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At Crosslight we understand that finding yourself in debt
can be a frightening and bewildering experience.
That’s why we’re here to help you navigate your way
through the routes out of debt and advise you on how
to best resolve your financial situation.
Everyone’s journey out of debt is different and there are various ways of
taking charge of your debt. This guide will provide you with a simple
overview of the options which may be available to you, although not all
of them may be appropriate for your individual circumstances.
Find the best path
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A. Repayment Plan
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B. Debt Relief Order
page 08
C. Individual Voluntary Arrangement
page 10
D. Administration Order
page 12
E. Bankruptcy
page 14
Working with Crosslight
page 16
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Find the best path
If you choose to work with Crosslight, we will help you decide which of the
options contained in this guide will be right for you. That may be one option
only, or a combination of several options – the best route will vary from
situation to situation.
In all cases however, our first task will be to help you deal with any urgent or
important debts. We call these Priority Debts, and they will include those
debts for which the consequences of non-payment are the most severe,
such as rent or mortgage arrears, council tax, gas or electricity arrears, or
debts which involve bailiffs.
The best option for you will depend on many things, including:

Your personal and family circumstances

Any long-term health issues you may have

How much you owe

The nature and extent of any Priority Debts

What type of other debts you may have

How much you can afford to repay after paying your basic living
expenses

Any assets you might have, for example a property, vehicle, savings
or investments

Your future prospects, for example if you intend to start working or
change jobs
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A. Repayment Plan
Making arrangements with your creditors to repay them over a period of time
is the most common way of dealing with your debt. Crosslight can help by
negotiating on your behalf to try to have interest and charges stopped and
arranging an affordable repayment plan between you and your creditors. This
is an informal method of dealing with your debt and does not involve any
courts or contracts. It also allows you to renegotiate the repayment amounts
should your circumstances change in the future.
Automatically free of debt?
No
Length of time?
No fixed time, but the debt may take a
long time to be repaid if the amount
you can offer is small
*Fee?
No, but interest could still be added
Which debts are excluded ?
None, but creditors may not agree to
the offered amount if it is too small
Impact on assets?
None, but you would need to keep
making payments on any secured debt
e.g. mortgage
Impact on employment?
Probably not
Credit rating affected?
Yes
* Crosslight itself does not charge any fees — ever.
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Repayment Plan cont’d.
There are several options when considering a repayment plan, and the right
option for you might involve a combination of one or more of the following:
Payments from income:
Any money that is left after your monthly expenses and essential costs, is
know as ‘disposable income’. This is used to repay your creditors. We will
help you work out how this should be divided amongst your creditors with
priority being given the things like rent, council tax and utilities.
Crosslight will carry out an assessment to see how you can maximise your
income through applying for additional benefits or tax credits. You may
consider seeking work or increasing your hours. If you have any non
statutory dependents living with you, could you ask them to contribute
toward the living expenses, or could you consider getting a lodger if you
have the space?
Payments from lump sums:
Some creditors will agree to write off part of your debt if your are able to
pay a lump sum towards what you owe. This may be an option if you have
savings, receive a bonus at work, are given an inheritance, or have assets.
However, if you have disposable income after your monthly expenses, some
creditors will ask that you make payments from that despite offering a lump
sum.
Token payments:
If you do not have any disposable income, it may be appropriate to offer a
‘token’ amount to your creditors. This could be as little as £1 a month and
may be offered for a short period of time to allow you to get back on your
feet.
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Writing off the debt altogether:
If you have exceptional circumstances such as very serious health issues or
difficult family circumstances, it may be possible to ask your creditors to write
off what you owe. This is rare and a strong case will need to be made for a
creditor to consider this course of action.
Managing your own affairs (self-help)
You may decide that you would prefer to handle matters yourself by
speaking to your creditors and making your own arrangements to repay
what you owe. You will still need to create a budget in order to work out
what you can offer and you should take care not to be pressurised into
paying more than you can afford. For detailed information and guidance
we recommend you visit www.nationaldebtline.org where you can access
factsheets on a whole range of topics as well as create your own budget.
Debt Management Plan (DMP)
A DMP is an alternative to the repayment plan which Crosslight can help
you put in place. Essentially it works in the same way as a repayment plan,
but instead of you making the payments yourself to individual creditors,
you would pay a single amount to a debt management company who
would distribute the payments on your behalf. Some companies charge a
fee for this, although there are also a number of charities and other
organisations which do not. Crosslight can refer you to a free debt
management company who will help you to set up a DMP if you would
prefer this option.
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B. Debt Relief Order
A Debt Relief Order (DRO) is a formal legal arrangement where your debts
(with some exceptions) are frozen for a period of 12 months and then written
off. It is intended for those with a low level of debt and a low income with little
or no assets. A DRO allows you to make a fresh start after one year and prevents those creditors listed in the DRO application from taking further action
against you without the courts permission. You do not need to go to court to
apply for a DRO. Crosslight is an approved intermediary who will submit the
online application on your behalf.
Automatically free of debt?
Yes, except debts that are excluded from
the DRO
Length of time?
12 months
*Fee?
£ 90
Which debts are excluded?
Court fines, CSA obligations, student loans,
secured debts, damages, personal injury,
Social Funds crisis or budgeting loans, and
fraud
Impact on assets?
None, but assets need to be under £1000vehicle worth less than £1000
Impact on employment?
Some employers may reserve the right to
terminate a contract, but this is quite rare
Credit rating affected?
Yes, for 6 years
* Crosslight itself does not charge any fees — ever.
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Am I eligible?

