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provide debt advice offer a number of services designed to help
people manage their debt and begin the process of paying it off
without incurring more obligations they cannot meet. Obtaining debt
advice may include counselling on Debt Management Plans, Individual
Voluntary Arrangements, and Debt Relief Orders, budgeting assistance
and re-evaluating oneís living standards and adjusting spending
habits to accommodate a cash only lifestyle, as well as an
explanation of legal rights and laws concerning actions taken by
A Debt Management Plan (DMP) can be used as an effective way to
repay non-priority creditors. Credit counsellors negotiate reduced
payments with creditors and make payments to them on behalf of the
client. The benefits of a DMP include having assistance in dealing
with creditors and reduced monthly payments.
An Individual Voluntary Arrangement (IVA) enables individuals to
make a proposal for repayment through an Insolvency Practitioner.
Arrangements are made to suit an individualís circumstances, and may
include an agreed upon monthly payment, a lump sum payment or both.
IVAs are an option to avoid bankruptcy or when a Debt Management
Plan would result in an unreasonably long repayment plan. An IVA
must be agreed upon by 75% of an individualís creditors; creditors
who voted against the IVA will be bound to accept the terms even if
they did not vote in favour of it. IVAs are not reported in legal
notices, and may make it more possible to keep assets such as the
family home than with a bankruptcy proceeding.
A Debt Relief Order (DRO) is an option that has been designed to
help people with few assets. To qualify for a DRO, and individual
must not be in debt more than £15,000, have no more than £50 per
month of surplus income, no more than £300 assets except a car
valued up to £1000, and may not be a homeowner. The DRO places a
moratorium on debts during which time no payments are made to
creditors. At the end of the period, debts listed in the DRO are
It is vital to seek debt advice as soon as debt begins to spiral out
of control. Many agencies have advisors that can immediately assess
a situation, and begin the process of obtaining emergency
assistance, provide debt management literature or schedule a credit