Topic 11 - Dealing With Debt

Question 1

Advantages of debt management plans

Answer 1

• person in debt makes only 1 monthly repayment to the DMC which makes it easier for them to manage
• DMC can arrange the plan and share the monthly repayment between creditors

Question 2

Disadvantages of debt management plans

Answer 2

• this is only a single for non priority debts
• creditor could still ask the debtor for further repayments
• creditors don’t have to accept debt management plans
• debts will take long to clear

Question 3

What are Administration orders?

Answer 3

Repayment plans for those who have less than £5000 in unsecured debt and at least one CCJ against them

Question 4

Advantages of administration orders

Answer 4

• debtor makes one monthly repayment
• creditors are. It permitted to contact debtors directly to ask for further repayments or add interest
• creditor can write off debt that cannot be repaid in a reasonable time

Question 5

Disadvantages of administration orders

Answer 5

• the court decides what the debtor can repay meaning the debtor could live on a tight budget during this term

Question 6

What is insolvency?

Answer 6

When people can repay debts they owe as their debts are greater than their assets

Question 7

What are IVAs?

Answer 7

allow people to make affordable reduced payments for five to six years and then debt is written off.

Question 8

Advantages of IVAs

Answer 8

• debtors can make affordable payments for a fixed period of time
• creditors cannot add interest or charges
• creditors cannot take court action a against the debtor

Question 9

What are debt relief orders?

Answer 9

These allowe people to write off their debts if they unable to repay them after 12 months.

Question 10

Who do debt relief orders apply to?

Answer 10

• people who owe less than £30,000
• those who aren’t homeowners
• have no more than £2,000 in assets
• have less than £75 a month left after paying living expenses

Question 11

Advantages of debt relief orders

Answer 11

• household goods are not included in asset calculation
• gives the debtor time to change personal circumstances
• debtors are not pressure to repay during 12 month period
• debt doesn’t grow

Question 12

Disadvantages of debt relief orders

Answer 12

• stays in persons credit bistro
• cost of £90 can be difficult for those on low incomes to pay

Question 13

Bankruptcy

Answer 13

Where a person’s assets are sold to compensate for the debt, along with savings and the persons income

Question 14

Advantages of bankruptcy

Answer 14

• debtors don’t deal with creditors directly
• debtors have a fresh start when bankruptcy is over
• creditor have to stop court action to recover money

Question 15

Disadvantages of bankruptcy

Answer 15

• debtors cannot apply for any more credit
• Debtors can only use basic current accounts
• bankruptcy record remains on credit history for six years
• debtor’s assets have to be sold to repay debts
• barred from certain occupations, can lose job
• details of bankruptcy could be reported and published in the media

Question 16

What is a debt arrangement scheme?

Answer 16

Where people who owe money to a creditor make payments to a debt payment programme under the scheme, which is shared among creditors

Question 17

what is an MAP?

Answer 17

Allows debtor to write off debts they are unable to repay in a reasonable time period.

Question 18

What is sequestration?

Answer 18

The term for bankruptcy in Scotland, which costs £150 and lasts for 12 months. Those who owe more than £3000 can apply