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UK Wide Debt Advice Charity
Call us at 0800 085 0226
E-mail: contact@debtsupporttrust.org.uk

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Lump Sum Trust Deed and IVA

On occasion, a debt solution can change from its standard approach and be adapted to meet a specific person's situation. It's for this reason that a "one-size fits all approach" doesn't work when giving debt advice. This can be demonstrated with a lump sum Trust Deed or IVA. This is also known as an equity only IVA or Trust Deed.

The lump sum IVA and Protected Trust Deed is a one off payment plan when a sum of money is used to repay outstanding unsecured debts. This usually involves offering creditors an asset, like equity from the sale of a house or redundancy money to settle the debts.

Lump Sum Debt Solutions

A one-off payment is only suitable for people in specific situations, such as people who may have an asset, but have recently became unemployed.

An IVA usually lasts for 5 years and a Trust Deed is typically a 3-4 year debt solution in Scotland. However, this is because a monthly contribution is required for the fixed period of time. At the end of the solution any remaining debt is written off.

Some people may not be able to contribute each month towards their debt because of ill health or redundancy, however, they may have a lump sum available. This money could be proposed towards the creditors as a full and final offer.

For example, if £30,000 is owed to 5 different creditors and a person were to be ill and unlikely to return to work, but they had £10,000 in their bank, then a lump sum debt solution could be proposed. The full and final offering would be similar to the traditional IVA and Trust Deed; protecting a person from their creditors, however it wouldn't usually last as long. Often a lump sum IVA or Trust Deed would last up to a year before the solution is closed. This is a Scottish debt advice solution only.

Informal Lump Sum Debt Plans

If you only owe one or two creditors then you could consider writing an informal payment plan to each of your creditors. Your creditors may be more willing to accept the plan because in the IVA or Trust Deed the Trustee will take a percentage of the money for managing the solution.

You should speak to our charity debt advisors if you would like help putting a lump sum informal payment towards your creditors.

You should offer creditors a pro-rata amount of your lump sum and agree to the plan once every creditor has responded in writing. The payment should be confirmed in writing that it will be a full and final settlement, with the remainder of the debt being written off.

Hot Points

There are some hot points to remember with an equity only debt solution.

Remember,

  1. If you can afford to make a monthly contribution then your Trustee in the IVA or Trust Deed will still want you to contribute this.
  2. Some people borrow money from friends and family in order to do the lump sum solution. Ensure you get debt advice before proceeding with this as bankruptcy may be a better option.
  3. If you make the lump sum payment, but then your situation improves while still in the IVA or Trust Deed, you could be asked to pay a monthly contribution for the remainder of the debt solution.
  4. The reason the IVA or Trust Deed closes early in a full and final solution is because all assets and contributions have been gathered in. If the Trustee believes there is other assets they will have to investigate these too. For example, it's the Trustees responsibility to check the PPI has been claimed and, if appropriate, returned to the creditors.

If you would like debt help on lump sum IVAs or full and final Trust Deeds please contact our charity on 0800 085 0226.

Alternativly you can ask any IVA questions you have in our Debt Advice Forum where our advisers are on hand to help.

Monday, November 04, 2013
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21 Percent Less Bankruptcies

Statistics released by the Insolvency Service show that bankruptcies in England and Wales have declined by 21% compared on the previous year. Year on year bankruptcy insolvency solutions have declined including debt relief orders (a cheaper route into bankruptcy).

However, IVAs increased in the last three months, compared to last year by 5.7%. The number of Individual Voluntary Arrangements (IVAs) increased to 13,394.

Number of People Entering Bankruptcy

The number of people deciding to enter bankruptcy to resolve their money problems still remains high, however the figures do continue to fall.

Bankruptcies in the last three months were 6,004 (21.4% less than the same time last year) and 6,632 debt relief orders (14.7% less than the previous year). The debt relief order is a route into bankruptcy costing £90, instead of the usual £700.

To enter a debt relief order a person must meet a specific criteria, otherwise they will have to enter bankruptcy via their local court. The number of court bankruptcies are falling but the debt relief order route is becoming more popular.

Bankruptcy Alternatives

There are solutions which are alternatives to bankruptcy, which many people may be suitable for. Debt management plans are informal debt solutions and are not registered anywhere. It's thought that there are 500,000 debt management plans active in the UK.

