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IVA

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Debtadvisersdirect.co.uk Remind Borrowers That An IVA Can Represent A Straightforward, Reliable Solution To Their Financial Problems

In response to economic data from the Office for National Statistics (ONS), debt experts DebtAdvisersDirect.co.uk remind consumers that the right debt solution can help them regain control of their debts, despite the unpredictability of the UK’s finances.

On 30 September, the ONS confirmed that GDP growth (Gross Domestic Product – a measure of economic activity) had been 0.0% in the second quarter of 2008, down from the 0.3% reported for the first quarter.

In other words, although the UK economy isn’t in recession (usually defined as two consecutive quarters of negative growth), nor is it experiencing growth – the usual state of affairs under ‘normal’ circumstances. More worrying yet, the economy would have to decline only slightly for the remaining six months of the year to be officially classed as ‘in recession’.

“It may be hard for people to see such macro-economic statistics as relevant to them as individuals,” stated a spokesperson for Debt Advisers Direct, “but the impact is all too likely to make itself felt in the average UK citizen’s daily life. In general, a slowing economy means everyone has less money: not just employees and employers, but the government itself. Given the rapid rises we’ve seen in the cost of living, any threat to a household’s income should be taken extremely seriously.

“People with high levels of debt, struggling to keep up with their debt repayments, are particularly likely to worry about the effects of a slowing economy. There may be little they can do to influence their utility bills, the price of food, or even their job security, but there may be something they can do about their debts – whatever debts an individual is facing, if they become unmanageable, there are a range of debt solutions available that could help reduce their payments and bring their debts under control.”

For people with unsecured debts of around £15,000 or more, an IVA (Individual Voluntary Arrangement) may be the most appropriate debt solution. An alternative to bankruptcy, an IVA is a form of insolvency that helps people bring their monthly debt repayments back down to an affordable level and – in the longer term – clear those debts entirely.

“An IVA is a legally binding agreement between an individual and their creditors. In brief, the individual agrees to make fixed monthly payments for a set period (normally five years), based on what they can afford to pay after taking essential living expenses into account. If they own their home, they may also be required to free up equity in their home (towards the end of the IVA) to increase the amount they can pay their creditors.

“It’s a big commitment, but their creditors will, in return, agree to freeze interest, not to take any legal action (such as pushing for bankruptcy) and to write off any outstanding debt once the IVA has successfully concluded. So an IVA can deliver clear benefits to borrowers and creditors alike.

“Finally, should the borrower’s circumstances change during the course of the IVA, they can request an ‘IVA variation’ – it’s in the creditors’ interests as well as the individual’s to make sure the IVA succeeds, so they may well agree to alter the terms of the agreement if this is clearly the best way to bring the IVA to a successful conclusion.”

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Debt Advisers Direct Have Emphasised The Importance Of Joining A Pension Scheme As A Means Of Securing An Income And Staying Out Of Debt When It Comes To Retirement

Responding to a recent report regarding the growing pensions divide in the UK, Debt Advisers Direct (http://www.debtadvisersdirect.co.uk) advised workers to ensure they are planning well financially for the future, and warned anyone approaching retirement with debts to take action as soon as possible.

The report from the Office for National Statistics (ONS) showed a growing gap in pensions contributions between the public and private sectors. Private sector membership of final-salary pension schemes – in which companies pay a percentage of the employee’s final salary throughout retirement – fell from 3 million in 2006 to 2.7 million in 2007.

Instead, many private sector employers are opting for money purchase schemes, in which workers pay into a retirement fund which is usually invested in the stock market. When the employee retires, the fund is used to buy an annuity – a financial product that provides an income for the rest of their life. The size of the pension depends on how well the retirement fund performs and on the annuity rates available at retirement.

The public sector, on the other hand, showed a rise from 5.1 million to 5.2 million members of final-salary pension schemes last year.

The statistics highlight a clear difference between the two types of pension. The ONS report shows that on final-salary schemes, workers paid an average of 4.9 per cent and employers 15.6 per cent of the worker’s salary in the last year. For money purchase schemes, workers paid an average of 2.7 per cent and employers 6.5 per cent.

Many experts agree that workers should save at least 10% per cent of their total income to ensure an adequate income throughout retirement.

A spokesperson for Debt Advisers Direct said: “The findings highlight two important things: firstly, the need for workers to save adequately for their future, and secondly, the importance of being on the right pension scheme.

