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.

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.