Debt and Insolvency Advice for Keyworkers from the UK Insolvency Helpline

Debt is an increasing problem in the United Kingdom and abroad, even in affluent areas. The nature of the problem ensures that once started, a cycle of debt and poverty can ensue that is very difficult to break out of.

Debt problems can lead to marital strain, loss of personal assets, County Court judgements, or in extreme cases criminal prosecution. Debt can arise in many forms, from credit cards to mail-order catalogues; from hire purchase to mortgages. To try and categorise the scale of the problem, we break debts up into priority and non-priority debts.

Priority debts
Priority debts are those which if unpaid will lead to criminal prosecution or eviction. This includes, but is not necessarily limited to unpaid fines, council tax, rent or taxes.

Non-priority debts
These are all remaining debts which will not lead to such serious consequences as the priority debts. It is important to note that failure to pay non-priority debts can still lead to a summons in the County Court, which, in the event of a judgement against you, may affect your credit rating, limiting your borrowing capacity and possibly causing financial problems for many years into the future.

• Always maintain a token payment - something is always better than nothing
• If you are getting out of depth, seek help as soon as possible. Many situations can be resolved if caught early enough.
• Cut down on lottery tickets - stop completely if you can
• Now might be a very good time to stop smoking
• Visit your local Benefits Agency and check you are receiving all the benefits you are entitled to.
• Keep an eye on household expenditure. Budget £30 for each family member (totalled together) per week and stick to it.
• Don't be afraid to ask for help. The Yellow Pages should have details of any local advice centres or Citizens Advice Bureau.

• In most cases, your total debt repayable will be greatly reduced with the balance written off by your creditors.
• Your repayments will be for a limited period of time (normally five years)
• You will know in advance of formalising the arrangement exactly how much you will pay each month and the total payable.
• Once agreed, this cannot be changed by either side.
• All interest charges are cancelled, so the spiral of debt is immediately halted.
• All legal action is frozen and all demands, letters and telephone calls from your creditors will cease.
• Repayments are simplified by a single monthly instalment regardless of how many creditors you have. You can even pay by direct debit if you wish.

Definition
An Individual Voluntary Arrangement is a proposal written by a person owing money (a debtor) and presented to his creditors, in which he determines how much money he can repay, over what period of time, and under what circumstances and conditions.

An Individual Voluntary Arrangment consists of 3 stages:

1. the making of a Proposal to creditors;
2. the making of an Interim Order which will put a stay (stop) on any bankruptcy proceedings which may have been instigated by a creditor;
3. the Creditors Meeting at which creditors can make a decision as to the suitablity of the debtors proposed arrangement.
   It is the involvement of a Nominee and Supervisor, with the intervention of the Court, that distinguishes the Individual Voluntary Arrangement from an informal agreement between debtors and creditors.

Proposal
There are a number of items that must be disclosed in the proposal, but otherwise the proposal can be individully tailored to suit every type of situation. The proposal is basically a private contract between a debtor and his creditors.

Nominee
Anyone who is in financial difficulties and thinks he is about to be made bankrupt, or is already bankrupt, may ask a Licensed Insolvency Practitioner to act as Nominee. The debtor will present the proposal, (although in practice this is normally written with the assistance of the Practitioner) to the Nominee.

When the proposal is considered to be suitable, an Affidavit is sworn by the debtor, and the proposal is presented to the Court. The Nominee consents to act in the matter by becoming the Supervisor of the Individual Voluntary Arrangment. The Nominee and Supervisor must be a Licensed Insolvency Practitioner.

Interim Order
The Court will set a hearing date for the application for the granting of an Interim Order. Once the Interim Order has been made, no action be creditors can then be taken against the debtor without the authority of the Court. The nominee will then report to the Court concerning the debtors proposal. At the hearing of the nominees report at court, the date for the creditors meeting will be set.

The Interim Order will be extended until after the date of the creditors meeting. The Nominee notifies the creditors of the meeting which will be between 14 and 28 days following the hearing of the nominees report.

Creditors Meeting
All creditors must be notified of the meeting and all creditors who are not secured* may vote. The creditors may wish to amend the proposal and any changes will be discussed and voted upon at the meeting. The debtor may not wish to accept the amendments and this could lead to the rejection of the proposal by the creditors.

The Proposal is accepted if 75% of the creditors voting are in favour of the proposal. The Chairman must file a report in Court confirming the outrcome of the meeting and the Court will agree to the arrangment taking effect. Any petitions that have been stayed are dismissed and there is no longer a need for the Interim Order. In the case of a bankrupt applying, the Court will annul the Bankruptcy Order, and the debtor will revert to the situation as if the Bankruptcy Order had never been made.

* A secured creditor is one who has a direct right over an asset of the debtor, eg a Building Society with a mortgage over a house.

Supervisor
On approval of the debtor's proposal the nominee is usually appointed as Supervisor, unless the creditors at the meeting have voted otherwise. The Licensed Insolvency Practitioner will act as Supervisor throughout the duration of the Individual Voluntary Arrangement. The Supervisor will abide by the terms of the proposal and normally will work in a number of different ways to assist the debtor in coming to terms with his basic situation.

Finalisation
At the sucessful conclusion of the IVA the Supervisor will issue a Certificate of Compliance. This is filed with the Court and the debtor is then free to go about his normal course of business without any encumberances.

What are the advantages of a voluntary arrangement against going bankrupt?

• It gives you more say in how your assets are dealt with and how payments are made to creditors.
• You may be able to persuade your creditors to allow you to retain certain assets (such as your home).
• You will obviously have to act responsibly and flexibly in order to reach agreement with your creditors.
• You avoid the restrictions which apply to a bankrupt.
• Because you will not have to pay some of the fees and expenses which are charged in a bankruptcy, the overall costs are likely to be less