ClearStart Guide to Debt Management Solutions

A guide to

Debt Management Advice

This guide explains how we can help you manage your unsecured debts so you can look forward to a brighter future.

Introducing ClearStart ClearStart has been helping people sort out their finances since 2007 We understand the situation you’re in and that you probably haven’t been here before.

It’s a frightening world, which seems to be filled with endless letters and phone calls from people demanding money – and it seems that it’s never going to end. Well here’s where you take back control. But first, you need to make sure that you are getting advice and support from the right people. We believe that’s us.

Regulated advice you can trust We are regulated and authorised by the Financial Conduct Authority (FCA). We meet all the requirements of the Debt Managers Standards Association (DEMSA) whose code of conduct is approved by the Trading Standards Institute. So you can be confident that you will receive a high standard of service and advice which is in your best interest.

The Clear Difference Not all debt management companies are the same. With ClearStart you can expect:

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Individual Voluntary Arrangement’s (IVA) with no upfront fees – unlike some companies we don’t charge any fees upfront. Our fees are taken once your IVA is in place

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Fee Free Debt Management Plans (DMP) - this means every penny you pay goes towards clearing your debts Specialist advisers - who are fully trained and solely focused on offering debt advice Fast and hassle free approach - we could have you in a plan within weeks Support - throughout the process Money Savings Team - who are dedicated to helping you cut everyday living costs

Any Questions? Call ClearStart today on

0800 988 9325

What can you expect from ClearStart?

Our advisers will work with you to identify the right solution based on your individual circumstances. If you are struggling with your bills here is an example of how ClearStart can help you.

Do you have unaffordable debts?

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Call us - A friendly ClearStart adviser will work with you to complete a review of your financial position. They will identify what solutions are available and help you understand your options

The outcome of your review is...

Your debts can be restructured to allow you to repay what you owe at an affordable amount, over an appropriate timescale

Your debts cannot be re-structured at an affordable amount, over an appropriate timescale

A Debt Management Plan (DMP) could be right for you

An Individual Voluntary Arrangement (IVA) could be right for you

Our Process

Call us so we can review your situation and confirm the right solution for you. We will go through all your options - explaining them in simple terms so you can choose the right one for you.

We will then send you a pack to check, sign and return.

Once the plan is affordable to you and is finalised, we’ll work to get agreement from your creditors to pay off your debts.

Once approved you’ll then make one affordable monthly payment to us and we will pay your creditors.

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Call us – there are lots of ways we can help manage your bills and help prevent you from getting into debt

Open & honest about every solution As well as an IVA and DMP, our advisers will look at every option available to you, including;

Bankruptcy

Debt Relief Order

Consolidation

Administration Order Self Help

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What is a Debt Management Plan (DMP)?

A DMP is an informal solution for anyone who is in debt and struggling to meet their monthly repayments. It is an arrangement between you and the people you owe money to, commonly referred to as your ‘creditors’.

It allows you to pay back what you can reasonably afford each month. Your creditors are happier because they get a regular fixed payment and, more importantly, it can help prevent your debts getting worse than they already are.

Who is eligible for a DMP? If you are struggling with unsecured debts (such as loans, credit cards, store cards, overdrafts and catalogue debts) and are finding it more and more difficult to keep up with the monthly payments then a DMP may be right for you.

How much will I have to pay?

You will only pay what you can reasonably afford and unlike other debt management companies, ClearStart don’t charge customers for their services. This means 100% of your affordable monthly payment will go towards clearing your unsecured debts.

There are plenty of advantages…

• You’ll only pay what you can afford each month In some cases interest will be frozen You won’t have to deal with creditors, we do that for you We can support you should your creditors contact you You don’t need to tell your friends and family if you don’t want to

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But remember…

• It’s not a legally binding agreement • We cannot stop creditors contacting

you Your debt can still get worse if it is not managed properly It can take a long time to complete a DMP It will affect your credit rating If interest isn’t frozen, it can continue to build up

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Visit our website for more details www.clearstart.co.uk

Frequently asked questions about DMP’s Will a DMP affect my credit rating?

