Grab a lifeline if you are drowning in debt

In the US they say you have to have to fail three times before you can be called a success. Donald Trump, one of the world’s most famous tycoons, has certainly had his fair share of failures.

By the early 1990s Trump had racked up around $900 million in personal debt as his property and casino empire faltered. Today however, he is worth an estimated $2.9 billion.

Trump was canny; he brokered deals with his creditors which left him with a controlling stake in many of his business. Once things picked up, Trump cashed in! MoneyExpert.com is here to advise you how to stage your own financial come-back if you are drowning in debt.

When the debt racks up

While most of us will never have to cope with a $900 million debt, we may be facing money problems which can seem insurmountable. Cheap credit is catching up with many of us, as 0% deals become difficult to come by and interest-free periods come to an end. Money Expert is here to show you the best solution.

Government figures have revealed that in 2006 a record 107,288 people went insolvent and that a staggering 17,603 people went bankrupt just in the period between October and December.

Don’t put your head in the sand

If you feel like your debt is spiralling out of control there are a number of basic things you can do to try and remain on top of the situation and avoid the last resort of bankruptcy.

Firstly, confront the problem. It is far too easy to ignore the bills and to put off opening bank statements. If you think your spending is getting out of control then stop, assess your outgoings and decide what you really need to live on.

Secondly, talk to your creditors. In some cases it might be possible to work out a repayment plan.

Thirdly, seek out advice. Your local loan-shark may claim to have your best interests at heart but you’re far better off visiting an impartial organisation such as the Citizen’s Advice Bureau. They are there to help and will be able to give you information about your options.

IVA – a light at the end of the tunnel

IVAs can take away both the worry that comes from uncertainty and reduce the threat to key assets, such as your home. They give you the chance to clear your debt by repaying an affordable proportion of what you owe. This is all agreed in a formal arrangement with your creditors, without having to involve the courts. Crucially, it can save you from declaring bankruptcy.

An IVA is an official, formal agreement that is legally binding and must be approved by a licensed insolvency practitioner. Under an IVA, the amount of debt is fixed, sometimes even reduced, and the amount of interest owing is frozen, too. The debtor then makes regular, agreed payments for a specified term, after which an agreed portion of the debt can be written off, sometimes by as much as 75%. If you stick to the agreed terms no legal action can be taken against you and you don’t have to pay any further interest.

Agreeing an IVA

Informal debt arrangements can be reached with lenders. If you prefer to have the formality and protection afforded by an IVA, then you can take expert advice from an insolvency practitioner. The process would involve drafting a financial profile that can be put to creditors. You may wish to file an Interim Order with a court to prevent any action by creditors while you prepare your IVA proposal. Once this proposal is passed to creditors and approved, the monthly repayments are made for a set term and the proceeds divided among them.

Don’t keep on borrowing

An IVA is a confidential agreement between you and your creditors, but an IVA will still appear on credit files for six years after the IVA finishes and that can affect your chance of borrowing more. However, if you complete your IVA successfully, you will be recorded as having managed your debt, which must stand in your favour.
However the aim must be to become debt-free so that means not borrowing any more.

Home and dry

Under an IVA arrangement you will not lose your house. But if you have equity, then this will be taken into account. When an IVA finishes, you may need to re-mortgage to release some of this equity to repay some or all your debt, depending on your circumstances.

If your debt problems have become serious, MoneyExpert.com suggests you look at an IVA. There are good deals to be had and it may be a solution to avoiding the permanent credit rating difficulties which come with the last resort, bankruptcy. Things might seem bad, but remember Trump had a $900 million debt hanging over his head and lived to tell the tale. Stay cool, and carefully consider your options.

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