For the vast majority of debtors, mounting debts and increasing pressure from creditors can quickly invoke the temptation to bury their heads in the sand and hope it all goes away. Sadly, however, this is very rarely the case, and by failing to engage with creditors, the situation will usually get much, much worse for all concerned.
What can creditors do if I go into debt?
If you go into debt, your creditors have plenty of options available to them to recover their money – most of which will necessitate further costs and charges being added to your account almost overnight.
From the moment you default on a payment, then your creditors can start to charge additional interest under s.69 of the County Court Act 1984 (or The Late Payment of Commercial Debt (Interest) Act 1998 if it’s a business debt). What’s more, the terms and conditions of your arrangement with them will most likely include details of additional charges which can (and will) be applied, such as late payment fees and legal costs. For this reason, it’s advisable to engage with your creditors as positively as possible if you find yourself unable to meet your repayments and to put some repayment plan in place before things quickly get out of hand.
Should your creditor choose to issue legal proceedings, they can also obtain a County Court Judgment against you. This can either be payable ‘forthwith’ or order you to repay a set amount of money each month. Either way, a CCJ will be registered on your credit file for a period of 6 years. If you default on its terms, they can also instruct bailiffs to attend to your property to remove goods for sale (including additional costs for removal and/or storage fees). It’s a very vicious circle.
How can an IVA help?
If you have lots of unsecured debts, then an IVA can be a handy tool to regain control and reach a legally binding agreement with all your creditors.
Under the terms of an IVA, you’ll have to pay one monthly amount to your chosen insolvency practitioner, who will then distribute funds to your creditors and manage the IVA on your behalf.
An IVA usually lasts for a period of 5 years, and once it’s ended, your creditors won’t be able to pursue you for any remaining balance. In fact, once you’ve made your 60 monthly repayments, then your legal obligation ends, and you can look forward to a debt-free future without any repercussions.
Where can I get advice about an IVA?
An IVA has to be managed by a licensed insolvency practitioner who is usually a lawyer or accountant. You can get IVA advice on where to find one online, through local recommendations, the Citizen’s Advice Bureau, or even at your local law firm or accountants.