Serious debt problems can be very stressful and are often seen as insurmountable. When the amount owed becomes more than you could ever hope to repay, it is easy to think there is no way to begin to tackle the debt, which is when many people turn to bankruptcy as the only way out. In some cases bankruptcy is indeed the best long term solution, but it is a drastic step to take and should never be the only option considered.
In the UK the government introduced a scheme called Individual Voluntary Arrangements, or IVAs, which were originally designed as an alternative to bankruptcy for small businesses. They are now very widely used for problems of personal debt, as the consequences are less serious than with bankruptcy. They provide a full and final settlement of unsecured debts, without having the lasting legal restrictions or the stigma that filing for bankruptcy brings with it.
In the US, the most common and most effective alternative to bankruptcy is debt settlement negotiation. This has the same effect as an IVA, in that you end up with one affordable monthly payment, and a large portion of your debts are written off.
There are many similarities between the positive aspects of an IVA and those of declaring bankruptcy. With both courses of action your debts immediately stop mounting up and all the dealings with your creditors are taken over by someone else. This puts an end to the constant hounding by creditors that some people suffer. Unlike in bankruptcy, IVAs only cover unsecured debts, so things like mortgages cannot be included. This does mean that you are far less likely to lose your home with an IVA.
There are costs involved in either declaring bankruptcy or setting up an IVA. The companies who do this need to be paid, either in fees as with bankruptcy, or usually through your monthly payments with an IVA. However, the costs involved in setting up an Individual Voluntary Agreement should generally be less than those for filing bankruptcy.
Debt Management Plans are often put forward as alternatives to bankruptcy, and while these also result in a single monthly payment, they do not actually write off any of the debt you owe. They are generally for people whose situation is not quite as serious as someone who might need an IVA or debt settlement. Unlike IVAs, debt management plans are not legally binding agreements, so if any of your creditors do not want to play ball, they don’t work. With an IVA, you just need the creditors for 75% of your debt to agree to the arrangement and the rest are legally bound by it too.
To qualify for an IVA you normally need to have at least £10,000 worth of debt to more than one unsecured creditor. You will also need to be a UK resident with some regular income to pay towards your debts. Because IVA providers get fees from setting up these arrangements, some less scrupulous companies may recommend them even if they are not the best option. For this reason you need to ensure that you find reputable companies and check with more than one in order to compare offers.
Read recommendations for the most reputable IVA UK Companies.
Saturday, 24 October 2009
Friday, 23 October 2009
Can You Be Sued For Credit Card Debts - What To Do If You Are Being Sued For Debt
Being sued for debt is a frightening thought, but is an increasingly likely scenario for many consumers struggling through the credit crunch. One of the most common forms of consumer debt is money owed to credit card companies. The reason for this is not least because it is often very easy to get credit in the first place and much harder to keep track of plastic spending compared to hard cash coming out of your bank account. When times get tough, it is often credit cards we turn to in order to pay the bills or buy the things we need.
If you do find yourself in a serious debt crisis where you are unable to meet your commitments to pay back what you have spent, you may well be threatened with legal action by the credit card companies. They are well within their rights to sue you for their money, but they are only likely to do this if they think that is the course of action which is most likely to get back what you owe them.
Ideally, you should not be letting things go as far as being taken to court, but if you are already at that stage, it may not be as bad as you think. You cannot be sent to prison for an unpaid credit card bill if you have not been to court before. If the court judgement goes against you, the judge will order you to pay back the money you owe at a rate which the court thinks you are able to pay. They will examine your finances in order to make this judgement about what you can afford each month.
The best option is of course not to let your debts mount up in the first place, but this is easier said than done. If you already have substantial credit card bills that you are unable to pay, your best option is to try to negotiate a settlement with the card companies. This too is easier said than done, particularly if you do not understand how card companies operate.
Many people in this situation turn to debt settlement agencies, but you will need to pay them for this service, so ultimately it ends up costing you a lot more than if you do it yourself. If you understand how credit card settlement works, and can time your negotiations properly, you should be able to come to an agreement that will result in a large proportion of your debt being written off.
It is important to know what to say to the card companies and you need to understand the procedures they go through in order to time your negotiations to achieve the best results. Getting this right can make the difference between not reaching any agreement to settle, and achieving a settlement that writes off a huge chunk of what you owe, getting you out of debt in one stroke.
With the right guidance and information, you can negotiate directly will all the credit card companies you owe money to, and achieve the best possible settlement deals without paying substantial fees to a debt settlement company for their services.
Find out how you can learn how to settle debt.
If you do find yourself in a serious debt crisis where you are unable to meet your commitments to pay back what you have spent, you may well be threatened with legal action by the credit card companies. They are well within their rights to sue you for their money, but they are only likely to do this if they think that is the course of action which is most likely to get back what you owe them.