Yes, your credit rating can be affected.

Credit ratings are recorded by agencies such as Equifax, Experian and Call Credit. Failure to maintain a contractual arrangement with any of your creditors will have an impact on these records, and lead to a default on your credit file. These defaults will remain on your account for a period of six years after the debt is paid off, and may affect your ability to obtain credit.

How quickly can I get my DMP up and running?

We can start the plan as soon as we have your Debt Management application pack and the first payment from you, so as quickly as you want. We can arrange for one of our advisers to call you within the first 24 hours after your initial call so everything can be arranged and completed quickly.

What if I change my mind about choosing a DMP? If you change your mind once your plan has started, you have a 14-day cooling off period during which you can instruct us to cease work on your case. However, it is always best to speak to us first – there may be something we can do to help!

What if my circumstances change when my DMP is up and running?

We can review your DMP at anytime during your plan all you need to do is give us a call.

We also conduct annual reviews to ensure you are getting the best from your DMP.

What happens to existing interest and charges in a DMP? On receipt of your completed pack we start negotiations with your creditors to freeze interest and charges for all of your unsecured debts. Creditor agreement to the proposal cannot be guaranteed and is subject to each creditors policies and your individual circumstances.

Where a freeze of interest is not possible, we will endeavour to agree a reduction in interest charged, however it is possible your total debt could increase where this is not achieved.

Will my creditors still chase me for payment when my plan has started?

Your creditors are allowed to contact you whilst you are in a DMP, and you will still receive your regular statements. However, once your plan is set up and agreements are in place, contact from creditors is usually greatly reduced.

Are there any alternatives to a DMP? Please see the Alternative Solutions section for details on other solutions that could be available to you.

You can also contact The Money Advice Service for free independent advice.

You can contact them on 0300 500 5000 or you can visit their website www.moneyadviceservice.org.uk

What is an Individual Voluntary Arrangement (IVA)?

An IVA is a contract between you and your creditors. Typically it commits you to making one affordable monthly payment for a fixed period of time.

In return, your creditors agree to freeze any interest charges and when the agreed time period is up, any debt remaining from the arrangement, is written off.

Who might benefit from entering into an IVA? As a form of insolvency an IVA may be suitable for those who cannot afford their monthly repayments to creditors.

How much will I have to pay?

Payments are based on what you can afford and our specialist advisers will help you with the calculations. Allowances for living costs are given first, what is left over will be the basis of your offer to creditors.

Who needs to agree?

75% of your unsecured creditors (based on the debt value) need to agree to your proposal in order for the IVA to be approved.

There are plenty of advantages…

• You will usually be able to keep your

property (as long as you keep up with the mortgage/any secured loan payments), but will be expected to try to remortgage towards the end of your term to pay funds into your IVA. Your creditors will not be able to continue with or start any legal action against you relating to your debt once your IVA is approved. Apart from sending you annual/regular statements, your creditors will not be able to call or send you any post regarding your debts.

When entering an IVA, a full ‘budget’ review of your income and outgoings will be completed with you to work out how much you can actually afford to pay towards your debts each month, regardless of what you are currently paying. Once your IVA is approved, you will pay this single, affordable monthly payment to your IVA company each month, who will then distribute shares of this to your creditors.

An IVA typically lasts for five years but it could be up to six years depending on whether you can release equity in your home.

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Any Questions? Call ClearStart today on

0800 988 9325

• An IVA can be varied to meet your

needs (subject to creditor agreement) should circumstances change.

No upfront payment is required to access the solution. A Nominee fee and Supervisory fee are both payable once the solution is active. These are taken from the monthly contributions and any assets you pay into the Arrangement.

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• An IVA will negatively affect your credit

rating/score.

