management plan. Also, creditors will not be able to force the client to file for bankruptcy if they are in a debt management plan and are making repayments via the plan.

An official from the Justice Ministry stated: ‘Such schemes depend on the voluntary participation of the debtor and creditors and operate without any form of regulation.’ He also said: ‘There is currently no power to compel creditors to adhere to the terms of a debt repayment plan.’

It also said that debt companies and charities would be able ‘to write off a proportion of the debts where a debtor complies with a plan, but cannot repay the full amount in reasonable time.’

Acknowledge and deal with your debts

admin — Mon, 26 May 2008 05:09:11 +0000

It can be very tempting for those with a high level of debt and financial commitment to simply try and ignore their financial worries once difficulties set in. Many people think that burying in their heads in the sand and trying to ignore financial worries means that they will not get stressed over the situation, but in fact failing to address this sort of problem can actually make the whole situation much worse, and could ultimately result in health problems, family problems, credit problems, and even legal action – or worse still loss of your home if you have secured finance.

Part of dealing with any problem is to actually acknowledge that the problem exists, and therefore you should never try and push financial worries to the back burner, as they can quickly get worse and spiral out of control, which can make it even more difficult to regain control over your financial situation. You will know when your financial commitments become too much, as you will regularly struggling to make ends meet and may even find that you are paying out more than you are bringing in, which means that you are probably relying on credit to fund day to day living and pay bills.

However, relying on credit such as credit cards and loans to fund your bills and payments can be very dangerous, and can quickly lead to unmanageable debt levels. You need to make sure that you are not relying on credit to make up your finances on a regular basis, as things will soon come to a head otherwise. Rather than relying on credit to try and make up your money each month you need to look at a longer term solution that will not lead to spiralling debt, such as cutting back on your outgoings.

There are a number of ways in which you may be able to cut back on your outgoings in order to ease the financial strain. You may find that simply by going through your income and outgoings you can find ways to reduce the amount that you are spending each month, perhaps by simply cutting back on the amount that you are spending on going out, clothes, general spending etc. You may also find that you can reduce your outgoings by switching certain products and providers such as utility suppliers, phone suppliers, insurance company, etc, and by finding cheaper deals you may be able to save a fair amount each month overall.

Consolidation may prove another effective way to cut back on the amount that you are paying out each month, and you can do this in a number of ways. You could, for example consolidate all of your expensive credit cards debts by transferring these balances onto a 0% balance transfer credit card. Alternatively, you could look at taking out a low rate consolidation loan and using it to pay off all of your smaller existing credit, such as store cards, credit cards, overdrafts, smaller loans, catalogues, and more.

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Debt advice companies and charities get new powers

admin — Mon, 19 May 2008 04:32:43 +0000

Rising personal debt levels in the UK have resulted in many consumers seeking advice and debt management assistance from one of the number of debt advice companies and charities around, and many have entered into debt management plans through these firms. However, in the past they have experienced difficulties in terms of making arrangements with creditors, who are often unhappy about freezing interest, accepting lower repayments, or writing off a portion of the borrower’s debt.

However, all of this could change as a result of debt advice and debt management companies and debt charities being given new powers that could allow them to take more control no matter what the lenders think. Under the new powers, which are in the Tribunals, Courts and Enforcement Act passed last year, these debt companies and charities will be able to write off a portion of the client’s debt themselves no matter that the lender thinks of the situation.

In other changes that come as part of the act, utility companies that are owed money will not be able to cut off the supply of consumers that are clients of these debt companies. Likewise lenders will not be able to petition for bankruptcy if the consumer is a client with the debt company or charity. The debt firms will also be able to enforce a repayment schedule with the lenders, even if the lender is not happy about the schedule.

There are currently around 70,000 in debt management plans with these debt advice firms and charities, and with household finances becoming increasingly strained this figure could rise. In the past some consumers have found that lenders have refused to accept certain offers even if they have been put forward by their case officer at the debt firm. However, the lender may soon no longer have a choice.

One official from the Justice Ministry stated: ‘Such schemes depend on the voluntary participation of the debtor and creditors and operate without any form of regulation. There is currently no power to compel creditors to adhere to the terms of a debt repayment plan.’