“The statistics show that final-salary schemes contribute over 20 per cent of the worker’s salary, whereas money purchase schemes contribute just over 9 per cent. It’s better than having no pension at all, but workers should consider whether a money purchase scheme will cover them fully for retirement.

“Most people do not usually associate retirement with debt, but in fact statistics show that increasing numbers of people are now retiring with debts to their name, or falling into debt because their pension doesn’t cover their outgoings.

“Our advice to people with debt problems is to seek expert debt advice as soon as possible, before they get too close to retirement age. There may a number of debt solutions that could help them clear their debts, and in general, the sooner they act, the more options they’ll have – as they approach retirement age, they may find they simply no longer have access to certain debt solutions.”

As long as the individual acts in time, a debt management plan or debt consolidationloan could simplify their finances and reduce their monthly outgoings by spreading out debt repayments over a longer period of time (although, in general, the longer the repayment terms, the more they are likely to pay in interest).

For people with debts of around £15,000 or more, an IVA (Individual Voluntary Arrangement) may be more suitable. An IVA is a legally-binding agreement between an individual and their creditors, in which they repay only what they can afford over a period of (normally) five years. Once the IVA is successfully completed, the remaining debt is written off.

Lasting for a specified time period, an IVA can be a particularly suitable debt solution for people approaching a deadline such as retirement. However, IVAs do represent a substantial financial commitment and can require homeowners to free up some equity. As with any debt solution, an IVA should never be entered into until the borrower has discussed all the alternatives – and the pros and cons of each – with a professional debt adviser.

Debtadvisersdirect.co.uk helps people with financial difficulties, providing free advice and tailor-made debt solutions.

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Debt Advisers Direct Reminds Consumers That There Is Still Plenty They Can Do To Help Protect Themselves Against Rising Household Costs

As the Government prepare to announce a new scheme that is set to help the millions of households that have fallen into fuel poverty, Debt Advisers Direct (www.debtadvisersdirect.co.uk) have welcomed the scheme, but have reminded consumers that there is still plenty they can do to help protect themselves against rising costs.

Fuel poverty is usually defined as when households are spending more than 10% of their total monthly income on keeping their homes adequately heated. In early 2008 it was estimated that around 4.4 million households in the UK were living in fuel poverty.

And with energy costs jumping up by as much as 30% with some providers, and with others set to follow, the threat of fuel poverty is increasing.

A spokesperson for Debt Advisers Direct said: “The rate at which energy prices are rising means that even families who would have previously considered themselves financially comfortable are beginning to feel the strain. Making compromises on other costs has become commonplace.

“Switching providers can help to bring costs down to an extent, but it might not be long before all providers raise their prices, which could mean sacrifices in other areas are needed.

“Ideally, consumers should be trying to put at least a small amount of money aside in a savings account every month. If prices shoot up unexpectedly, savings could be a very helpful financial safety net that could prevent people falling into debt.”

The spokesperson said that the worst hit are lower-income families, who might not have the extra funds available for rising fuel costs. “For those on lower incomes, fuel poverty is a particularly serious matter. There is a choice: turn the heating off, or keep yourself warm and suffer the consequences. We have seen large numbers of people being pushed into debt because of energy costs.”

The spokesperson followed that if consumers do find themselves struggling to balance debts with increasing costs of living, it’s essential that they seek debt advice before the problem grows out of control. “There are a number of debt solutions that are designed to reduce monthly outgoings and simplify finances, which could be a great help in these difficult times.

“It could be a debt management plan, in which a debt adviser works with the owner of the debts and their creditors to work out a new repayment plan, usually resulting in lower monthly payments over a longer period of time.

“For some people, a debt consolidation loan is more effective – a new loan is taken out to pay off the existing debts, after which it is repaid in single monthly payments. Debt consolidation loans can also be set out over a longer period of time, so monthly payments will be lower, although the borrower will usually end up paying more in interest in the long run.”

For more serious debts of £15,000 or over, an IVA (Individual Voluntary Arrangement) may be more suitable. If you are in debt but are unsure about how to tackle it, contact a debt adviser for further information.

Debt Advisers Direct are a debt management company based in Salford Quays, Manchester. They offer a range of debt advice and solutions, including debt consolidation, debt management plans and IVAs (Individual Voluntary Arrangements).

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Whatever Financial Problems An Individual Is Facing, It’s Crucial They Seek Debt Advice As Soon As Possible

Debt specialists GregoryPennington.com remind consumers with debt problems of the need to seek debt advice on time.

