What is….
Repossession
Repossession is a legal procedure where a mortgage lender takes control of a property following non payment of a mortgage.
If you miss payments on your mortgage your mortgage provider will contact you and require an explanation and proposal of how you will catch up on payments.
If the situation worsens or you mortgage lender is dissatisfied with the proposal you have given them, you will receive further contact from the lender. In this instance you will usually be asked to clear debts immediately or legal action will ensue.
If legal action goes ahead, your mortgage lender will apply to the courts for a possession order to give them the right to take over your property. To avoid this kind of action individuals may consider taking advantage of a sell rent back scheme.
An IVA
IVA stands for Individual Voluntary Arrangement. This is an alternative to declaring bankruptcy. For people over £50,000 in debt, it gives them the possibility to work their way out of this debt.
An IVA is a legal agreement with your creditors. In this agreement you consent to paying an amount you can afford each month over five years. Any outstanding debt that you cannot afford to repay will be written off by your creditors.
The IVA will stay on your credit history for a year following the end of the IVA. This is likely to affect your credit rating.
Debt Management
Debt Management can be a viable way to control outstanding debts without legal procedures such as IVA’s or declaring bankruptcy.
A Debt Management Company will negotiate your current repayments with your creditors. After this negotiation, you agree to pay an amount each month to the company; this will usually mean lower repayments over a longer period of time.
Debt Consolidation Loan
If you have several outstanding debts, it may be helpful to organise these debts into one payment.
A Debt Consolidation loan allows you to have a clearer idea of your outgoings and it in some cases it is possible to reduce payments over a longer period.
Bankruptcy
Bankruptcy starts when someone in debt is declared Bankrupt. It is often seen as the last resort to become free of debts you may never be able to repay.
In order to declare yourself as Bankrupt you must make a petition to your Local County Court. Subject to certain exceptions, you are likely to lose control of all assets including any property and bank accounts and it will damage your credit rating.