Man in Debt Goes to Extreme Measures: Alternative Debt Advice

Ross Humphries, a man with severe debt problems is facing a three year jail term for agreeing to be a courier of 45 Kilograms of cannabis resin which was worth around £280,000. Mr Humphries received a fee of £250 for his services.

The class B drug was found in Mr Humphries car when he was stopped by police on the M1 in May 2011.

Mr Humphries was a man described as a 'hard-working family man who fell on hard times and got into debt'.


What to do in debt?

It's understandable people in debt may feel stressed and panicked about their debt problems however committing crimes to survive is not a sustainable way solution to debt.

There are numerous debt solutions which people can utilise to resolve their debt problem. These solutions include general money advice, debt management plan, refinance, full and final settlement, IVA, Trust Deed or potentially Bankruptcy.

Individual Voluntary Agreement Case Files

Ms E went through a divorce over five years ago now. Ms E now lives with her grown up kids in a rented house through her local authority. She has debt outstanding at approx £40,000. Her debts are two loans and a couple of credit cards.

After the divorce there was only her income and Child Support payments from her ex husband. As the kids are now 18 she does not receive any child support anymore and is struggling to pay her creditors. She has robbed Peter to pay Paul but is now at limits on both credit cards.

Ms E recently sought advice and called Debt Support Trust for financial help. After looking at all avenues Ms E has decided to enter an IVA.

The nominee looking after her case has sent out the proposal to Ms E and also to her creditors. Ms E has a disposable income of £300 per month. The monthly contractual payments for debt add up to £920 per month.

The meeting of the creditors has taken place and the vote went in favour of the IVA to go ahead meaning that in five years Ms E can look forward to a new beginning. Ms E will pay £300 per month into her IVA and will pay so much back to the creditors and at the end the rest will be legally written off. All interest and charges will be frozen. (Unless the IVA terms are not met then these can be added back on).

Ms E can now see light at the end of the tunnel and has no assets that the supervisor will look at so has now peace of mind.

The Individual Voluntary Arrangement (IVA)

An IVA is the Equivalent of a Protected Trust Deed but is only available in England, Wales and Northern Ireland. IVA's have helped thousands of people who face severe financial problems.

Ms E had went through a divorce over five years ago and lived with her grown up kids in a rented house through her local authority. She had debt outstanding at approx £40,000. Her debts were two loans and a couple of credit cards.

After the divorce there was only her income and Child Support payments from her ex husband. As the kids were 18 she didn't receive any child support and was struggling to pay her creditors. She was robbing Peter to pay Paul and had reached her limits on both credit cards.

After looking at all avenues Ms E has decided to enter an IVA.

The nominee looking after her case had sent out the proposal to Ms E and also to her creditors. Ms E had a disposable income of £300 per month. The monthly contractual payments for debt added up to £920 per month.
The meeting of the creditors took place and the vote went in favour of the IVA to go ahead meaning that in five years Ms E could look forward to a new beginning. Ms E now pays £300 per month into her IVA and will pay this until the IVA is complete at the end the rest will be legally written off. All interest and charges were frozen. (Unless the IVA terms are not met then these can be added back on).

Ms E could now see light at the end of the tunnel and had no assets that the supervisor would consider liquidating so she now had peace of mind.

To be suitable for an IVA you would need to meet the following criteria;

- Unsecured debt must be £12,500 or over
- You must have a monthly disposable income of £200 or greater
- You must live in England, Wales or Northern Ireland
- You must be in full time employment

Benefits Of An IVA

Your IVA would be legally binding meaning no further charges or interest could be added. It also means your creditors are not able to change their mind if they agree to your proposal

You will only be asked to make affordable repayments

An IVA enables a professional person (doctor, accountant, solicitor etc) to continue to practice whilst resolving their debt problem

Bankruptcy may affect their professional status. You may have to check your employment contract to ensure you can enter an IVA

You are likely to be able to keep your home within an IVA, usually
the Insolvency Practitioner will only be interested in any equity

You would face fewer credit restrictions entering an IVA compared to bankruptcy

Negatives Of An IVA

Any available equity in your house or other asset would have to be released for your creditors

An IVA is legally binding so defaulting on the agreement would result in your IVA failing, which could mean your creditors will proceed with bankruptcy

Your income and expenditure will be reviewed on a frequent basis which can mean your monthly contribution could fluctuate up as well as down

Your IVA would be noted within your credit file and it would remain there until you complete the IVA, and for a year after that

An IVA usually lasts for 5 years, whereas Bankruptcy would only last for 1 year

Protected Trust Deed and IVA - 'Clear Debt'

A common problem within the debt industry is the lack of clarity around debt solutions. Some websites state that it's "Easy to write off 100% of your debt" and "become debt free today". The Office of Fair Trading is clamping down on firms stating that this is possible. This article examines the truth behind the solutions where you can repay a percentage of your debt, with the rest being cleared at the end of the solution.

