How do I get my debts written off?
If you are looking to write off your debts in the UK, there are 2 formal solutions which can achieve this.
It sounds too good to be true:
Yes, it does! Like everything which has positives, a debt solution may come with negative consequences too. So it is important that you consider your options carefully before entering into a formal plan.
There are 2 options which can write off debt.
- Bankruptcy – for a one-off fee, you can declare yourself bankrupt. An official receiver will take control of your estate and step into your shoes. This will come with a host of negative consequences which you can read about throughout this site.
- IVA – the soft approach? If you have over £5000 worth of unsecured debt, you can consolidate all of this debt into one low monthly payment which is based on your affordability. IVA’s are becoming more and more common. It is 100% confidential and is a formal solution to your debt problems.
How does it work?
- Your advisor will run through your income and expenditure.
- Your advisor will work out allowances for your general daily spending and money to cover your bills.
- With the rest of the money, you will contribute this towards an IVA (minimum £90 per month).
- Using Government legislation, you will agree to pay a percentage of your debt off over 60 low monthly payments.
- At the end you are completely debt free, the rest of your debt will be totally written off.
- You are now debt free!
Write off debt with a Government scheme
A lot of people ask us is an IVA a legitimate debt solution? Is it really a government debt scheme? What is the new legislation to write off debt?
Well to put minds at rest, here is some information below to clarify:
- The IVA was established and governed by Part VIII of the Insolvency Act of 1986, and is presented to the creditors of the debtor via an Insolvency Practitioner, as a formal repayment proposal.
- An individual voluntary arrangement (IVA) is a formal alternative used to avoid bankruptcy.
- Insolvency Practitioners are regulated by the Insolvency Practitioners Association (IPA).
- This IVA is a contractual arrangement with creditors, that can be flexible in the same way that an individual’s circumstances may be. The base of an IVA can be capital, third party payments, income or any combination of these.
Government debt write off
After priority creditors and necessary expenses, a debtor can arrange an individual voluntary arrangement in this process, if sufficient money remains. In the case where serious problems exist, debtors may wish to consider a debt management plan after taking independent advice. Read about the advantages and disadvantages of IVA’s here.
The IVA proposal is discussed at a creditors’ meeting, called for creditors to take a decision. The return that is given to creditors is often higher, than what would have been received in the case of bankruptcy. A vote is taken based on value. For there to be approval of the arrangement, at least 75% in value of the creditors who vote at the meeting, whether in person or by proxy must agree.
If any of the persons voting are in fact ‘associates’, such as friends, family or business associates, then there must be a second count. During this count, 50% of the non-associated creditors must give approval.
Government debt help scheme
The original purpose of IVAs was to provide relief, to the debts that resulted due to business insolvency. Recently with the increasing levels of consumer debt, there have been many to insolvent individuals who have non-business generated debts, and require the legal protection available within an IVA.
Now they are used to write off:
- Benefit overpayments
- Payday loans
- Catalogue debts
- Credit card debt written off
People with large amounts of assets which they wish to protect, may express the most interest in IVAs. These types of assets include expensive cars and high-equity cars for example, and are not directly at risk under an IVA, as may be the case in a bankruptcy.
Frequently asked questions
Q. Can a debt be written off?
Debts can be written off formally through an Individual Voluntary Arrangement (IVA). This applies to people who have £5000 or more of unsecured debts: such as loans, credit cards, overdrafts, payday loans etc.
Q. Can I go to jail for debt?
It is unlikely that you will end up in jail for not paying your bills on time. It is more likely that your creditors will instruct bailiffs or debt collectors to try to reclaim the money.
Q. Can the Government write off my debt?
Debts can only be written off formally through either bankruptcy or insolvency.