Some of the more Frequently Asked Questions we hear at DebtBusters

"What is an Informal Arrangement?"

This is an arrangement to pay debts over a period of time, with the agreement of the creditors, based on your ability to repay a comfortable monthly amount.

This method is used where the debt figure is relatively small, or where it is clear that the debt can be repaid in full within a realistic time scale.

If your creditors do not agree to an informal arrangement, we recommend the set up of an Informal Voluntary Arrangement. (See below.)

"What is an Informal Voluntary Arrangement (IVA)?"

An IVA is a legal arrangement that binds the creditor as well as the individual - it freezes interest and most importantly, puts you back in control - one monthly payment and no more harassment from creditors.

"Who can propose an IVA?"

Any individual with unsecured debts of £12,000 or more can propose an IVA to their creditors. On acceptance, ALL legal proceedings will be halted.

"What must be offered in the IVA?"

Typically an IVA will propose that a set monthly amount is paid into a central fund to be distributed to creditors. (Usually a minimum of £250 per month.)

"DebtBusters have set up a repayment programme for me, so why am I still receiving letters from my creditors?"

Don't worry. Although this type of correspondence can be worrying and agitating, there is often a reasonable explanation for it. Sometimes a payment may get temporarily allocated to the wrong account at a particular bank leading to the bank issuing a "demand" letter. Also, once a payment has been agreed, a credit company might refer the account to a Collection Agent who may send a letter on to you demanding a payment and failing to acknowledge that DebtBusters has forwarded a proposal.

All you need to do is forward any letters on to us. We will take care of the situation; advice the collection agent that a programme has been set up and if necessary, direct payments to the collector.

"Can I get my creditors to freeze interest charges?"

It may be possible to freeze interest charges. Having attended a recent MALG meeting where the freezing of interest was discussed, DebtBusters has prepared a guideline indicating the credit company's selection process when deciding whether or not it is appropriate to freeze interest charges on a client's account. The guideline is detailed below:

Interest charges will usually be frozen when:

The individual is unable to maintain a sufficient level of payment in order to cover the interest charges and further reduce the account balance.
The current financial predicament is likely to be long term, for example where the individual's income has ceased due to ill health.
Financial circumstances have changed since entering into the agreement, for example through redundancy or reduction in earnings.

Interest may continue to be debited to the account if:

The financial situation is likely to be temporary, i.e. likely to improve within the next 12 - 18 months.
The proposed repayment is relatively close to the original contractual instalment.
The present situation has been caused simply through financial over-commitment, although very often a credit company will agree to freeze the interest as an act of goodwill.

It is important to remember that although credit companies can be sympathetic to a client's circumstances, they look to establish a commitment from the individual before suppressing interest charges on the account. This commitment often entails a minimum of three consecutive monthly payments on the account. For interest rates to be frozen, it is imperative that the individual meets the credit company's concession arrangements without default.

Each case is different and it should be noted that in some cases the interest rate may simply have been suspended to be re-applied at a later date to the account. For this reason. it is vital that customers continue to monitor their account, ensuring monthly payments are made regularly and punctually.

As your financial advisor. DebtBusters is acutely aware of the importance of encouraging the repayment of the client's indebtedness and we feel that, with credit companies freezing interest charges, accounts will be repaid at a faster rate.