you owe less than £20,000

you have less than £50 a month surplus income after essential
expenses

you have less than £1000 worth of assets and/or a vehicle worth
£1000 or less

you’ve lived or worked in England and Wales within the last 3 year

you haven’t applied for a DRO within the last 6 years
How do I apply?
You cannot apply for a DRO on your own. You will need an organisation like
Crosslight to submit the application on your behalf. We will ensure you fit all
the criteria and are given the appropriate advice before submitting a DRO
application. In some instances we may be able to secure a grant toward
the application fee.
What else do I need to know?

If your financial situation changes within the first 12 months, the DRO
may be cancelled and your debts reinstated. This could be if you
break any of the conditions of the order, or you have more than
£50 a month of surplus income (after essential expenses), or you
acquire more assets.

The DRO is entered into the Insolvency Register which is a public
record. It is removed three months after the DRO ends

You will not be allowed to borrow more than £500 without telling
the lender about the DRO

You cannot act as the director of a company, trustee of a charity,
school governor, or solicitor during the DRO period
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C. Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) can be a way of dealing with your
debts without losing assets. It is a legal agreement with your creditors to pay a
negotiated amount over a period of 5 to 6 years, after which any remaining
debt may be written off. Unlike a DRO, you will need to have significant
monthly surplus income to enter into an IVA. An IVA can only be setup by a
licenced Insolvency Practitioner (IP).
Automatically free of debt?
Yes, when you have completed the terms
of the IVA
Length of time?
No set term, but usually 5 or 6 years
*Fee?
We will refer you
to an IP who will not
charge a service fee.
Which debts are excluded?
Court
fines,
CSA obligations,
student
loans, secured debts, damages, personal
injury, Social Fund crisis or budgeting
loans, and fraud
Impact on assets?
If you own a property you may have to
release some of the equity as part of the
IVA i.e. increase your mortgage
Impact on employment?
Some employers may reserve the right to
terminate a contract, but this is quite rare
Credit rating affected?
Yes, for 6 years
* Crosslight itself does not charge any fees — ever.
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Am I eligible?

You owe debts to more than one creditor

You have a significant monthly surplus income (usually more than
£100 a month) or a lump sum to enable your Insolvency Practitioner to
negotiate acceptable terms of the IVA with your creditors
How do I apply?
Crosslight will refer you to an Insolvency Practitioner (IP) who will facilitate
the IVA and who will not charge you any service fees. However, the IP will
take a percentage of the monthly amount you pay the creditors to cover
the cost of the IVA. The IP will negotiate the terms of the IVA with your
creditors and prepare the proposal. Once you have entered into an IVA
you will make one monthly payment to the IP who will administer and
distribute it amongst your creditors.
What else do I need to know?

An IVA can only proceed if 75% of creditors (by amount of debt)
agree to the IVA

If your financial circumstances change and your IP cannot get the
creditors to accept the amended terms, the IVA might fail. You will
then still owe the creditors the full amount and may be made
bankrupt

On completion of the IVA the balance of what you own will be
written off

The IVA will be listed in the public domain
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D. Administration Order
If you have a County Court or High Court judgement against one or more of
your creditors an Administration Order is a way of dealing with your debt.
Under an administration order you will need to make weekly, monthly or
quarterly payments to the court who will share it among your creditors.
Automatically free of debt?
No, but if the debts will take a long time to
repay, it may be possible to ask the court
for an order to write off a part of the debt
Length of time?
Until last payment is made
*Fee?
No upfront fee but court will take a 10%
admin charge from monthly payments
Which debts are excluded?
You can attempt to include any debt, but
most priority creditors will object
Impact on assets?
No, but you’ll need to keep paying an
secured loans e.g. mortgage
Impact on employment?
No
Credit rating affected?
Yes
* Crosslight itself does not charge any fees — ever.
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Am I eligible?

You owe less than £5000 to more than one creditor

You have a court judgement against you and you are unable to pay
the amount in full
How do I apply?
Crosslight will assist you to fill in the necessary court forms. You will then need
to take the forms and supporting documents to the court. The court will then
set a hearing date to decide whether or not to grant an Administration
Order.
What else do I need to know?

