Personal Insolvency – What to do if your debts are too big to tackle

Take a good look at your personal finances

Being in debt can feel like a living nightmare. Every time the phone rings you’re afraid of who might be on the other end. Every letter through your door contains red ink and every knock on the door fills you with dread. It’s no way to live and at Lines Henry, we want to help you get your finances back on track so you can once again live your life without stress.


What is personal insolvency?

Personal insolvency, simply put, is where an individual has accrued debts they are unable to pay.

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.” – Mr Micawber in David Copperfield by Charles Dickens

Ideally, you’ll be able to spot debt issues long before they become problems. However, through mistakes, situations beyond your control, and numerous other factors, individuals can find themselves with more to pay than they have funds to cover. At this point, you should seek help. The sooner you do, the sooner you can regain control of your finances.


Bankruptcy is not your only option

Insolvent individuals have more options than just bankruptcy.

Debt Management Plans

A debt management plan (DMP) is an arrangement between you and your creditors as to how you will repay them. They are usually used if you can only pay a small sum or if you cannot make payments now but will be able to do so in the future. You can arrange a DMP yourself or you can use a company that will arrange it for you. If you use a company they will charge you a fee. The major problem with DMPs is that there is no legal back up to the agreement which means that creditors can change their minds about whether or not they agree to it.

Debt Relief Orders

A debt relief order (DRO) is a cheaper option than bankruptcy for those without much in the way of income (less than £50 per month surplus) or assets (less than £1,000) and a relatively low level of debt (less than £20,000). Not everyone qualifies for a DRO, but for those that do, they can provide a straightforward way of dealing with their debt which would be written off after 12 months.  There’s no need to appear in court, but there is a fee and a form to fill out. Additionally, DRO’s will appear on a public register, with implications for your credit record.

Individual Voluntary Arrangements

An Insolvency Practitioner is required to assist with making an Individual Voluntary Arrangement (IVA). This is a formal, legally binding arrangement between you and your creditors where you offer to repay your debts to them based on what you can afford to repay. If they agree, you are obliged to adhere to the agreed terms but, equally, creditors cannot change their mind once the IVA has been approved.


Not to be entered into lightly, but sometimes the best solution based on your circumstances. Bankruptcy can give you a fresh start, but you’re likely to have to give up any asset of value you have in return for having your debts written off. Only suitable for those who have no realistic chance of paying their debts and whose financial situation is unlikely to improve. Bankruptcy will make it extremely difficult if not impossible to obtain credit for up to six years and there are further restrictions on the public and professional roles you may play until the time such restrictions have ended.


How can I find out more?

We offer a free consultation for individuals and businesses who are in financial difficulty. Picking up the phone can sometimes feel like the hardest thing to do, but we’re sure that once you speak to us, things will start to improve.


Get in touch with Lines Henry and let us help you deal with your debt burden.