Once the plans have been reviewed the Justice Secretary, Jack Straw, will provide licensing to approved debt agencies and charities so that they can utilise these powers when setting up debt management plans for their clients.

This is just one of the measures that the government is bringing in to try and help consumers with high levels of debt. Later this year a more simplified version of the IVA (Individual Voluntary Arrangement) is due to be brought in, and this could help more people to find a suitable solution to deal with their debts. In April of next year and simplified form of bankruptcy filing known as a Debt Relief Order is to be brought in, and this can help those with under £15,000 of unsecured debt.

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Debt advice companies and charities get new powers is a post from: Glitec Loans

Refinancing mortgage could prove costly to IVA consumers

admin — Mon, 31 Mar 2008 11:37:18 +0000

Many struggling borrowers in the UK have entered into an IVA over recent years, with awareness about this process having been raised through a series of advertisements put out by IVA firms. An IVA, or Individual Voluntary Arrangement, is a legally binding agreement that is known as a softer alternative to bankruptcy. This process is designed to help those with a high level of unsecured debt to benefit from more affordable monthly repayments and to get out of debt more quickly.

However, industry experts state that there could be a problem if you have entered into an IVA and you are a homeowner. The IVA does not require the homeowner to sell their home, but there is a clause in the agreement that requires them to use the equity in their home to put towards their debts in the final year of the programme. The IVA usually lasts for five years, and in the final year homeowners will have to borrow against any equity in their home to pay some more towards their debts, and this could prove very costly.

For many homeowners in an IVA programme interest rates are far higher now than they were when they originally took out their mortgage, and for many this may mean having to remortgage on a much higher rate, or borrow money against their equity at a higher rate. In addition to this, the consumer will be charged additional interest as a result of being classed as a sub-prime customer due to being in an IVA programme.

One industry official stated: ‘There is a problem here. People in an IVA will be remortgaging into something significantly more expensive. Not only are mortgage rates higher than when these people bought their houses, but they could well be classified as sub-prime – that is to say as riskier borrowers who need to be charged more to compensate for that risk.’

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Refinancing mortgage could prove costly to IVA consumers is a post from: Glitec Loans

Are you a homeowner on an IVA programme?

admin — Wed, 19 Mar 2008 07:29:45 +0000

Awareness over Individual Voluntary Arrangements, or IVAs, has increased over the last couple of years, with a number of firms putting out advertisements relating to this type of debt solution. An IVA is known as a softer alternative to bankruptcy and is designed to help those in high levels of unsecured debt to get out of debt more quickly.

The term of the IVA is usually five years, and eligible consumers agree to make a set repayment each month, which is then distributed amongst the different creditors. The remainder of the debt following the specified term is then written off, leaving the borrower debt free.

The good thing about an IVA is that the person entering into the agreement does not have to lose their home in the event that they are a homeowner, and this comes as welcome relief to many homeowners who have huge unsecured debts that they can no longer manage to pay, as it gives them a chance to cut back their outgoings and get out of debt within the space of five years.

However, there is a downside, and this has been highlighted in a recent report, which claims that some homeowners that have entered into an IVA could soon find themselves having to pay a fortune in mortgage interest as the result of a clause that is in the IVA agreement. As part of the IVA the homeowner has to use the equity in his or her property in the last year of the agreement in order to put towards their debt, and experts have stated that this could cause a problem for some homeowners, as it could cost them dearly in terms of interest.

According to reports having to borrow against the equity in the home in the last year of the agreement means that some homeowners will have to take out a mortgage or secured loan at a far higher rate than the one that they currently have, and this is due to rises in interest rates. However, it does not end there. Another problem that these people are likely to suffer is the fact that they will be classed as high risk borrowers due to their IVA, and this means that they will be hit by even higher interest rates when borrowing against the equity in their homes.

An industry official from an insolvency firm recently stated: ‘There is a problem here. People in an IVA will be remortgaging into something significantly more expensive. Not only are mortgage rates higher than when these people bought their houses, but they could well be classified as sub-prime – that is to say as riskier borrowers who need to be charged more to compensate for that risk.’

IVA homeowners that are looking to borrow against the equity in their homes as part of their IVA agreement are advised to shop around and compare different mortgages or secured loans in order to find the most competitive deal, although they should be prepared for the higher interest rates that will be charged due to market conditions and due to their sub-prime status.