Ideally, you should not be letting things go as far as being taken to court, but if you are already at that stage, it may not be as bad as you think. You cannot be sent to prison for an unpaid credit card bill if you have not been to court before. If the court judgement goes against you, the judge will order you to pay back the money you owe at a rate which the court thinks you are able to pay. They will examine your finances in order to make this judgement about what you can afford each month.
The best option is of course not to let your debts mount up in the first place, but this is easier said than done. If you already have substantial credit card bills that you are unable to pay, your best option is to try to negotiate a settlement with the card companies. This too is easier said than done, particularly if you do not understand how card companies operate.
Many people in this situation turn to debt settlement agencies, but you will need to pay them for this service, so ultimately it ends up costing you a lot more than if you do it yourself. If you understand how credit card settlement works, and can time your negotiations properly, you should be able to come to an agreement that will result in a large proportion of your debt being written off.
It is important to know what to say to the card companies and you need to understand the procedures they go through in order to time your negotiations to achieve the best results. Getting this right can make the difference between not reaching any agreement to settle, and achieving a settlement that writes off a huge chunk of what you owe, getting you out of debt in one stroke.
With the right guidance and information, you can negotiate directly will all the credit card companies you owe money to, and achieve the best possible settlement deals without paying substantial fees to a debt settlement company for their services.
Find out how you can learn how to settle debt.
Wednesday, 21 October 2009
Can A Credit Card Company Sue You - Being Sued For Debt How To Avoid It
Credit card companies and collection agencies are quite within their rights to take legal action against you if you have failed to pay a debt that you legitimately owe. Taking out credit is a legal agreement, so if you fail to keep up with your end of the bargain by not paying the money back when it is due, you can be sued.
This does not mean that it is a foregone conclusion that you will be sued, as it can depend on many other factors. Taking someone to court will obviously cost the card company money, so they will want to weigh up the cost in legal fees and staff time, compared to what they are realistically likely to get back at the end of the process.
The fact that you are sued does not magically bring money out of the air for the card company, so if you genuinely cannot afford to pay back what you owe, being sued will not change that. If they successfully sue you, you will be ordered to pay back the money at a rate which the court decides you can afford, after looking at your finances.
You do not want a court judgement against you if you can help it, of course, so it is much better to deal with the problem before it gets to the stage of going to court. By far the best way to deal with credit card debt is to agree a settlement with the company. This may sound easier said than done, because it is, but it is perfectly possible to agree settlements for much less that you owe, if you understand how the card companies work.
My usual advice to anyone in debt would be to never ignore the issue and to talk to your creditors and try to establish a relationship. However, credit card debt is quite a distinct area of debt and requires some specialist advice. For instance, at certain times, it may actually help to ignore approaches from the card company, because timing, in settlement terms, is everything. Judging when to negotiate and when not to, can make the difference between not achieving a settlement and wiping out most of your debt.
The main choice you have to make if you are in serious debt to credit card companies is whether to try to reach settlements with your creditors by undertaking negotiations with them yourself, or whether to use a professional company to do this on your behalf. If you wish to do it yourself, it is difficult if you do not have any experience or understanding of how card companies operate, but is still perfectly possible if you get the right help and advice.
A debt settlement company will know what to do and the good ones are likely to get reductions on your debts of up to 60%, but you will need to pay them a proportion of what they save you as their fees. The advantage of doing it yourself is that you maximise the reductions you achieve by not having to pay a settlement company.
Read a detailed guide on how to negotiate debt.
This does not mean that it is a foregone conclusion that you will be sued, as it can depend on many other factors. Taking someone to court will obviously cost the card company money, so they will want to weigh up the cost in legal fees and staff time, compared to what they are realistically likely to get back at the end of the process.
The fact that you are sued does not magically bring money out of the air for the card company, so if you genuinely cannot afford to pay back what you owe, being sued will not change that. If they successfully sue you, you will be ordered to pay back the money at a rate which the court decides you can afford, after looking at your finances.
You do not want a court judgement against you if you can help it, of course, so it is much better to deal with the problem before it gets to the stage of going to court. By far the best way to deal with credit card debt is to agree a settlement with the company. This may sound easier said than done, because it is, but it is perfectly possible to agree settlements for much less that you owe, if you understand how the card companies work.
My usual advice to anyone in debt would be to never ignore the issue and to talk to your creditors and try to establish a relationship. However, credit card debt is quite a distinct area of debt and requires some specialist advice. For instance, at certain times, it may actually help to ignore approaches from the card company, because timing, in settlement terms, is everything. Judging when to negotiate and when not to, can make the difference between not achieving a settlement and wiping out most of your debt.
