FAQs

We receive many phone calls every week from people asking for debt advice. These FAQs are designed to provide you with answers to our most frequently asked questions. Gain a better understanding of the debt solutions we provide, our role in setting a solution up for you, how you can expect your debt repayments to change and the options available to you. If the answer to your question isn’t here, call us to speak to an advisor.

What is a Debt Management Plan?

A Debt Management Plan is an agreement between you and your creditors, which is negotiated and maintained by your Debt Management Company.  Under the agreement, the Debt Management Company supervises all your debt repayments, and distributes these payments to your creditors. They will also act as an intermediary between you and the people you own money to over the course of the plan, providing relief to you from having to contact multiple creditors.

How long does it take to set up a Debt Management Plan?

We can start the plan as soon as we have your Debt Management application pack and the first payment from you, so as quickly as you want. We can arrange for one of our advisors to call you within the first 24 hours after your initial call so everything can be arranged and completed quickly.

What documents do you require to set up my Debt Management Plan?

We require your completed Debt Management Plan pack including the signed terms of business, signed authority to act, direct debit mandate and up to date references and balances for all of your creditors. Supporting documents are always useful to ensure we have all of your proof of income, expenditure and current address to enable us to deal with your creditors on your behalf.

What if my circumstances change when my Debt Management Plan is up and running?

Every 12 months we will review your case with you to ensure you are getting the best from your Debt Management Plan. If you do have a change in circumstances, our Client Liaison Officers are on hand to review your account and amend your payment plan.

What happens to existing interest and charges in a Debt Management Plan?

On receipt of your completed pack we start negotiations with your creditors to freeze interest and charges for all of your unsecured debts. Creditor agreement to the proposal cannot be guaranteed and is subject to each creditors policies and your individual circumstances.

Where a freeze of interest is not possible, we will endeavour to agree a reduction in interest charged, however it is possible your total debt could increase where this is not achieved.

As outlined in your agreement our 'initial fees' will be evenly distributed over the first 6 months of your plan. Payments to creditors will begin instantly. This is reliant on all account information provided being correct.

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What is an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement is a legally binding contract between you and the people you owe money to (your creditors).

You pay an agreed, affordable monthly sum towards your unsecured debts over a set period, typically 5 or 6 years. This is divided up between your creditors, who accept the sum in settlement of the amount you owe them. For further information see What is an IVA?

How quickly can I get my IVA up and running?

After you’re initial call with us we advise it will take a minimum of 8 weeks to set up your IVA. This takes into account no delays, receiving the correct documents from you and timescales when dealing with your creditors.

Which documents do you require from me when setting up my IVA?

In order to progress your IVA application after you have returned your signed IVA pack to us we require the following information from you.

  • Three months of bank statements.
  • Up to date creditor balances and reference numbers.
  • Three months’ worth of wage slips if you are in employment.
  • Proof of any benefit income you receive, for example child benefit or income support.
  • Proof of your mortgage or rent agreement, for example your mortgage statement or rent agreement.
  • Proof of all Hire Purchase or HP agreements including any vehicles with a financial agreement.
  • Your signed Authority to Act form granting us permission to act on your behalf.
  • Proof of your household income, for example your partner’s wage slips even if they are not entering into an IVA with you.

On receipt of the required documents we’ll be able to contact your creditors on your behalf and create your IVA proposal.

What do I need to do to enter into an IVA?

After speaking to us for the first time you will need to complete our financial questionnaire and return it with your supporting documents ASAP.

If an IVA is a suitable option with your agreement we will prepare your IVA proposal for your creditors to review. Before your IVA proposal is given to your creditors you need to sign it as a “Statement of Truth”. You do not need a solicitor for this: you simply need to read and sign it.

We prepare all of your documentation for you and also contact your creditors on your behalf (and if necessary we will make an application on your behalf to your local County Court for an “Interim Order”).

Your creditors will then consider your IVA proposal. You will not usually need to attend as typically the voting is done by proxy instead. Even if your creditors to do attend, the meeting usually only lasts for between 15 – 20 minutes. We will chair the meeting, and you need to be available on the phone during this period.

I have an IVA. What changes do I need to tell you about?

If any changes to your circumstances might affect your ability to meet your obligations under the IVA, contact us immediately.

You should also tell us if you receive any unexpected large payments such as inheritances. These could affect your IVA and could be payable into the arrangement.

Please ensure that you notify us of any address or telephone number changes.

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What is bankruptcy?

Bankruptcy is a legal process that can be started if you can’t afford to pay all of your debts. It can also be started by someone else if you owe them more than £750. Bankruptcy allows you to reduce overwhelming debt and make a fresh start. A “Trustee in Bankruptcy”, (the person appointed to deal with your assets) sells your assets and distributes the proceeds to people you owe money to, to recoup as much debt as possible.

After your bankruptcy ends, the people you owe money to can’t make further claims against you. However, bankruptcy brings with it certain implications. For example, if you rent your home your landlord is told and your employment may be at risk in some occupations and professions.

Do I lose everything in bankruptcy?

When you make yourself bankrupt, all of your assets automatically become the possession of your Trustee in Bankruptcy. He/she has the authority to dispose of them without your consent.

