| If you are a homeowner and struggling with debt, | | | | mortgage. |
| your house could be at risk if you do not take the | | | | The advantage of a DMP is that it is flexible. You are |
| right precautions and chose the appropriate debt | | | | not forced to release any equity from your home to |
| solution. | | | | help repay your creditors. However, because your |
| More and more people in the UK are facing problems | | | | monthly payments are smaller, it will take you much |
| with debt. Official figures show that over 130,000 | | | | longer to repay your debt - in some cases many |
| people were declared insolvent in 2009. Unofficial | | | | years. |
| estimates put the number at least double that. | | | | Individual Voluntary Arrangement - An individual |
| However, simply being in debt does not automatically | | | | voluntary arrangement (IVA) is a more formal, legally |
| mean that your house is at risk. | | | | binding solution which allows you to pay your debts |
| Mortgage payments must be maintained | | | | for five years. After this any unpaid debt is written |
| The problem for many people when they are short | | | | off. |
| of money, is that they prioritise payments to | | | | With an IVA, you remain in control of your house. It |
| unsecured debts such as credit cards and personal | | | | is protected because money is freed up to ensure |
| loans This means that mortgage payments are | | | | you can afford to make the mortgage payments. |
| missed. | | | | However, as a homeowner, if you carry out an IVA |
| Missing mortgage payments is a serious mistake. The | | | | there are some serious implications to consider. |
| first rule if you are a home owner is to maintain your | | | | Firstly, if there is any available, you will have to agree |
| mortgage payments over any other unsecured debt | | | | to release equity from your property for the benefit |
| payments. | | | | of your creditors. |
| If you default on your mortgage, your home is at | | | | Secondly, if your IVA fails because you cannot make |
| risk. If you default on unsecured debt payments such | | | | the payments, you risk being forced to declare |
| as credit cards, there is no automatic risk to your | | | | bankruptcy. If this happens, you home may have to |
| house. | | | | be sold to release any equity in it. |
| Tackle your debt problem head on | | | | Bankruptcy - Generally speaking, if you have equity in |
| Even though missing payments to your unsecured | | | | your property, bankruptcy should be avoided. If you |
| debt poses no immediate risk to your house, you | | | | declare bankruptcy, there is a very high probability |
| must not just ignore the problem. If a debt remains | | | | that your house will be sold to release any equity in it |
| unpaid, a creditor is likely to take out a county court | | | | for the benefit of your creditors. |
| judgement (CCJ) against you. | | | | If you have a debt problem, this does not |
| If a CCJ remains unpaid, the creditor can apply for a | | | | automatically mean that you will end up losing your |
| charging order against your property which in effect | | | | house. However, if maintaining your unsecured debt |
| secures the debt against it. | | | | payments means that you are getting in arrears with |
| In order to prevent this type of action against you, | | | | your mortgage, this could have very serious |
| you need to tackle your debt problem head on. | | | | consequences. |
| Assuming that you are unable to re-mortgage and | | | | Implementing a debt management solution will |
| consolidate your debt, there are three main options | | | | protect your home by reducing payments to your |
| to consider: | | | | unsecured debts thus freeing up cash for your |
| Debt Management Plan - A debt management plan | | | | mortgage. |
| (DMP) allows you to reduce the payments you make | | | | However, you must make sure that you get the |
| to your unsecured creditors to a manageable | | | | right advice and fully understand the implications for |
| affordable amount. This means you free up money | | | | your home before deciding which debt solution is |
| to ensure that you have enough to pay your | | | | best for you. |