Debt ManagementA Debt Relief orderBankruptcyIndividual Voluntary ArrangementSettlement AgreementsAdministration OrdersSelf help / Management

Debt Management

A Debt Management Plan can help you to manage your debts by:

  • Reducing repayments to a level you can comfortably afford

  • Helping you regain control

  • We will deal with your creditors on your behalf

What are the advantages of a Debt Management Plan?

  • You will no longer need to deal with creditors yourself. Capital Financial Management will liaise with your creditors on your behalf and will always be available to assist you with any correspondence that you receive.

  • You will only pay what you can afford based on an assessment of your income and expenditure

  • We will ask your creditors to contact us in case of any query and this can significantly reduce the number of letter or telephone calls that you may currently be receiving. Creditors do however still have the right to contact you direct but we will deal with any correspondence or queries on your behalf.

  • Creditors will often agree to stop interest and charges that may be accruing on your accounts. As a Debt Management Plan is an informal arrangement however it is important to note that they are not compelled to agree to such concessions.

  • Throughout your Debt Management Plan creditors may offer, or agree to accept reduced lump-sums in short or full and final settlement.

How about any disadvantages?

  • A Debt Management Plan will usually have an adverse effect on your credit rating. However, if you are already behind with repayments your credit rating may have already been affected. Default Notices that have already been received or are received in the course of your Debt Management Plan will appear on your credit file for a period of 6 years.

  • If you are only making a small payment and your debts are relatively high it may take several years for you to repay your debts under a Debt Management Plan.

  • Although creditors are generally keen to work with those who demonstrate that they are committed to resolving their financial difficulties by was of a Debt Management Plan, as the remedy is an informal one, creditors can theoretically continue with collection activities including possible court action and bankruptcy proceedings. Capital Financial Management will of course assist you should this ever occur during your Debt Management Plan.

A Debt relief order

A Debt Relief Order (DRO) is low cost alternative to bankruptcy available to those with relatively low debt levels and little or no assets.

A DRO is only available to those who;

  • Are not homeowners

  • Have less than £2000 is assets

  • Have less than £75 per month disposable income

  • Have a debt level less than £30,000

  • Have not been subject to any other formal insolvency proceedings or had a previous DRO within the last 6 years.

If you qualify and an order is made;

  • No payments will have to be made towards your debts

  • Creditors should stop contacting you once they are aware that a DRO has been made

  • All debts included in the order will be written off 12 months after the order is made.

  • A DRO will adversely affect your credit rating and the DRO will appear on a public register


Although bankruptcy should not be entered into lightly, it can be a good way of freeing some individuals from overwhelming debt.

Capital Financial Management can help you decide whether an application for bankruptcy is appropriate in your circumstances. If a bankruptcy order is made;

  • The debts included in the order will be written off on discharge
  • in most cases you will usually be discharged 12 months after a bankruptcy order is made.

It is important to note however that;

  • If you have any assets such as a house, car or other items of value they may be included in the bankruptcy and sold

  • You will be subject to various restrictions which in some cases may affect you job, i.e. you cannot be a company director

  • The Official Receiver may seek an Income Payments Arrangement or Order in which case you will have to contribute towards your bankruptcy for up to 3 years
  • The bankruptcy order will remain on your credit file for 6 years

It is therefore vital to get the right advice before applying for bankruptcy. Capital Financial Management can help you with the process. Our fees can be as little as £600.00 and you will have to pay a fee to the Insolvency Service which is currently £680.00.

Individual Voluntary Arrangement

An Individual Voluntary Arrangement (IVA) is a formal Insolvency procedure which requires the supervision of an Insolvency Practitioner.

Your creditors will be asked to vote as to whether they accept the arrangement and if approved;

  • You will make one affordable repayment towards your debts

  • There will be a set timescale in which your debts will be cleared
  • Interest and Charges will be suspended

It is important to note however that;

  • Your details will be recorded on the Insolvency Register

  • An IVA is not automatically accepted. 75% of your creditors based on the value owed to them will have to vote in favour

  • Some debts including student loans, court fines and money owed under family court proceedings cannot be included
  • Homeowners may have to release equity from their home at the end of 5 years. If this is not possible, an additional 12 months contributions may be required

  • If you fall into 3 months arrears the IVA could fail

  • If the IVA fails then you could be made bankrupt

An IVA might be the best solution for you depending on many circumstances including the length of time it would take to repay your debts under other solutions.

We will signpost you to an appropriate source if we believe an IVA is a suitable option.

Settlement Agreements

Providing there is evidence of financial difficulties, creditors will often agree to accept a reduced lump sum in settlement of the debt.

Proposals should only be made when a lump-sum is readily available without jeopardising you priority commitments and where all of your priority bills are up-to-date.

  • Settlement proposals can be made either immediately or at any time during the life of some other debt remedies such as a Debt Management Plan

  • If a settlement is agreed and executed you will not be pursued for the residual balance

  • If the settlement is agreed on a ‘full and final settlement basis’ your credit file should indicate that the debt is fully settled.

  • If a ‘short settlement’ is negotiated the creditor will agree that neither they, their agents or any third parties will pursue you for the outstanding balance. However, the debt will show as only partially satisfied on your credit file and the information will remain visible for six years from date of default.

Capital Financial Management can help negotiate settlements on your behalf.

Settlement fees are calculated at 10% of the amount of reduction negotiated. For example, if the outstanding balance is £3600 and we agree a settlement of £2000 then the saving will be £1600 before the fee of £160.00.*

*Example given is for illustrative purposes only and is not meant to be or should be taken as the likely percentage reduction that can be negotiated.

Administration Orders

An application needs to be made to the court and these orders are only suitable for those who owe less than £5000, have at least 2 creditors and already have a county court judgment registered against them.

An Administration Order will prevent creditors from taking enforcement action and interest will cease to accrue. A creditor can request to be left out of the order and the court may make an Attachment of Earnings Order.

If an Administration Order is accepted then you will continue to make payments until your debts are paid off. If you do not keep up with payments the court can revoke the order.

If you owe more than £5000 other options may be suitable. Capital Financial Management will be happy to discuss these with you.

Self help / Management

You may feel comfortable in dealing with your debt problems without seeking advice or help from a third party.

If so;

  • You can liaise directly with your creditors to make them aware of your situation and make offers of payment that you can comfortably afford.
  • Providing you present your case correctly, creditors will generally agree to reduce monthly payments that are calculated pro-rata to your disposable income.
  • You can request that your creditors agree to stop applying charges and interest although they are not obliged to do so.
  • Self-help is flexible meaning that providing you reach prior agreement with your creditors, payments can be varied to suit your circumstances.
  • Online guidance may be sought from a number of sources including money helper from the Money & Pensions Service a ‘self-help pack’ downloadable from here

However it is important to consider that;

  • As you will not be receiving advice you may make decisions that would otherwise have not been in your best interest.
  • In most cases you will still need to provide a comprehensive financial statement to your creditors detailing your income, expenditure, priority debts and non-priority debts and calculate pro-rata offers of payment.
  • You will need to conduct regular reviews with your creditors, usually at 6 or 12 monthly intervals.
  • If creditors agree to accept reduced repayments this will adversely affect your credit rating.
  • Creditors do not have to agree to your proposals. They may still contact you requesting full payment.
  • Creditors do not have to agree to stop interest and charges. Where they refuse to do so paying the debt over a longer period may result in the total amount payable increasing.