The debt solutions people talk about when it comes to 'writing off debt' includes the IVA and Protected Trust Deed. If you are made bankrupt you will also clear the debt you cannot afford to repay. All of these debt solutions will negatively affect your credit rating because of the default. A default on your credit rating will last for 6 years.

The IVA debt solution

The IVA (individual Voluntary Arrangement) typically lasts for 5 years and you would repay a percentage of your debt. The minimum repayment over the 5 years must be 25% however most people repay a lot more. The proposal is put to your creditors at an official meeting and if they accept the proposal your IVA will be in place. The criteria for an IVA is

- debt of at least £12,500

- minimum disposable income of £200

- at least 3 different creditors

A key criteria for the IVA is that your equity (value of your house minus what is owed to your mortgage lender) within your property does not exceed your debt and 5 years of monthly contributions.

The Protected Trust Deed solution

The Protected Trust Deed is similar to the IVA but is only available to people living in Scotland. There are legal differences between Scottish law and the rest of the UK when it comes to debt.

The Protected Trust Deed would last for typically 3 years and at least 10% of the debt must be repaid over the course of the solution. The Trust Deed is signed and advertised within the Edinburgh Gazette. After 5 weeks, if there are no objections (or less than a majority in number or a third in value) then your Trust Deed will be Protected. The criteria for a Protected Trust Deed is;

- debt of at least £10,000

- Minimum disposable income of £150

- at least 2 different creditors

If you have a house with equity then the money tied up in your house should not outweigh your debt and 3 years of monthly contributions.

There are websites, TV adverts, newspaper columns and leaflets which claim to offer miracle solutions to deal with debt. The truth is that "clearing your debts" is not as simple as it's suggested but there is a route to resolve all debt problems. It's essential when dealing with debt you speak to a not for profit charity with qualified debt advisors who can provide you with honest, transparent debt advice.

There are a number of ways to find debt charities you can trust, including using Google and searching for debt advice charity or even speaking to friends and asking for their help.

Debt Support Trust is a registered debt charity providing debt advice on Protected Trust Deeds and IVAs. The charity offers a wide range of support from benefits advice through to help with bankruptcy advice.

Secured Loans - Debt Advice And Support

Secured loans require a person to sign something in their possession against the loan. The reason it is called a secured loan is because the creditors can take possession of that which the credit was taken against if the loan repayments are not made.

When people secure credit against an asset they are generally able to get more in return. An example of this would be when someone takes out finance against the equity they own in their property. They could find that at time they are able to apply for more money than they would if they weren't to secure it against the property. This is usually because the creditor feels that the person is less of a risk and they will be able to recover the amount owed if they fail to make payments.

Many people have seen the benefits of secured loans and have managed to pay back what they owed without having their possessions being reposed. However this isn't always the case and in some instances a person can find themselves struggling to manage their finances if they lose a job or have other personal problems.

The main disadvantage of secured credit are those people who do not manage to pay back what they owe may find themselves at risk of losing their assets. Sometimes the temptation of a large sum of money can be too much to resist. This is especially true of those who have refinanced because they are in debt and unable to find another solution which could help them.

Those who have refinanced in order to repay other debts can find themselves owing even more than they did originally. There is a number of debt solutions which can help those who have found themselves in this situation. When trying to asses which of these solutions is most suitable it is advised to speak with a debt advice charity/company. The solutions which can help are;

General Advice - This is best for those who may need to cut back on expenses but are not suitable for any other help 

Debt Management Plan - this can arrange for regular payment to be made to the creditors

IVA - For those who are unable to pay back what is owed in full but is not suitable for bankruptcy. This is only available to people living in England, Ireland and Wales.

Protected Trust Deed - Similar to an IVA but is only available to people living in Scotland. The main difference is simply the criteria needed to meet the requirements for these solutions.

Bankruptcy - The final solution when all else fails is to petition the court to legal declare bankruptcy. This is only available in England, Ireland and Wales 

Sequestration - This is the same as bankruptcy except only available in Scotland. The only difference between these solutions is the criteria which is required to meet them.

LILA - A new debt solution which has been introduced to help people who could afford the cost of making themselves bankrupt, still manage to be declared insolvent. This is only available in Scotland

Debt Relief Order - Same as LILA except for the criteria need to be met. This solution is only available in England, Ireland and Wales.

The trade association whose members account for approximately 98% of all UK mortgage lending has stated that new house loans returned to the same levels as December 2007 levels. In addition, the remortgage market has seen a stabilisation of growth over the same period of time. According to data published by the Council of Mortgage Lenders, the number of loans that went to home movers rose by 15% from September to October 2009. A significant number within that group opted for a tracker mortgage loan, a loan where the interest rate rises and falls in line with the Bank of England base rate. This is believed to be an indication in borrower confidence that rates may remain low for the long term.