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Are you a homeowner on an IVA programme? is a post from: Glitec Loans

IVA homeowners could face problems

admin — Tue, 18 Mar 2008 10:16:24 +0000

Over recent years Individual Voluntary Arrangements, or IVAs, have become increasingly popular with borrowers that have found themselves in unmanageable levels of debt. With an IVA, if agreed, the borrower pays a set amount each month, which is then distributed amongst all creditors on a pro rate basis, and the term of the agreement is usually five years. At the end if the five year period any remaining debt is written off leaving the borrower debt free.

However, there is a clause in the IVA agreement with relation to homeowners. Whilst those that have entered into an IVA do not have to sell their home in order to go through this process, the clause states that in the final year of the IVA the homeowner must use any equity in the home to put towards the outstanding debt, and this could result in these consumers facing crippling interest rates. Experts state that it means the homeowner will have to take out finance against the equity in the home, and this will probably be at a far higher rate than when they originally took out their mortgage.

IVA homeowners will also face a second blow, as their poor credit profile resulting from the IVA means that they will have to pay an even higher rate of interest on the money they borrow, which could make the repayments crippling.

One industry professional stated: ‘There is a problem here. People in an IVA will be remortgaging into something significantly more expensive. Not only are mortgage rates higher than when these people bought their houses, but they could well be classified as sub-prime – that is to say as riskier borrowers who need to be charged more to compensate for that risk.’

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IVA homeowners could face problems is a post from: Glitec Loans

Does it make sense to consolidate?

admin — Tue, 11 Mar 2008 08:29:53 +0000

Consolidation of debts is a term that many of us have become increasingly familiar with over recent years, with many of us turning to consolidation in order to try and eliminate higher interest debts. If you are able to get your hands on a low rate consolidation loan with cheap repayments you could really feel the benefits of consolidation, but this is not necessarily a solution that is right for everyone in debt.

There are, of course, many people that can benefit from debt consolidation, and these are people that can afford the monthly repayments on their consolidation loan, are able to get a consolidation loan based on their circumstances and credit, and have the willpower to maintain repayments on the loan without running up other debts again.

Consolidation loans are available from a wide range of lenders, and can be taken out on a secured or unsecured basis depending on your needs and circumstances.

If you are a homeowner and you have good credit then you can usually choose whether you want to opt for a secured or unsecured loan depending on the amount that you wish to borrow coupled with other factors. If you are a non-homeowner you can only go for an unsecured one, and will therefore need decent credit. If you have bad credit then you may find it difficult to get an unsecured consolidation loan, and may therefore need to be a homeowner.

The good choice of consolidation loans available means that you should be able to find a loan with competitive rates of interest and affordable repayments, and if you take the time to compare a number of loans from a wide range of lenders you can boost your chances of finding an affordable loan. By consolidating your debts by repaying them and replacing them with one larger, lower interest loan you can reduce the amount that you have to pay out each month, and you could ease financial management with just one debt to deal with.

Consolidation of debts is not appropriate for everyone. Some people may find that their debt levels are so high that they cannot keep up with repayments on a consolidation loans. Some people may find that they cannot get a consolidation loan due to their credit or due to some other factor. Some may not be able to exercise enough willpower to resist running up credit and store card debts again after repaying them through the consolidation loan. This can result in an ever worse situation, leaving the borrower to repay their original debts as well as the consolidation loan.

Debt consolidation can be a very effective and sensible solution for many people, but there are other debt solutions available for those that do not qualify or do not feel that debt consolidation is for them. Some of these solutions include debt management plans, debt advice and counselling, or in severe debt circumstances an IVA could be considered.

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Does it make sense to consolidate? is a post from: Glitec Loans

Options That Can Help Clear Your Debts

admin — Sun, 09 Mar 2008 19:19:40 +0000

These days, with the level of consumer debt in the UK at record highs, many people find themselves suffering from debt problems, and once these problems start they can quickly spiral out of control. Often, it is people with a number of high interest debts such as credit cards, store cards, and high interest loans, that find themselves experiencing problems when it comes to repayments, and with interest rates still high coupled with food, energy, and petrol costs on the rise, the financial outlook for those in debt can be very bleak.

