Debt can be a good thing at times until it gets out of control when this happens there are free debt counseling services that can help you get control of your spending and start coming back to a life without debt stress. Without debt many of us wouldnt be able to make large purchases such as a house or a car, so when it is handled with care it can become a good thing.
Each service will offer its own perks to get your business and each of them will handle your account a little differently. Some services will be very hands on and will have you deposit one monthly payment into a trust account. When your bills are due the trust company pays your bills for you. This is good in the way that all you have to worry about is one payment and they take care of the rest for you. They will also phone your creditors and get your payments and interest lowered but this type of service is usually reserved for those that are in serious trouble.
Another free program will use the same type of management by getting your payments and interest lowered but usually again it’s a last resort. They will monitor the income going out and coming into your home and look at your overall financial situation. Then they will help you put together a budget that and give you some really good advice. Their main goal is to correct the problem.
The last type of free services is non-profit services. This is usually offered to those of you who need charity. They will help you in creating a budget and will work for your unique situation. You will find most of these services run by a church or other non-profit establishments. They will not contact your creditors for you, but will help by giving advice on how you should proceed.
May 29th, 2007
According to accounting firm PricewaterhouseCoopers, the number of people in the UK entering into individual voluntary arrangements to escape debt is on the decline. The firm reviews about 50 per cent of all proposed IVAs for its clients who are the creditors of those in debt. Some of these clients include banks. The records of PricewaterhouseCoopers seem to suggest that the trend has been occurring during the past four months.
An IVA is an alternative to filing bankruptcy , and allows the debtor to repay a portion of his or her debt. An insolvency expert at PwC feels that current trends are indicative of a gradual month to month decrease in IVA cases. One reason for this is believed to be stabilization in the amount of personal debt after a large increase during the first five years of the 21st century.
Personal debt increased in 2006, but the amount of outstanding balances on credit cards declined because of a decrease in use, the first time that has happened since their introduction in 1966. Official statistics from the government’s Insolvency Service indicated that in 2006, there was nearly a 60 per cent increase in personal insolvencies, but this is believed to be because more people turned to IVAs in order to eliminate some of their debts. The figures seem to be stabilizing now that the majority of consumers have completed their proposals for IVAs.
Another contributing factor to the decrease in IVAs is the attitude of some lenders that are adopting a stricter policy toward the IVA proposals that they receive on behalf of their indebted customers. IVAs are voluntary, and a creditor is not obliged to accept the proposal if he thinks the debtor can repay more of their debts that suggested in the IVA proposal. Banks are expressing irritations with a minority of people who try to push through IVAs who the lender feels is in a position to pay off more of their debts without an Individual Voluntary Arrangement.
Research shows that the typical seeker of an IVA is a male in his 40s with debts between 40,000 and 43,000. An IVA can significantly cut that debt with a five year repayment term. Because of the hard-nosed attitude that lenders have begun to take toward IVA proposals, new IVA companies that have opened in the past few years are reporting a decrease in business over recent months. In spite of that, analysts warn that the trend could pick up again, especially if mortgage rates increase. If interest rates on mortgages increase, people are less likely to use their homes to eliminate debt and will be forced to find other ways for reduced their debt load such as an Individual Voluntary Arrangement, or perhaps worse, bankruptcy.
May 29th, 2007
A substantial number of people in the United Kingdom became insolvent in 2006 as they struggled to remain afloat under the weight of the 1.3 trillion in debt that UK consumers faced. Based upon reports by the Insolvency Service, 63,000 filed bankruptcy while 44,000 chose Individual Voluntary Arrangements(IVAs). IVAs have seen a higher level of grown than bankruptcy, perhaps because people many people do not want to suffer the social stigma of filing bankruptcy even though many times this may be the best option. A spokesperson for Consumer Credit Counseling Services warned that both IVAs and bankruptcy should only be used as last resorts, but you should choose the correct path when you are forced into insolvency.
What path you choose depends upon your personal circumstances. IVAs are the best solution for those who have a regular income, debts over 15,000, a major asset they wish to protect from seizure, a high level job, and enough discipline to follow through with the contract. The typical IVA client is a young professional with a good job that has simply gotten himself or herself in too much debt.
An IVA is a formal agreement sanctioned by the court between debtor and creditor. In return for a portion of the debt being removed at the end of the IVA period (between three and five years), the debtor promises to pay a set monthly payment. If the IVA contract fails, the debt returns to the original amount regardless of how much has been repaid, which will likely force the debtor into bankruptcy anyway.
In order for an IVA to work, the debtor must be able to afford to pay at least 200 per month on their debts, and if they are going to struggle in order to raise that amount throughout the term of the contract, they should look at options other than an IVAs. That is the reason that most people who choose IVAs are employed in positions that pay higher salaries.
Homeowners are more likely to choose IVAs than renters. The benefit of this is that your home is largely protected from any seizure by credits, and you also have some influence over how other assets, such as cars, are treated. A creditor cannot force a debtor to sell their home in order to satisfy debts, but at the closure of the IVA contract, they can force them to revalue the property. If the property has risen in value, they do have a right to ask the debtor to release the equity in order to make a final payment on the outstanding debt. If a debtor is driving an expensive car, a credit can also ask them to sell it and buy a cheaper model, using the difference to pay creditors.
Most professionals who find themselves too deeply into debt usually choose IVAs over bankruptcy because choosing bankruptcy means that they must obtain permission from the court to become involved in the promotion, formation, or management of a company. Their professional accreditation will also suffer if they work in financial careers such as accounting.
At the end of an IVA contract, the amount that is written off can be up to 75 percent; however, lenders are tightening the reins on the number of IVAs the approve as well as how much of the debt they are willing to write off. In the past, HSBC used to accept IVAs that gave them twenty-five pence on every 1, but they have now raised the minimum to forty pence per 1 of loan value.
Insolvency practitioners arrange IVAs, which can have start up costs that run into the thousands. The insolvency companies claim that the consumers do not bear the cost of these expenses, but the harsh reality is that during the first year of the contract, all repayments go to the insolvency practitioner.
Keep in mind there are some good and bad points to filing an IVA.
Pros
* You do not have to sell major assets such as your house
* You are not restricted from any employment
* Between one half and two thirds of the debt may be written off at the end of the contract
Cons
* The process is long and brittle. If the program fails, you are right back where you were on day one.
* If the value of your property increases during the contract, credits can make further claims.
May 29th, 2007