“Whatever their nature, virtually all financial problems have one thing in common: they get worse if left unaddressed,” says a Gregory Pennington spokesperson. “Whether someone’s behind on their mortgage payments or struggling to keep up with credit card bills, all the experts agree that the sooner they seek debt advice, the better their chances of clearing their debts as quickly and painlessly as possible.”

At the moment, mortgage payments are at the forefront of many homeowners’ worries. “The Council of Mortgage Lenders (CML) has reported 18,900 repossessions in the first half of the year, signifying a year-on-year increase of 48%. Given their forecast of 45,000 repossessions in 2008, this means they expect over 25,000 more before the end of the year.”

With timely debt advice, however, many of those potential repossessions needn’t happen at all. In a video on the BBC’s website, Judge Stephen Gold (Kingston-upon-Thames County Court) states: “The big message which I think needs to be screamed from the rooftops of the County Courts is this: that if you get into difficulty with your mortgage, don’t bury your head in the sand. Engage with the lenders. Pay what you can.”

“For unsecured debts,” the Gregory Pennington spokesperson continues, “the principle is essentially the same. When people contact us for debt advice, we stress that simply talking to a lender – whether they do it themselves or we do it on their behalf – can often produce results. A lender might agree to accept lower payments, for example, or to reduce the interest rate on a loan. It’s in the lender’s interest to arrive at an arrangement which the borrower can afford, so the money can be repaid as soon as realistically possible.

“Before they grant any concessions, of course, most lenders will want to see that the borrower is doing their utmost to order their finances and repay the debt. So the debt advice we provide goes a long way beyond ‘Talk to your lender’: we help people with all sorts of financial issues, from improving their budgeting skills to understanding their rights and responsibilities in relation to different kinds of debt.”

“If the individual’s situation has reached the point where debt advice simply isn’t enough, we can help them choose the debt solution that offers the best way out of debt. Depending on their circumstances, that could be a debt management plan, in which we talk to their unsecured lenders on their behalf, negotiating changes to their repayment terms so they can clear their debt at a rate they can afford.”

In cases where debt management isn’t appropriate, an IVA (Individual Voluntary Arrangement) or Trust Deed could be the answer: helping people reduce their monthly debt payments, these debt solutions can free up the money they need for mortgages payments, food bills and other essential living costs.

“Everyone’s circumstances are different, and no debt solution is ‘better’ than another – it’s a question of which is the most appropriate for that particular person under those particular circumstances. As always, the most important thing is for them to seek debt advice as soon as possible, before any further financial problems restrict the range of options open to them.”

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Debt Solutions Company Debt Advisers Direct Have Warned That There May Be Tougher Times Ahead, And Advise People To Make Sure They Are Protected

Responding to the news that average bank balances are down by 5% compared to last year, a spokesperson for debt solutions company Debt Advisers Direct said that this is a clear sign that the credit crunch and fast-rising inflation is starting to truly affect consumers.

HSBC reported that average balances of its 8.2million customer accounts had fallen by 5% in the first six months of 2008, as rising costs of living and inflation at a 16-year high puts increasing pressure on consumers’ disposable incomes.

The Debt Advisers Direct spokesperson commented: “This is one of the first clear signs that people are feeling the pressure of the credit crunch, even if 5% is a relatively small figure.

“It’s been said many times that the impact of the credit crunch would take a while to filter through, and it would appear that time has come. Prices and living costs have reached the point where they are beginning to have a clear effect on bank balances – and that should be taken as a warning that it’s time to act.”

The spokesperson continued that while many people may not feel they have been significantly affected by inflation just yet, many leading economists have suggested the worst is yet to come.

“Economists have been predicting a more severe downturn for some time, and while that hasn’t happened yet, there are clear signs that the economy as a whole is slowing down,” he said. “This is likely to lead to further cuts in disposable incomes, especially with the sharp rises in gas and electricity prices due to come in shortly.”

HSBC had also suggested that some of the reduction in disposable incomes might be due to more people transferring money into savings accounts. In reaction to this, the Debt Advisers Direct spokesperson commented: “It would be reassuring to think that a large part of the lower disposable incomes is due to savings – and some of it probably is – but research suggests that most people do not save enough money for their future.

“Saving will become increasingly important in the next few months. Just a few hundred pounds put aside can be a useful financial buffer when money gets really tight.

“Of course, there are some people whose income simply does not stretch far enough once all their living costs are taken into consideration – particularly people struggling with debt – and those people are most at risk.”

The spokesperson added that for anyone who finds themselves struggling with debt, or thinks they might be about to, it’s essential that they seek professional debt advice as soon as possible.

