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Given everything that’s happened over the last couple of years, it’s hardly a surprise that insolvencies are forecast to rise.  If you’re concerned that you’re on the point of insolvency, here’s a quick guide to what you need to know.

You can get free debt advice

If you’re concerned that you’re insolvent, or close to it, you need personalised debt advice.  You may be able to get this from a charity for free.  Check both national and local charities as you may get quicker help from the latter.

If you can’t get seen by a charity in the sort of timescale you’d like, you might want to consider paying for debt advice.  This may seem counterintuitive, given that you’ll want to save as much money as you can.  It can, however, be worth it both for your peace of mind and for quick, practical assistance.

If you do go down this route, however, make sure you thoroughly investigate the credentials of any company you’re considering using.  Essentially, make sure that they can actually give you more help than you could get for free through an online forum.

You may qualify for a “breathing space”

The “Debt Respite Scheme” comes in two forms, standard and mental health.  There are different qualifying criteria and rules for each scheme.  In principle, however, both schemes work in much the same way.  You get legal protection from creditor action for up to 60 days.  Interest, fees and charges are also frozen.

During the breathing space, you must keep up-to-date with the minimum payments on everything you owe.  You must also work with a debt counsellor to come up with a way forward.  This way forward may involve some form of insolvency.  That cannot be ruled out.  There may, however, be other options you might have thought of or managed to organize yourself.

For example, your debt counsellor may be able to negotiate with your creditors for you.  They may agree to write off some of your debt, lower interest and/or extend the payment term so the monthly repayments become more affordable.  Remember, this is likely to be in their best interests too.

Firstly, most, if not all, of your creditors are very likely to be regulated.  This means they are required to show forbearance to people in difficult circumstances.  This includes people dealing with debt.  Secondly, it makes no sense for them to push you into insolvency if you will give them at least as much without being made insolvent.

Remember there are different kinds of insolvency

There are three main kinds of insolvency.  These are Debt Relief Orders (DROs), Individual Voluntary Agreements (IVAs) and Bankruptcy.  DROs are essentially a straightforward route to insolvency for people with low debts and minimal assets.  If you have higher debts and no assets, then bankruptcy is likely to be the right option for you.

The exception to this is if you are in a profession that would be impacted by bankruptcy.  In that case, an IVA might be a better option.  With that said, if you are asked to declare insolvency rather than specifically bankruptcy, you will have to declare an IVA.

For most people, an IVA is only really worth considering if you have significant assets and want to hold on to them.  The most obvious example of this is the family home.  You may well be emotionally attached to this and also have practical reasons to want to keep it.  IVAs can be a good option here but you should think very carefully before you make a final decision.

Keep in mind that IVAs last a lot longer than bankruptcy.  If your circumstances change, you may end up being unable to fulfil the IVA and having to go bankrupt anyway.  In this situation, it may be best just to grit your teeth and just go straight for bankruptcy.

For help and advice, please get in touch.

Blackpool: 01253 299 399 | Carlisle: 01228 558 899