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Debt Relief Orders

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    Debt Relief Orders

    Up until now, the most common ways of dealing with debt are bankruptcy, IVAs and Debt Management Plans.

    ē Bankruptcy is the traditional way of escaping overwhelming debt. It ends after one year, but you are likely to lose all your assets including your house to pay something to the creditors. Itís often the last resort and costs £495. Debts are wiped out after a year but it will leave a black mark on your credit rating for six years.
    ē An IVA (individual voluntary arrangement) is a deal between you and your creditors, overseen by an insolvency practitioner. There is less chance of losing your home and less stigma, but involves paying some of your debts in one go or over a number of years. Itís designed for people owing more than £15,000 to three or more creditors. An IVA will stop creditors chasing you and protect you from court action, but if you donít keep up the payments you can be made bankrupt.
    ē A Debt Management Plan is an informal arrangement where you negotiate with creditors to repay debts over a longer period. You pay what you can each month to the company dealing with the people you owe money. Banks may agree to freeze interest charges.

    However, a new alternative comes into force in April for those living in England & Wales. Debt Relief Orders are designed to catch people on the downward spiral before they get even deeper in debt and are aimed at people with debts of less than £15,000 but without much surplus income or assets to their name. If you fit this criteria a Debt Relief Order may be for you as well as many others. The Citizens Advice Bureau estimated that a third of its debt cases would be eligible for the new relief, but called for fair treatment by lenders and creditors, as well as for more government schemes to help those in debt without them having to go to court.
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