“There are several solutions out there for people who find themselves struggling with debt,” he said. “For people with multiple debts who are getting by but want to simplify their finances, a debt consolidation loan could help.

“Debt consolidation loans involve combining all your existing debts into one, meaning you pay only one lender instead of many, and you may be able to reduce your monthly payments this way. However, you are likely to pay more in the long run if you do reschedule payments.

“Debt consolidation is a good way of freeing up extra funds each month – which could be crucial if the economy does hit hard times.”

He continued that even for those with unmanageable debt problems, there is help available. “For more severe debts, a debt management plan or an IVA (Individual Voluntary Arrangement) might be more suitable. Both can reduce your monthly payments in line with what you can afford.

“Before making any decisions, though, you should always contact an expert debt adviser. They will talk you through your situation and decide which debt solution is appropriate for you.”

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Ivas Don’t Address Mortgages And Other Secured Debts But They Do Reduce Payments To Unsecured Creditors

Commenting on the rising number of home repossessions, debt consolidation experts DebtAdvisersDirect.co.uk point out that IVAs (Individual Voluntary Arrangements) and other debt solutions could help people stay in their homes.

Of the 45,000 repossessions expected by Council of Mortgage Lenders (CML) in 2008, there were 18,900 in the first half of the year. In the second half, therefore, the CML expects a further 26,000 or so.

“As with any statistical forecast, this figure isn’t written in stone,” said a DebtAdvisersDirect.co.uk spokesperson. “Times are particularly tough for homeowners, but many people threatened with repossession may be able to resolve their situation by talking to their lender, and by taking steps to sort out their finances and free up enough money for their mortgage payments.

“Different homeowners will, of course, need to adopt different tactics to avoid repossession. Some may just need to reduce their spending, while others may need to consider taking in a lodger, for example, or working longer hours.

“But for many, the problem is unmanageable debt. Many people can’t afford their mortgage payments because their non-priority debts are taking up so much of their budget. We would advise anyone in that situation to seek debt help immediately. A professional debt adviser can help them go through their finances and figure out what steps they would need to take to free up the necessary funds.”

Often, those funds are already there: “Very few people know exactly where all their income goes. They may know where they spend large sums of money, but the smaller sums can easily slip through the cracks – and they all add up. This is why so many people find they have enough ‘on paper’, but not in reality. A debt adviser can help them create a monthly budget sheet and track their spending more effectively.”

Some homeowners, however, are facing more serious debt problems. “At a certain point, the monthly debt repayments simply exceed the individual’s ability to keep up – there just isn’t enough money coming in to service the debts and cope with the ongoing bills. Once this happens, they find it’s almost impossible to pull themselves out of debt without professional help. The important thing is to get in touch with a debt specialist as soon as possible, and find out what they can do to help.

“Depending on the individual’s circumstances, the best debt solution could be an IVA. As a form of insolvency that helps people clear significant debts without resorting to bankruptcy, an IVA can be an effective way of reducing their monthly expenditure, freeing up the money they need to make their mortgage payments and start paying off any arrears that have built up.”

An IVA is a legally binding agreement between an individual and their unsecured creditors, which normally lasts for five years. “The individual commits to making fixed monthly payments throughout the IVA, based on what they can afford after taking their essential living expenses (including mortgage payments) into account. If enough of the creditors agree to the terms, they’ll agree to freeze interest, not to take any legal action, and to write off any outstanding debt at the end of the IVA. Like bankruptcy, an IVA helps borrowers make a fresh start, but unlike bankruptcy, it helps them protect their home – they may have to release some equity, but it’s extremely unlikely they would have to sell.”

Yet it’s important to recognise that IVAs are not an appropriate solution to every homeowner’s problems. “Whatever financial issues an individual may be facing,” the spokesperson concluded, “it’s vital they seek debt advice from a specialist offering a range of debt solutions – someone who can help them take stock of their situation, understand their options and identify the best way forward.”

About Debt Advisers Direct
www.debtadvisersdirect.co.uk helps people with financial difficulties, providing debt help & advice and tailor-made debt solutions.

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Gregory Pennington advise people to stay on top of their finances

As the credit crunch reaches the end of its first year, debt management company Gregory Pennington (http://www.gregorypennington.co.uk) have advised people to keep on top of their finances, and warned that there may still be tough times ahead.

A spokesperson for Gregory Pennington said: “While studies suggest some of the country feel they have not yet been affected too badly by the credit crunch, these people may begin to feel the effects as future events unfold.”