Experts have urged those in debt to remember that burying your head in the sand is not the answer, as the situation will only get worse until you end up in court, and in the meantime your physical and mental health could suffer, not to mention your home life, your relationships, and other aspects of your life. It you are finding it increasingly difficult to keep up with your repayments then you need to address your debt problems right away so that you can find the best solution.

There are a number of options that are available, which could help you to clear your debts more effectively. Simply going through a debt counsellor to learn how to better manage your finances could help, as these counsellors are trained to provide financial and debt help. You could consider a debt management plan, where you can make one affordable monthly repayments to be distributed by your case officer to each of your creditors on a pro rata basis.

You may prefer to handle the situation yourself and contact each of your creditors with a view to coming to an informal arrangement about the amount you pay each month and over what period. By coming to an arrangement with your creditors with regards to reducing your repayment and extending your term to accommodation the reduction you could effectively ease your debt problems.

If you want to clear your existing high interest debts, ease financial management, and reduce monthly outgoings you may find that a consolidation loan will do the trick, and this will not affect your financial future or credit. You can use the loan to repay your current debts, and enjoy one lower rate loans with just one convenient repayment to make each month.

There are also other possible solutions for those looking to get help with their debts, and those in serious debt may wish to consider an

or bankruptcy, which – whilst not encouraged because of the long term effects on your future – may be the only option for some people because of the level and severity of their debts.

No matter which solution you decide to opt for, it will be a positive move in helping you to deal with and clear your debts. The worst thing that you can do is to bury your head in the sand and hope that the problem will go away, as it will simply continue to get worse, and can affect all areas of your life.

Will IVAs become more transparent?
Is A Secured Loan The Right Choice?
IVA homeowners face soaring interest rates [news March 2008]

Options That Can Help Clear Your Debts is a post from: Glitec Loans

Will IVAs become more transparent?

admin — Sat, 08 Mar 2008 11:30:02 +0000

In the past many consumers had no idea what an IVA was, but awareness has been raised over the past couple of years following a series of glossy advertisements run by a number of debt management agencies. An IVA, or Individual Voluntary Arrangement, is a legally binding agreement between a borrower and his or her creditors with regards to the repayment of debts. The aim of an IVA is to get the borrower out of debt more quickly, increase short term affordability for the borrower, and enable creditors to recoup some of what is owed to them.

An IVA is known as a softer alternative to bankruptcy, and enables borrowers to repay a set amount each month, which is then distributed between the creditors. This is paid for a fixed period, which is usually five years, and after this period any remaining balance on the debt is written off. In order to be eligible for an IVA you or your partner must be employed full time, and you must have at least £15,000 of unsecured debt. The majority of your creditors must also agree to the IVA before it can go through.

Over recent years there have been concerns that whilst many debt agencies have been pushing IVAs with their advertisements and marketing materials, consumers were not being told enough about the risks of this process. In addition, many creditors were clamping down on IVAs, rejecting many applications and forcing borrowers who were unable to repay their debts to take other courses of action. With more and more people trying to go down the IVA route after the mass influx of advertisements – which many said made the process sound like an easy way out of debt – creditors became even stricter about accepting IVAs.

However, a new IVA protocol has recently been developed, where debt agencies, creditors, and campaigner have all worked together in order to put together a protocol that could make this process more transparent, and could see a drop in rejections from creditors.

The Insolvency Service has been involved in drawing up the protocol, and one official from the service said: “The Insolvency Service has facilitated a process which has successfully produced a voluntary code for IVAs to reflect the changing needs of the market. It will provide greater transparency for creditors and debtors alike by using standard clauses and a consistent format. Today’s protocol is a significant achievement for everyone involved.”

The move has also been welcomed by the banking industry, and a spokesperson from the British Bankers’ Association said: “The BBA, the Insolvency Service and the participating IVA providers are united in support for this agreement, which should provide customers with the reassurances they need in order to make the right choice for their financial futures.”

An industry professional added: ‘All this does is tighten up and simplify what’s already in place. I’m not sure we will be forwarding more people for an IVA, but this means that more people should be accepted and less will have to resort to bankruptcy.

Will IVAs become more transparent? is a post from: Glitec Loans