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Tackling your debts

Debt Advisory Centre now able to offer fee-free bankruptcy

Posted 18 August 2014

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Debt Advisory Centre now offers a fee-free bankruptcy service. Find out more about this solution and whether it’s right for you.

People who choose to file for bankruptcy through Debt Advisory Centre (DAC) will not have to pay client fees. While court fees still stand, clients in England and Wales will not be charged for the service the debt advice and solutions provider offers.

DAC provides advice and access to a range of debt solutions. It already offers fee-free Debt Relief Orders (DROs), and is pleased to now offer fee-free bankruptcy as well.

Understanding bankruptcy

Bankruptcy is often seen as the most drastic solution to unmanageable unsecured debt, and certainly there is a lot to consider before taking this route … but, for some people, it could offer a lifeline.

Once a bankruptcy order becomes legally binding, it means that lenders are not allowed to take further action against the client over their unsecured debts so it should mean an end to their letters and phone calls. A new affordable payment plan will be worked out that takes into account other day-to-day living costs as well as debt repayments. And once a client is discharged, any unsecured debts they cannot afford to pay back are written off.

However, there are of course serious consequences to bankruptcy, which is why choosing whether or not it is right for you needs such careful consideration. Your credit rating will be affected in a big way for the medium to long term, and if you own your home you could lose it … along with any other valuable assets you have. This is because once your bankruptcy is approved, the rights to your assets are handed to a ‘Trustee’, who can sell them to raise money for your lenders.

Is it right for me?

Bankruptcy is a serious solution, but it might still be the right one. If approved, the payments, interest and charges on your debts will be frozen. And many people are discharged after 12 months, at which point it’s likely any outstanding unsecured debts will be written off … giving you the ability to start again (although, if you can afford to, you might have to keep making affordable payments to your lenders for up to three years after this).

There are certain other restrictions … you won’t be able to hold a job as company director once you’ve been declared bankrupt, for example. However, there are other reasons why bankruptcy might not be suitable.

Typically, it is aimed at people with a large sum of unsecured debt but assets that might help cover some of this. If you have a relatively low amount of debt you’re struggling to repay, a different solution might be more suitable.

You must also be able to cover the court fees charged for going bankrupt. These total £705 and must be paid up-front. They are made up of a £525 fee paid to the Official Receiver and £180, which goes to the court … although there are some cases where clients would be exempt from the court fee. If you can’t afford the £705 court fees, bankruptcy may not be right for you.

Other solutions are available

If you’re worried about your unsecured debts and don’t think bankruptcy is the best option, there are other solutions available. These range from debt management plans … which work out more affordable payments with your lenders that, if agreed, allow you to still meet your day-to-day living costs. Other solutions include Individual Voluntary Arrangements (IVAs), and DROs … the latter of which is an alternative to bankruptcy aimed at people on a low income and with few assets.

All these solutions come with pros and cons, but it’s likely that one of them is suitable for your circumstances. You can call one of our debt advisors to chat through your situation, and they can suggest the debt solutions that might be most suited to your needs.

by Emily Bancroft

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.