However, you are able to retain tools, books and vehicles that are considered essential for employment. You can also keep clothing, bedding, furniture and household equipment needed to satisfy the basic domestic needs of yourself and your family.

The assets which the Trustee in Bankruptcy can take are as follows:

  • Any interest you may have in property, even if it’s held in joint names with a spouse or partner
  • Any shares, bonds, endowments and savings policies
  • Any funds held in bank or building society accounts
  • High value assets such as motor vehicles and jewelry, although a suitable lower cost replacement can be provided instead
  • Lump sums from private and occupational pensions if they mature during the bankruptcy. The Trustee may also be entitled to subsequent pension payments for up to three years.

You can also face having to pay part of your monthly or weekly wage, either with your consent or through a court order. This order is based on you contributing any surplus income and will last for a maximum of three years from the date of bankruptcy.

If you acquire any asset during the term of your bankruptcy you have to advise your Trustee, who will release it for the benefit of people you owe money to. Example assets include:

  • Inheritances, including property, cash, investments and any other asset of value
  • A windfall from a win on the National lottery, football pools or bingo
  • Money received after the date of bankruptcy but before the date of discharge from your bankruptcy
Will other people know I’m bankrupt?

It is now unlikely that Bankruptcy Orders will be advertised in a newspaper in your local area. Details are placed on the Government’s publicly available Insolvency Service website.

Anyone who you have had a financial relationship with will be told of your bankruptcy, including banks and building societies, mortgage and secured loan companies, hire purchase companies, your landlord, people you owe money to and pension and insurance companies.

How does bankruptcy affect my bank account?

All of your bank accounts will be closed and any funds in them used by the Trustee to pay people you owe money to. If an account is in joint names with your spouse or partner then only half the funds can be taken. You’ll be allowed to open a new bank account with the authorisation of your Trustee.

Will my student loan be written off as part of bankruptcy?

If your student loan was taken out after 1st September 2004 then it can’t be written off. It will be treated as if the bankruptcy had never happened – if you are currently having payments taken directly from your salary then these will continue until the loan is repaid.

If you fall below the income threshold no payments will be made until your salary reaches the level where repayments automatically start. Note that interest will continue to accrue, as per your agreement with the Students Loan Company.

If your student loan was taken out before 1st September 2004, you can include the Student Loan Company as a creditor in your bankruptcy and your monthly payments to them should cease.

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Who are you regulated by?

Debt Free Direct is a member of DEMSA whose code of conduct is approved by the Trading Standards Institute (TSI).

The Institute of Chartered Accountants of England and Wales (ICAEW) regulate our Insolvency Practitioners.

What if I change my mind?

You are under no obligation to proceed with any of the solutions we advise on. Should you change your mind after signing the proposal, you are provided with a cooling off period of 14 days under the Consumer Protection (Distance Selling) Regulations 2000.

Please see our Terms of Business for full details on your right to cancel.

Please note that an IVA is a legally binding arrangement and cannot be cancelled once a meeting of creditors has been accepted. Failure to maintain payments towards your IVA could result in a termination of your IVA.

How will a Trust Deed affect my credit rating?

Your credit rating will be affected. Credit reference agencies such as Experian, Equifax and Call Credit maintain records of your credit accounts.

Failure to maintain contractual payments towards any debts will result in a default notice being made on your credit file. These notices will remain on your credit file for 6 years (unless the creditor agrees to remove them prior to this) and may affect your ability to obtain credit.

What if my Trust Deed fails?

If you fail to keep up repayments your Trust Deed may fail. As a result your assets may be at risk, and bankruptcy proceedings could start against you.

If your circumstances change you should contact your trustee immediately.

Is a secured loan or remortgage right for me?

This is down to individual choice, mortgage rates are usually lower and set up fees higher than those of loans because of the length of time involved and your home will be at risk with both a remortgage and secured loan if you cannot meet the repayments.

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Does PPI come off my IVA balance?

PPI is an asset of your Arrangement and must be paid into the IVA on top of the IVA contributions that have been agreed. You are obligated to pay back 100% of your debt and the IVA fees. So if the PPI that comes in means that you will pay back 100% of the debts plus fees (also includes EIF fees) then this may result in an early completion of the IVA. 

Does PPI come off my IVA balance?

PPI is an asset of your Arrangement and must be paid into the IVA on top of the IVA contributions that have been agreed. You are obligated to pay back 100% of your debt and the IVA fees. So if the PPI that comes in means that you will pay back 100% of the debts plus fees (also includes EIF fees) then this may result in an early completion of the IVA.

I need my certificate of completion

Until PPI has been completed (or the mass variation has been done) we cannot close the IVA and send out the certificate. We can look to send a conduct letter to state the IVA is closing successfully.

I have received a letter threatening doorstep collections

If you receive a letter of this kind or someone calls at your property, remember that you are fully protected by your IVA, simply hand over a copy of your Chairman’s Report.

I have received a letter saying “Notice of Sums in Arrears”

At least once a year, following a change in the Consumer Credit Act 1974, your creditors are legally required to provide you with a statement advising of the arrears on your account. These letters are of a standard format, are for information only and no action is required.

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