There are a number of options available to debtors with personal financial difficulty:
- Individual Voluntary Arrangement (IVA)
- Debt management
- Full and final settlement
- Debt Relief Order (DRO)
Debt management is very popular with consumer debt. It is often considered to be a debt for life as there is no debt-forgiveness. Full and final settlements are useful if you have access to sufficient resources to make a reasonable offer to creditors.
For many years consolidation was popular due to the possibility or re-mortgaging. This is very difficult in the current climate.
Debt relief orders were introduced last year. It is for individuals who have debt of less that £15,000. The individual must have a monthly surplus of income over expenditure of less than £50 and must not have assets of greater than £300.
This is an inexpensive debt solution as the fee payable by the debtor is only £90.
An individual can go bankrupt in three ways:
- On a voluntary basis
- By a petition by a creditor who is owed £750 or more
- By the supervisor of a failed IVA
A debtor may petition for his own bankruptcy on the grounds that he cannot meet debts. The debtor must arrange a hearing date at the local court, and on the day of the petition hearing, he will be required to complete the petition forms 6.27 and 6.28. A fee of £625 must be paid to the court in cash before the bankruptcy order is made. This consists of a court fee of £175 (increased on the 06/04/2011 from £150), and Official Receiver’s fee of £450.
A District Judge will review the petition papers, and if he is satisfied that the fact as stated in the forms is true, then a bankruptcy order is made.