If you are a homeowner, you will be expected to try to remortgage towards the end of your IVA and if affordable, release additional funds to be paid into the IVA. If a remortgage isn’t possible, the term of your IVA may be extended by one year, during which you may be required to make additional payments.

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But remember…

• An IVA is a matter of public record -

details of your IVA are listed on the Insolvency Service website, which the public can access.

An IVA may impact your employment; we always recommend checking your employment contract.

If you fail to maintain your IVA repayments or obligations, your IVA could fail and your creditors may decide to order bankruptcy proceedings.

You will have limited access to credit until your IVA has completed, which could mean that you pay higher rates of interest until your credit rating is restored.

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Visit our website for more details www.clearstart.co.uk

Frequently asked questions about IVA’s How will my credit rating be affected whilst in the IVA? Once you have defaulted on your contractual payments, and received a default notice, this can be registered on your credit file. The default will show for a minimum of six years, so your credit rating is affected during the IVA and for a year after. The IVA is also registered on your credit file. Note that if someone checks your credit rating for another reason, such as a potential landlord, your credit rating may become an issue.

How quickly can I get my IVA up and running?

After you’re initial call with us we advise it will take a minimum of 8 weeks to set up your IVA. This takes into account no delays, receiving the correct documents from you and timescales when dealing with your creditors.

What if I change my mind about choosing an IVA? You are under no obligation to proceed with any of the solutions we advise on.

Should you change your mind after signing the proposal, you are provided with a cooling off period of 14 days under the Consumer Protection (Distance Selling) Regulations 2000.

Please see our Debt Management Terms of Business for full details on your right to cancel. Please note that an IVA is a legally binding arrangement and cannot

be cancelled once a meeting of creditors has been accepted. Failure to maintain payments towards your IVA could result in a termination of your IVA.

Will I lose my house?

By entering an IVA your home is protected from legal action such as charging orders.

You will not have to sell your property unless you choose to do so as part of your IVA.

What if I lose my job?

An IVA is flexible and can change to accommodate your circumstances. You just need to keep us informed so we can liaise with your creditors on how to proceed.

Do I have to pay any costs in an IVA? No, once your IVA has been approved by your creditors they will pay our fee each month. In an IVA all you pay is the amount you can realistically afford, each month for the period of your arrangement (usually 60 months), and that is literally all you have to pay as long as you keep up with your monthly payments.

How will I manage my money whilst I’m in an IVA? During the course of an IVA, we will help you to create a budget to help you manage your income and expenditure. This is also agreed between yourself and your creditors.

This budget may have some restrictions including allowances for living essentials.

Alternative Solutions If you would like further information visit the Insolvency Service, who are a government agency providing services to those affected by financial distress. This is available at: https://www.gov.uk/government/organisations/insolvency-service

Remortgage (or an alternative consolidation loan secured against your property) A remortgage is where you take out a new mortgage on a property you already own. This is to either replace your existing mortgage, or to borrow money against your property.

You will need to speak to a professional mortgage adviser to confirm that this is definitely the correct solution for you.

Advantages of Remortgaging

• Releasing equity in your home by

remortgaging can be used to pay off your unsecured debts.

You may be able to get a lower interest rate than you have with your current mortgage payment.

A remortgage will be one single payment which puts all debts and your mortgage into one payment.

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Points to Consider

• Your home is at risk if you do not keep

up with your mortgage payments. You may end up paying more over time by moving unsecured debt amounts to your mortgage. Lower interest rates on a remortgage which are spread over a longer period of time, may result in you paying back much more than you would have if you kept your debts unsecured over the shorter term.

• You may not have enough equity in your

property to pay off all of your debts.

Failure to maintain payments may affect your credit rating/score.

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Bankruptcy Bankruptcy is a court based procedure available to people who are unable to pay their unsecured debts and their assets are of a lesser value than the total debts owed.

You can file for bankruptcy voluntarily, or it can be asked for by a creditor if you owe more than £5,000.

