English Debt Agreement: Important Information to Know
Debt agreements are a way to manage your debts when you’re unable to pay them back. In England, there are specific debt agreement options available to those in financial difficulty. If you’re thinking about entering into an English debt agreement, here’s what you need to know.
What is an English Debt Agreement?
An English Debt Agreement is a legally binding arrangement between you and your creditors to repay your debts. It’s a way to avoid bankruptcy and manage your debts when you’re unable to pay them back.
There are two types of debt agreements typically used in England: Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs).
Individual Voluntary Arrangements (IVAs)
An IVA is a formal, legally binding agreement between you and your creditors that allows you to repay your debts over a set period, usually five years. You’ll make one affordable payment each month, which is distributed among your creditors. At the end of the agreement, any remaining debt is usually written off.
To qualify for an IVA, you need to have at least £6,000 worth of debts and a regular income. You’ll need to work with an insolvency practitioner to set up and manage your IVA agreement.
Debt Relief Orders (DROs)
A DRO is a way to write off your debts if you have little or no assets and a low income. You’ll need to apply for a DRO through an approved intermediary, such as Citizens Advice Bureau or National Debtline.
If your application is accepted, your creditors will be prevented from taking any action against you for twelve months. At the end of the twelve months, your debts will usually be written off.
To qualify for a DRO, you need to have debts of less than £20,000, assets of less than £1,000 and a disposable income of less than £50 per month.
Pros and Cons of English Debt Agreements
Debt agreements can be a good option if you’re struggling to repay your debts. They can help you avoid bankruptcy and manage your debts in a way that suits your budget.
Pros of English Debt Agreements:
– You’ll be able to repay your debts over a set period, usually five years.
– Interest and charges on your debts will be frozen.
– You’ll make one affordable payment each month.
– At the end of the agreement, any remaining debt is usually written off.
Cons of English Debt Agreements:
– Debt agreements are only available to those who are in financial difficulty.
– It will negatively affect your credit score.
– It could impact your ability to get credit in the future.
– You may need to release equity in your property or assets to repay your debts.
Conclusion
If you’re struggling to repay your debts, an English Debt Agreement could be a good option for you. It’s important to understand the different types of debt agreements available and how they work, so you can make an informed decision.
Debt agreements can provide a way to manage your debts and avoid bankruptcy. However, they do have limitations and could impact your credit score and ability to get credit in the future.
If you’re considering an English Debt Agreement, it’s a good idea to seek advice from a debt advisor to ensure you fully understand the implications and whether it’s the right option for you.