If you’re trying to look through your alternatives to bankruptcy in England right now, you’re not alone. A lot of people are struggling with the possibility of having to file bankruptcy, even though they really don’t want to. It feels like your financial situation can really change in the blink of an eye. You have to make sure that you’re focusing carefully on the type of plan that’s going to allow you to change your life. Even though bankruptcy changes things, you might not want to take that step if you don’t have to.
Ultimately, it’s going to be about the amount of money you owe compared to the amount of money you make. If this ratio is skewed, then you will have to take drastic action in some way. No alternative to bankruptcy isn’t without its drawbacks. We’re going to explore a few.
The Local Shelter has many advice centers that are going to be there to help you through this process. The advice is free, and it’s designed to help you to make stronger decisions over time. You can also rely on the National Debtline, Citizens Advice Bureau, or the Step Change Debt Charity for more information. There are outlets to help with debt, so you don’t have to feel like it has to take over your life.
Let’s go into those alternatives to bankruptcy now.
The first one would have to be the administration order.
This is good when your total debts are less than 5000 GBP, and one of the creditors has successfully obtained a county court judgment against you. An administration order is a county court order that gives you the ability to make a single payment every month into the court towards repayment of all of your debts. This is powerful because it’s going to be handled through the court. You don’t have to worry about the money being misapplied or misrepresented. The court will divide the money between your creditors in proportion to how much they are owed.
There are some requirements that have to be met in order to apply for an administration order. You have to have at least two debts, and the total of these debts has to be less than 5000 GBP. You also have to have at least one county court or high court judgment against you.
The administration order has a lot of power. Your creditors cannot take anymore action against you unless they go through the court to get it. It also stops interest from building up along with other charges. Once you have cleared the debt, the administration order comes to an end and you go on with your life.
What if you just don’t have the money to repay it within a reasonable amount of time? The court may decide that you only have to pay off a percentage of the debt and the rest is written off. The decision is commonly referred to as a composition order, and it will form part of the administration order.
The administration order starts by filling out form N92 from the Ministry of Justice Court Service site.
What about Individual Voluntary Arrangements? IVAs are still in style, as they are a legally binding agreement between you and the creditors. This enables you to repay a portion of your debts through payments that you can actually afford. If high interest is really getting to you, then this is a great solution. The agreement is for a set period of time, around five years. It can be longer or shorter but five years is the average. At the end of the agreement, the outstanding debt is written off.
If you’ve been served with a statutory demand for payment, you might want to consider if the IVA will give you better options than going with bankruptcy. This is especially the case if you have a regular income that you can use.
You have to make sure that you act fast — creditors can start bankruptcy proceedings on you 21 days after the statutory demand has been formally filed.
You can’t do the IVA on your own. You have to make sure that you get the help of a qualified insolvency practitioner. A debt adviser can refer you to one. Debt advice charities can provide this service for free, so make sure that you check them out first. If you know that you’re not going to have the type of money to really get things done, then you really want to make sure that you’re taking matters into your own hands as much as possible.
The insolvency practitioner helps you prepare a proposal that your creditors have a strong chance of accepting. That’s where their experience lives. An IVA can protect you from losing your home, but you do have to have all of your creditors agree with the proposal. You might have to work at compromises a bit until the proposal is accepted.
You also have debt relief orders, which is where you need to look if you honestly have very little income or assets. You can’t get the DRO if you have a bankruptcy order or an IVA, but that’s okay — the DRO format has benefits as well. In order to qualify you have to make sure that your unsecured debts are less than 15,000 GBP, and that you have less than 50 GBP disposable income per month and your savings and assets are worth less than 300 GBP. This also includes the value of a private pension. You also cannot own your own home. This is definitely geared for someone that is just starting out in life, or truly comes from an impoverished background. Debt shouldn’t be a trap for people that are already struggling.
The debt relief order prevents your creditors from going after you directly for payment. The total debt will be written off after 12 months. If your financial situation improves, you can have the DRO cancelled and pay directly to the creditors.
There are plenty of legal solutions to getting out of debt that don’t involve bankruptcy. Make sure that you review these based on the unique factors of your situation. As this is a general guide, none of this should be construed as financial advice from a professional. Good luck!