In bankruptcy all your financial affairs are under the control of an “Official Receiver” or a “Trustee” who has the power to sell your assets to pay your creditors. The duty of the Official Receiver and Trustee is to investigate and realise assets for the benefit of your creditors.

Advantages of Bankruptcy

• The period over which you pay back

your debts will be shorter.

You could have your debts written off after twelve months.

Outstanding personal tax debts will be cleared.

Contact from your creditors will stop.

When you file for bankruptcy, interest and charges on included debts will be frozen.

You will pay back over a maximum of 36 months.

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Points to consider

• Bankruptcy is a matter of public record - details of your bankruptcy are listed on the Insolvency Service website, which the public can access.

The court may decide to take your monthly payments through an ‘attachment of earnings’, which comes straight out of your wages. Your employer would therefore be aware of your bankruptcy.

Bankruptcy may impact your employment; we always recommend checking your employment contract.

To go bankrupt in England and Wales fees of £705 have to be paid to the court upfront.

You must co-operate with decisions made by the court or your Official Receiver/Trustee.

Bankruptcy will negatively affect your credit rating/score.

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Debt Relief Order (DRO) A Debt Relief Order (DRO) is a legal procedure administered without court involvement by the Insolvency Service. In order to apply for a DRO, you must meet certain conditions including having debts less than £20,000, not owning/having an interest in any property/assets over the value of £1,000 and having a disposable income of less than £50 per month. If you would like any more information on a DRO or bankruptcy we recommend you visit www.insolvency.gov.uk.

Advantages of a DRO

• The fee to enter into a DRO is relatively

low at £90 and can be paid in monthly instalments. However, your DRO cannot begin until the £90 has been paid.

You do not need to go to court to apply for a DRO. Creditor contact relating to debts included in the DRO will stop.

All included debts are written off after 12 months.

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Points to Consider

• A DRO is a matter of public record -

details of your DRO are listed on the Insolvency Service website, which the public can access.

Not all debts can be included on a DRO – for example, student loans.

A DRO may impact your employment; we always recommend checking your employment contract.

A DRO may negatively affect your credit rating/score.

If your financial circumstances improve you will be expected to make arrangements to pay your creditors.

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Administration Order (AO) An Administration Order is a repayment plan arranged by the County Courts in England, Wales and Northern Ireland, for individuals with less than £5,000 debt in total and one or more court judgments.

Advantages of an Administration Order

• Once you enter into an AO, you are

legally protected from your creditors trying to recover debts.

You will not have to deal with your creditors any more – the court will do this for you.

You pay the court one single payment each month and they will share this (minus their fee) among your creditors.

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Points to Consider

• You can only have an AO if you have

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one or more County Court Judgements (CCJs) or High Court Judgements and owe less than £5,000 in total to your debts.

The court may decide to take your monthly payments through an ‘attachment of earnings’, which comes straight out of your wages. Your employer would therefore be aware of your AO. An AO will negatively affect your credit rating/score.

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Self Help Solution You could negotiate reduced repayments with each of your creditors. Normally, you would be required to repay everything that you owe, plus some interest in any self managed solution.

Advantages of Self Help

• You do not need to pay fees to a debt solution company.

• You are in control of your debts and

assets.

Budgeting, keeping a spending diary and keeping track of debt payment dates can be enough to keep debts on track if your debt difficulties are due to spending habits and lifestyle.

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Points to Consider

• You will need to deal with your creditors

yourself.

You will still need to pay all of your debts separately; most debt solutions combine these into one single monthly payment.

Failure to maintain contractual payment levels may affect your credit rating/score.

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There are free sources of advice available to you. If you would like further details or advice, you can go to the Money Advice Service (www.moneyadviceservice.org.uk).

ClearStart is a trading name of Clear Start Partnerships Limited. Registered in England and Wales number 06563333.

Registered address: 70 Great Bridgewater Street, Manchester M1 5ES. Authorised and regulated by the Financial Conduct Authority.