Debt Solutions: Advice on Debt Management Plans to Help You Avoid Bailiffs

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Debt Solutions: Advice on Debt Management Plans to Help You Avoid Bailiffs

If you are struggling with unresolved debt, it may be difficult to envisage a future free from
financial strain and overdue payments. Bankruptcy may often be considered the only viable
option by those so overwhelmed by debt that it feels impossible to escape, but there are
less drastic alternatives available.
Image courtesy of Jenny Kaczorowski

For example, an Individual Voluntary Arrangement (IVA) is a legally binding insolvency
agreement made on behalf of the debtor to their creditors to arrange affordable regular
repayments. IVAs are obtained through insolvency practitioners, who will make the
necessary arrangements with your creditors regarding what you can afford to repay and
how long the term of your IVA will last.

An Individual Voluntary Arrangement is not to be confused with a Debt Management Plan
(DMP). Although the two are similar in that they offer an alternative solution to bankruptcy,
a DMP is an informal agreement that is more flexible to an IVA in that repayments can be
negotiated and there isn't a minimum amount of debt required to set up a DMP.

Your situation will depend on what solution is best for you; this can range from how much
you can afford to pay to how much you owe. If you are considering taking action against

your outstanding debts, it is important to consult a professional debt solution service first to
explore all avenues available to you.

What are the key differences between an IVA and a DMP?

* You can administrate a DMP yourself free of charge, you can't with an IVA

As an IVA is a legal form of insolvency, it needs to be processed by an Insolvency Practitioner
which will incur administration fee, and also further handling fees whenever a payment is
made. A DMP can be set up by the debtor discussing the repayment plan directly with their
creditor, or via a debt charity which is usually free of charge.

* An IVA can write off some of your debt, but a DMP cannot

As an IVA is a legal form of insolvency, an arrangement is made to make regular and
affordable payments towards clearing debt over a set period of time (usually 5 years). If at
the end of this period there is still debt outstanding, it will be written off. As a DMP is set up
for the debtor to repay all, not some, of their debt, there is a no set time period. If reasons
occur that delay repayment, the agreement will be extended until all debt is cleared.

* An IVA will protect you from creditors, a DMP may not

Once an IVA has been administered, your creditors should no longer contact you regarding
the amount owed. However creditors can continue to chase you for extra payments and
continue with debt recovery proceedings if you are part of a DMP.

* An IVA will freeze charges and interest, but a DMP may not

When you enter into an Individual Voluntary Arrangement, all charges and interest from
creditors will be frozen to allow you to pay back the amount owed without adding to it. A
Debt Management Plan will not necessarily do the same, as creditors are not obligated to
agree to freeze these charges. This therefore means that as your DMP starts, you may
notice that your monthly payments are higher than usual due to interest being charged, but
this will reduce as your creditors see that you are making regular payments.

* Repayments for an IVA are not very flexible, whereas they can be for a DMP

An Insolvency Practitioner will be issued to you when you apply for an IVA to calculate what
you can afford to pay a month. These payments aren't that flexible, but can sometimes be
paid within a 15% margin of the fixed amount. As a DMP has no set time period, payments

have more scope to vary as the repayment term can be extended until the debts are
cleared. However, you will need to inform your creditors of any changes to your repayment
plan, and they are not obligated to accept them.

There's more good news: Rogue Bailiffs Forced to Clean-up their Acts
The coalition government has issued statements that laws to tackle aggressive bailiffs will be
introduced in England and Wales next year. Justice Minister Helen Grant has recently
announced plans to counteract illegal behaviour employed by some enforcement agencies
that carry out debt recovery services.
Improvements to the law
Amid rising concern from pressure groups, new laws are
being introduced to tackle the menace of bailiffs
behaving in an improper and unprofessional manner.
These laws, created by the Crime and Courts Bill, will be
made by enacting sections of the Tribunals, Courts and
Enforcement Act 2007, which is still progressing through
Parliament.
Not before time either - online forums and message
boards are full of the desperate pleas of those who need
advice about bailiffs.
The new initiatives are set to combat rough tactics from
rogue bailiffs, including the introduction of a mandatory
training scheme, so bailiffs can approach the vulnerable
in society with necessary due care and diligence.
New safeguards will also be introduced to address the rise in complaints about the complex
set of charges that bailiffs levy for their services. From next year, a new fee scale will be
implemented to avoid any confusion over exactly how much debtors are being charged for
bailiff's services. At present, the system is very unregulated.
Time for change
For too long bailiffs have gone unregulated, allowing a small minority to give the industry a
bad name. "Too many people in debt have had the additional stress of dealing with
aggressive bailiffs who often charge extortionate fees", said Justice Minister Helen Grant.
These new laws will clean up the industry and ensure bailiffs play by the rules or face being
prevented from practising. They will also make sure businesses and public bodies can collect
their debts fairly.

While some bailiffs have welcomed the changes in the law, members of the public may feel
the government is being too soft on debtors who owe money to creditors, handing them yet
more legislation that will help them further avoid paying monies owed.
Worrying Statistics
o In 2012 the Citizens Advice dealt with over 63,000 problems with bailiffs in
England and Wales.
o Almost 9 in 10 (87 percent) concerned issues with private bailiffs.
o 2 in 5 (39 percent) threatened the use of force to enter premises
o 1 in 4 threatened to take items that are banned from removal by bailiffs
(such as clothing or work tools)
o 29 percent threatened to seize goods that belonged to someone else.
Many campaign groups see bailiffs acting autonomously a legal grey area.
"It's clear that some bailiffs think they're above the law they're not. Citizens Advice Chief
Executive Gillian Guy said, calling for tougher measures. The nature of the industry is an
open door for abuse of power. Bad practice is blamed on rogue individuals but the only way
to stop this is to hold bailiff firms accountable.
New initiatives will require all enforcement and collection agents to abide by a certificate of
fitness for practise. No enforcement agency or agent will be allowed to act without a
certificate and rogue bailiffs will have their certificate removed if the firm is found to be
operating outside of its jurisdiction.
The bailiff system in England and Wales is widely considered to be complex and confusing,
both in terms of the debtor and the bailiff. The government intends to make the new
initiatives transparent so that all parties will be aware of their rights.
Over- stepping the mark
Bailiffs have been frequently accused of over-stepping the mark, using threatening
behaviour and making claims that cannot be backed by UK law. The new legislation states:
o Bailiffs will be banned from entering homes at night. They will only be
allowed to call between 6am and 9pm
o They will not approach properties where only children are present
o Fee scales will be brought in.
o Mandatory training and a new certification process for bailiffs will be
introduced.

o Landlords will be banned from using bailiffs to seize property for rent arrears,
without first going to court.
Shadow Justice Minister, Rob Flello said:
"We need to see the Government bring forward legislation quickly and, provided it
addresses our concerns, we will work constructively to help make it happen. At a time of
great hardship for so many families, the last thing they need to fear is the knock at the door
from an unscrupulous bailiff, whose actions do so much to damage the reputation of those
striving to keep up the standards of the rest of the profession."
There are services available to those who are living in fear of the knock at the door. If you
need advice about bailiffs because you are worried they might call on you, there are many
services and solutions that can offer immediate and impartial assistance.
Clearly this is a controversial area, with good bailiff firms feeling they are constantly being
penalised because of the errant behaviour of bad firms. Yet, many enforcement agencies
have also stated that the changes in the law are welcome. Ultimately, any progress that
makes their industry less stressful is considered, at the very least, a step in the right
direction.