Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

LIBF Unit 1 > Topic 11 - Dealing With Debt > Flashcards

Topic 11 - Dealing With Debt Flashcards

1
Q

Why do ppl fall into debt?

A
  • changes in personal circumstances
    • lose job
    • mortgage, food + energy costs may inc.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Actions ppl can consider when dealing w debt

A
  • get free impartial advice
  • use budget to work out what they can repay
  • negotiate w lenders affordable amounts to repay
  • inc. income e.g. sell assets (car)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Advisory organisations who may give free impartial advice on dealing w debt

A
  • MoneyHelper
  • StepChange Debt Charity
  • Citizens Advice
  • National Debtline
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How may ppl inc. their income to repay debt?

A
  • claim all benefits they’re entitled to
  • take on more work
  • sell an asset
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How can ppl w a good credit rating change products to deal w debt?

A
  • can switch credit card debt to another provider not charging interest on balance transfers
    • stops original debt growing + gives time to repay
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Factors to consider when ppl struggling to repay a loan extend term of loan

A
  • dec. monthly repayments but inc. overall cost of loan
  • maybe set up or arrangement fees for new loan
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is a consolidation loan?

A
  • loan used to pay off several diff. debts
  • monthly repayments made to loan provider
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Considerations before taking out a consolidation loan

A
  • full costs involved in new loan
  • must afford repayments on loan if they are to clear their debts
  • overall cost must not be > cost of individual loans
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What to prioritise when dealing w debt

A
  • most expensive debt 1st
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What ppl set up debt management plans?

A
  • ppl w many diff. debts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How do debt management plans work?

A
  • person pays DMC each month who splits money between those the individual owes
  • free from most charities
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a debtor?

A

Someone who owes money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a creditor?

A

Someone who is owed money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Advantages of debt management plans

A
  • easier to manage debt
  • longer to repay what owed
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Disadvantages of dept management plans

A
  • DMCs only deal w non-priority debts
  • creditors don’t have to accept plan
  • debt takes longer to clear
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are administration orders?

A
  • repayment plans
17
Q

Who do administration orders apply to?

A
  • ppl who have < £5,000 in unsecured debt + at least 1 CCJ against them
18
Q

What do administration orders do?

A
  • ppl can apply to court for them + court decides what they can afford to court monthly
  • court pay their creditors
  • creditors can’t contact debtors directly to ask for further payments + can’t add interest to debt
19
Q

What does it mean if a person is insolvent?

A
  • they can’t pay their debts
20
Q

What are the solutions of insolvency?

A
  • individual voluntary arrangement (IVAs)
  • debt relief orders (DROs)
  • bankruptcy
21
Q

What does IVA stand for?

A

Individual voluntary arrangements

22
Q

Who does an IVA apply to?

A
  • ppl w unsecured debts > value of their assets
23
Q

Advantages of IVAs

A
  • ppl make affordable repayments for 5-6yrs then debt written off
  • an insolvent practitioner (IP) negotiates w creditor on debtors behalf
  • creditors can’t add any more interest or charges to debt
24
Q

What does DROs stand for?

A

Debt relief orders

25
Q

What do DROs enable ppl to do?

A
  • write off their debts if they’re unable to repay after 12 months
26
Q

Who do DROs apply to?

A

ppl who:
- owe < £30,000
- aren’t homeowners
- have no more than £2,000 in assets
- have < £50 after they’ve paid their living expenses

27
Q

What is bankruptcy?

A
  • a court order where a person’s assets are shared between their creditors who write off remaining debt
  • fee of £700
28
Q

Advantages of bankruptcy

A
  • debtors don’t deal directly w creditors
  • debts can be written off in 12 months
29
Q

Disadvantages of bankruptcy

A
  • record remains for 6yrs: difficult to get credit
  • assets have to be sold to repay debts
  • cost of bankruptcy
  • debtors can only use basic accounts: can’t go overdrawn
  • details of bankruptcy published
30
Q

What are the insolvency solutions in Scotland?

A
  • debt arrangement scheme
  • trust deed
  • minimal asset process (MAP) bankruptcy
  • sequestration
31
Q

What is the debt arrangement scheme

A
  • run by Scottish gov.
  • similar to debt management plan
32
Q

What is a trust deed similar to?

A
  • an IVA
33
Q

What does minimal asset process allow you to do?

A
  • write off debts u are unable to pay off in a reasonable time
  • fee is paid + debt written off in 6 months
34
Q

What must u prove to enable minimal asset process bankruptcy?

A
  • ur on a low income
  • debt between £1,500 + a specified higher amount (£17,000)
  • u aren’t a homeowner
  • owned vehicle < £3,000
  • assets < £2,000
  • not been bankrupt in last 5yrs
35
Q

What is sequestration?

A
  • bankruptcy in Scotland

LIBF Unit 1 (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions