What is an Individual Voluntary Arrangement? (IVA)
An Individual Voluntary Arrangement (IVA) is a formal and legally binding agreement between you and your creditors to repay your debts at an amount you can afford over a set period of time. Interest and charges are frozen at the point the IVA is agreed. Typically, an IVA lasts for 5 years, with any remaining debt legally written off at the end.
What is a Debt Management Plan? (DMP)
A Debt Management Plan (DMP) is an informal arrangement which can be made between you and your creditors.It allows you to pay less than your contractual payments each month until your debt is repaid in full. As you are paying less each month and you are paying your debts in full, it is likely to take you longer to repay your debts.
What is Bankruptcy?
Bankruptcy is a formal insolvency process. You may still need to make payments for a period of 3 years and all of your assets (e.g. your property) will be included in the Bankruptcy. You can choose to request your own Bankruptcy or a creditor can petition the Court to make you Bankrupt if you have not paid them the money you owe them.
What is a Debt Relief Order? (DRO)
A Debt Relief Order (DRO) is one way of dealing with your debts if you owe less than £20,000, have a low monthly disposable income (less than £50) and you don’t own your home or have any other high value assets (e.g. a car). A DRO is a form of bankruptcy which lasts for 1 year as long as your circumstances don’t change. An application for a DRO costs £90 and you need to apply through an approved intermediary.
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