None of the creditors listed in the Order can take any further
action against you once it is in place

Interest and other charges are stopped

You will make payments to the court who will distribute it to your
creditors

If you fail to make payments, the Order can be revoked and the
creditors can take action against you again

If your circumstances worsen you can ask for your payments to be
reduced

If the court makes an attachment of earnings order, your employer
will be notified of your situation
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E. Bankruptcy
Bankruptcy is a legal process that will clear most of your debts. If you have
assets they will usually be sold to help pay back your creditors, however you
will be able to keep your personal belongings and essential household items.
You may be able to avoid selling your home if your spouse or partner can buy
your share of its value after any secured debts have been paid. Bankruptcy
usually lasts one year, and once you have been freed (discharged) from your
bankruptcy, you are cleared of your debts.
Automatically free of debt?
Yes, except debts that are excluded from
the bankruptcy
Length of time?
Usually 1 year
*Fee?
£680 (this is made up of an application
fee of £130 and a bankruptcy deposit of
£550)
Which debts are excluded?
Court fines, CSA obligations, student
loans, secured debts, damages, personal
injury, Social Fund crisis or budgeting
loans, and fraud
Impact on assets?
The Official Receiver may require assets
to be sold and used to pay back to your
creditors
Impact on employment?
Possibly
Credit rating affected?
Yes
* Crosslight itself does not charge any fees — ever.
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Am I eligible?

You own more than £750

You do not have enough disposable income to pay your debts over
a reasonable period of time (usually 5 years)

An IVA or DRO is not a more appropriate option
How do I apply?
Bankruptcy petitions are made online. Crosslight will assist you with the
process and help you complete the necessary application – you will not
need to attend Court. If your bankruptcy is approved, you may need to
attend an interview with the Official Receiver.
What else do I need to know?

Debts included are written-off when the bankruptcy order is made.
However if you have surplus income you may have to make
payments for up to 3 years

Any business you have will most likely be closed and your
employment might be affected. Certain professionals are barred
from practising after bankruptcy

You cannot act as the director of a company or be involved in its
management unless the court grants permission

If you act dishonestly or irresponsibly you can have a bankruptcy
restrictions order invoked for 2 to 15 years

If will be illegal for you to borrow £500 or more without permission
from the court

The bankruptcy is entered into the Insolvency Register and listed in
the public domain
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Working with Crosslight
Although the exact level of support you may need will depend on your
individual situation, at Crosslight we’ll use the following process to advise and
support you toward becoming debt free.
Budgeting
Debts
Options
We will review all
your income and
spending and help
you create a realistic
budget so that you
can meet all your
essential living costs
We will look at all
your debts and will
help you prioritise the
most important ones
such
as
housing,
council
tax
and
utilities
We will discuss
all
your options with you
and help you make
a decision on the
best way forward,
dealing with any
priority debts first
Legal Action
Fair Repayment
Prevention
We will help you
navigate your way
through
any
collections activity or
legal action and
advise you on how
what action you can
take
If appropriate, we
may talk directly with
your creditors to help
negotiate an action
plan appropriate to
your situation
We will talk to you
about ways to live
within your budget
and manage your
money
more
confidently
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What we promise you:
No Fees
Crosslight is a charity and does not make any charges for the advice it gives
or services it provides.
Your Decision
While we’ll advise you on your options and will recommend a course of
action which we think is best for you, we will not make any decisions for you.
It is always your choice.
Ending the Advice
You may end your relationship with Crosslight at any time in the process. In
turn, we may also choose to end the relationship with you if you fail to keep
to the terms of your agreement or it is felt that further advise would not be
beneficial for you.
What we ask of you:
No More Debt
While working with Crosslight we ask that you not take on any further debt as
this may affect our ability to help you.
Open and Honest
We ask that you provide us with complete and accurate information about
your situation and keep us informed of any changes to your circumstances.
Full Co-operation
We ask that you keep in regular contact with us during the process and work
with us by attending all your appointments.
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Other things to consider:

In almost all cases, the options contained in this guide will affect your
credit rating and may show on your credit record for up to 6 years

Using any of the options could effect your employment. Depending
on the terms of your employment, you may need to disclose your
situation to your employer

None of the options will have an affect on the rights of any secured
creditors. If someone you owe money to has taken security over your
home or other property (for example a mortgage, secured loan, or
certain Hire Purchase agreements), they will still have the right to take
possession of your home or goods if you do not repay the debt

Most credit card debts, loans and store cards etc. are unsecured,
meaning the creditor cannot automatically claim entitlement to your
home or property if you fail to make payments. However if you are a
home-owner, in some circumstances a creditor may be able to ask
the court to secure the debt on your home through what’s known as a
charging order

The people you owe money to are not obliged to accept reduced
repayments or to freeze interest if it is being applied. Stopping or
reducing payments to them may therefore result in the debt taking
longer to be repaid or the creditor taking legal action against you
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HTB Brompton Road | London | SW7 1JA
020 7052 0318 | [email protected] |
www.crosslightadvice.org
Crosslight Advice is a registered Charitable Incorporated Organisation (charity no. 1163306) and is
authorised and regulated by the Financial Conduct Authority (authorisation no. 715066). Crosslight is
part of the national Community Money Advice network of debt advice agencies and is a member
of Advice UK. Crosslight holds the Advice Quality Standard.
Revised: 16.2.17
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