When - you owe less than £20,000, have less than £50 per month ‘available income’ and have assets worth less than £300, or a car worth less than £1000 a Debt Relief Order (DRO) can help.
A DRO costs £90 and can be paid for in instalments, but must be paid within 6 months.
Pros – your debts will be frozen for 12 months and then written off .Unlike bankruptcy there is no investigation into your financial affairs, so long as you fit the above criteria your application will be accepted. Creditors should not chase you for payment. It allows you a fresh start.
Cons – In the same way as bankruptcy, you will be restricted for 12 months. This means you have to disclose any change in your circumstances to The Official Receiver, during that period. A DRO also carries the same weight as a bankruptcy in terms of its effect on your credit file.
When - you owe at least £5,000 worth of debt and do not have any assets bankruptcy can be ideal choice.
If you have no available income or assets, all debts put into the bankruptcy are in affect written off.
Pros – usually you can be discharged from bankruptcy within 12 months. Creditors are not allowed to contact you from the date of Bankruptcy.
Cons – it costs £680 to declare yourself bankrupt. Your credit rating will be affected for 6 years. If your income is high enough, you will be asked to make payments towards your debts for 3 years. If you own your home it might have to be sold as will some of your possessions, for example, your car and any luxury items you own. Pension and savings might be taken by the official reciever. Some professions do not let people who have been made bankrupt carry on working. If you own a business it might be closed down and the assets sold. Going bankrupt can affect your immigration status. Your bankruptcy will be published publicly unless you fear for your safety due to domestic violence.
When - a legally-binding arrangement to pay an agreed amount off your debts over a set period. Any unpaid parts of your debts that were included in the IVA are written off when the arrangement is completed.
IVAs can be specifically tailored to your circumstances. Some are based on a monthly installment plan over a fixed term (normally five years), or for other a short term arrangement IVA maybe more suitable, for example if you have a lump sum of money to put down. In some cases an IVA can be a mixture of both
Pros – can be flexible and safeguard your property and stop a creditor making you bankrupt. One Monthly payment and creditors cannot chase you.
Cons- it is still a legal remedy to your debts and will affect your credit rating. If there is equity in your house you might be asked to remortgage to raise money to pay off your debts.