A recent survey in The Times revealed that 66% of those asked felt their family would fare badly over the next year, while 77% felt the country as a whole will suffer. The spokesperson said that while these views are probably justified, there is still a lot people can do to lessen the effects of the credit crunch.

“The most important thing is staying on top of your finances,” says the debt solutions company. “Make sure you are meeting all your priority financial commitments before anything else, and try to build a budget around that. If you find you can’t meet those commitments, seek expert advice as soon as possible.

“We would also advise people to save as much as possible, because that little bit extra could come in very useful if things get tight.”

The fact that the remaining 34% of people questioned in the survey did not feel (or weren’t sure) that their family would suffer over the next year suggests that the credit crunch has not necessarily affected everyone. But the Gregory Pennington spokesperson warned that other problems linked to the credit crunch may start to kick in over the next few months.

“It’s important to distinguish between the different elements of the economic downturn we’re currently experiencing,” he said. “The credit crunch primarily affects people looking for credit – particularly homeowners, who may be faced with large arrangement fees or higher payments when they remortgage, and also those looking to obtain loans and new mortgages.

“People who aren’t reliant on credit, or homeowners who have a long-term fixed rate on their mortgage, may well have been largely unaffected – so far.

“But it’s now very possible that we will see the knock-on effects of the weak housing market combined with rising costs of living – higher unemployment, increasing amounts of people struggling to meet their comments, and more people facing problems with debt.

“Even if it does get to that stage, there are still things you can do. Seeking professional debt advice from an expert debt adviser is essential if you find yourself in financial difficulty.

“There are a range of debt solutions available to meet different situations, including debt management plans, IVAs (Individual Voluntary Arrangements), debt consolidation loans and remortgages, etc. One of these could be a lifeline if you find yourself with unmanageable debt, which is a growing threat in the current economic climate.”

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ThinkMoney.com anticipates the rise in insolvencies as the slowing economy begins to affect more consumers.

Financial solutions company ThinkMoney.com anticipates a rise in the number of people experiencing debt problems in the coming months, despite a year-on-year fall in individual insolvencies.

A recent report from the Insolvency Service suggested that the number of people entering into IVAs in the second quarter of 2008 had fallen to 9,256, down from 10,561 a year previously – a drop of 12.4%.

At the same time, bankruptcies had fallen from 16,214 in the second quarter of 2007 to 15,297 in the second quarter of 2008 – a fall of 5.7%.

Given the onset of the credit crunch in recent months, the statistics may come as a surprise to many. But Melanie Taylor, Head of Corporate Relations at ThinkMoney.com, said that the falls in both IVAs and bankruptcies should not be taken as a sign of long-term recovery. “Most economists are predicting an economic downturn,” he says, “which certainly doesn’t raise hopes of the number of people in debt decreasing anytime soon.”

Other indicators, such as the Financial Services Authority’s report that repossessions rose 40% in the first quarter of 2008 compared with the same time last year, do indicate a sharp rise in the number of people facing financial difficulties.

Ms Taylor suggested that this could be an early sign of things to come. “As things stand, we would expect the number of people experiencing debt problems to increase fairly significantly, due to a combination of the credit crunch, rapidly growing costs of living and rising unemployment.

“These things take a while to ‘filter through’ to the wider economy. Typically, lower-income families will be hit first, since they have less money to spend – but that then hits the companies where they usually spend money, so their staff are affected too. Eventually, most people are affected financially in some way.

“This in turn could lead to increasing numbers of people who can no longer manage their debts – and it’s essential that these people get expert help as early as possible.”

But Ms Taylor was keen to emphasise that both IVAs and bankruptcy are valid ways of getting out of unmanageable debt. “An IVA can be a great help to people with over £15,000 of debt,” he said. “It allows a significant portion of their debts to be repaid in convenient monthly payments, usually for five years – after which the remaining debt is written off.”

He continued: “There is something of a stigma surrounding bankruptcy, but in the right circumstances it may be the best possible way of making a fresh start.

“People who go through bankruptcy are subject to some restrictions – for example, they are highly unlikely to be able to borrow any more money for a number of years, and they will most probably be forced to sell any valuable assets they own. But once the bankruptcy process is complete, they will be legally debt free, and able to get on with their lives.”

Think Money are a financial solutions company based in Salford Quays, Manchester. The company specialises in a range of financial services, including mortgages, loans, debt help and advice (including debt management plans, IVAs, and debt consolidation).

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