The main choice you have to make if you are in serious debt to credit card companies is whether to try to reach settlements with your creditors by undertaking negotiations with them yourself, or whether to use a professional company to do this on your behalf. If you wish to do it yourself, it is difficult if you do not have any experience or understanding of how card companies operate, but is still perfectly possible if you get the right help and advice.
A debt settlement company will know what to do and the good ones are likely to get reductions on your debts of up to 60%, but you will need to pay them a proportion of what they save you as their fees. The advantage of doing it yourself is that you maximise the reductions you achieve by not having to pay a settlement company.
Read a detailed guide on how to negotiate debt.
Monday, 19 October 2009
IVA UK - Information and Advice On How To Find The Right IVA Company
An IVA is a debt solution which is only available in the UK. It stands for an Individual Voluntary Arrangement and is a formal agreement between you and your creditors, which is negotiated by an Insolvency Practitioner. The basis of the agreement is that you make payments of an agreed amount over a specified period of time (usually five years) after which your debts are considered to be fully settled. This usually involves writing off a significant portion of the debt.
From the date of the IVA, the amount of your debt is usually frozen and you should not be charged any further interest or penalty charges. It is often seen as a better option than bankruptcy for people who are faced with the need to get rid of debts which they can’t afford to repay. Even though an IVA lasts longer then bankruptcy, it does not have the stigma or some of the legal consequences that bankruptcy brings with it.
For example, you can carry on using your bank account without declaring that you have an IVA, and there are no jobs that you will be prohibited from working in, as there are for anyone who has been made bankrupt. Also, your house may be excluded from the IVA if the Insolvency Practitioner agrees, so the risk of losing your home is less with an IVA.
An important point about an IVA is that, unlike a Debt Management Plan, which is a completely informal arrangement, the IVA is legally binding. If at least 75% of your creditors agree to the IVA, then the remaining ones are bound to it whether they like it or not. The 75% agreement relates to the proportion of the debt in monetary terms, not the number or creditors. So if 75% of your total debt was owed to two companies, you would only need the agreement of those two companies for the IVA to also bind the other people who are owed money. So if you have already looked at a Debt Management Plan or other informal agreement, and some of your creditors will not agree to it, an IVA could be a better alternative.
IVAs do of course cost money, because the companies who negotiate and administer the schemes need to be paid for their work. Generally you do not need to find this money up front and it will be included as a proportion of the monthly repayment amount that you agree. The cost is still less than the cost for declaring bankruptcy, and provided a good proportion of your debt is written off, it can seem like money well spent.
Care should be taken when selecting an IVA company, however, as rates can vary enormously. You must also bear in mind that when discussing the options for dealing with your debts, these companies stand to gain financially from the decision you make. You should therefore take care to select a reputable company in the first place, who will properly consider your particular situation, offer you advice then allow you to choose the best option, rather than pressurise you to go for the scheme that will generate the biggest income for them.
Read more about IVAs, including recommendations for the top IVA UK Companies.
From the date of the IVA, the amount of your debt is usually frozen and you should not be charged any further interest or penalty charges. It is often seen as a better option than bankruptcy for people who are faced with the need to get rid of debts which they can’t afford to repay. Even though an IVA lasts longer then bankruptcy, it does not have the stigma or some of the legal consequences that bankruptcy brings with it.
For example, you can carry on using your bank account without declaring that you have an IVA, and there are no jobs that you will be prohibited from working in, as there are for anyone who has been made bankrupt. Also, your house may be excluded from the IVA if the Insolvency Practitioner agrees, so the risk of losing your home is less with an IVA.
An important point about an IVA is that, unlike a Debt Management Plan, which is a completely informal arrangement, the IVA is legally binding. If at least 75% of your creditors agree to the IVA, then the remaining ones are bound to it whether they like it or not. The 75% agreement relates to the proportion of the debt in monetary terms, not the number or creditors. So if 75% of your total debt was owed to two companies, you would only need the agreement of those two companies for the IVA to also bind the other people who are owed money. So if you have already looked at a Debt Management Plan or other informal agreement, and some of your creditors will not agree to it, an IVA could be a better alternative.
IVAs do of course cost money, because the companies who negotiate and administer the schemes need to be paid for their work. Generally you do not need to find this money up front and it will be included as a proportion of the monthly repayment amount that you agree. The cost is still less than the cost for declaring bankruptcy, and provided a good proportion of your debt is written off, it can seem like money well spent.
Care should be taken when selecting an IVA company, however, as rates can vary enormously. You must also bear in mind that when discussing the options for dealing with your debts, these companies stand to gain financially from the decision you make. You should therefore take care to select a reputable company in the first place, who will properly consider your particular situation, offer you advice then allow you to choose the best option, rather than pressurise you to go for the scheme that will generate the biggest income for them.
Read more about IVAs, including recommendations for the top IVA UK Companies.
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