An IVA is an alternative debt solution for somebody to enter in order to resolve debt problems. The IVA debt solution typically lasts for 5 years and at the end of the solution the remaining debt is written off. A bankruptcy will only ever last for 1 year, however, if it's determined a payment plan is applicable then the monthly repayments could last for 3 years. The official receiver in bankruptcy will decide if a payment plan is suitable and how much should be taken every month.

Bankruptcy Debt Advice

If you think you are suitable for bankruptcy then talk it over with a qualified debt advisor. The money and debt advisor will have the knowledge and experience to explain the full process and tailor the advice to your exact situation. This means they can discuss income, expenditures, what debts can be included and assets, like houses, cars, stocks, share and savings.

The debt advice team will also explain if you would be suitable for other debt solutions so you can become debt free.

You can speak to our charity debt advisor on 0800 085 0226 or by completing our debt analyser and requesting a call back.

Friday, November 01, 2013
Debt Support Trust
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IVA Companies

After receiving debt help you may decide an IVA is the best option to resolve debt problems. The IVA will typically last for 5-6 years and at the end of the solution, any debt which has not been repaid is written off. The best IVA companies can make the process simple and straight forward.

If you need help with an IVA or wish to receive debt help you can call our not-for-profit charity advice team on 0800 085 0226 or complete our debt analyser.

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IVA Debt Companies

An IVA is a legally binding contractual agreement whereby the person in debt pays one monthly payment which they can afford. The IVA will require any realisable equity to be released near the end of an IVA. Usually this means the equity from a house, car, stocks or shares. If the equity can't be released in a house through a remortgage or third party payment, then the IVA will typically last for 6 years and you will keep your property.

To propose an IVA, an insolvency practitioner is required. The insolvency practitioner (IP) will work for an IVA company and will propose the plan on your behalf. The IP will be responsible for managing the IVA and will become the IVA supervisor once the IVA has been accepted. There are many IVA companies able to propose an IVA on your behalf throughout England, Wales and Northern Ireland. Your IVA company doesn't have to be local, however sometimes it can be beneficial if your insolvency practitioner is nearby.

Applying for an IVA via an IVA Company

If you enter an IVA the interest and charges are frozen. The proposal usually takes 10 -14 weeks to gather paperwork and create the plan. The creditors are given the option to accept, reject or negotiate the proposal. Often creditors will accept the proposal as long as they feel it's the best offer they can get.

If the creditors decide to modify the arrangement it doesn't mean the proposal won't go ahead, however there is sometimes extra information required during the creditors meeting. You don't have to attend the creditors meeting as you IVA company will do this for you.

The IVA company will let you know what happens after the IVA creditor meeting. If the IVA proceeds then you stop paying your unsecured debt (credit cards, overdrafts, payday loans etc) and pay one monthly payment to the IVA company. This payment continues until the plan is finished. At the end of the solution any remaining debt is written off by your Insolvency practitioner.

Lump Sum IVA

The other type of IVA is known as a lump sum IVA or full and final IVA. Sometimes a person will want to enter an IVA and offer what they can. However, if they are unemployed then they may not be able to make a monthly contribution. But, if there is a lump sum, for example a redundancy payment, divorce settlement or inheritance, this could be used as a one-time payment towards the creditors.

For instance, a £10,000 inheritance could be proposed towards the creditors to cover a £30,000 unsecured debt. The IVA company would take their fees from the monthly payment, or in this case the lump sum payment, then divide the remaining sum of money among the creditors on a pro-rata basis. Usually a lump sum IVA will last for a shorter period than a traditional contribution based IVA.

Get IVA Advice

For advice and support on an IVA or help with IVA companies speak to our charity advisors. We can help ensure the IVA is the best advice for you and point you in the right direction to get the IVA established. We'll take every care to guarantee you're given every piece of important IVA help.

You can call our advice line on 0800 085 0226. This is a free number from a landline. If you're calling from a mobile please let us know and we'll call you back.

Our debt analyser can help you understand whether the IVA is the best option for you too. It takes 5 10 minutes to complete.

analyseyourdebt

Thursday, October 31, 2013
Debt Support Trust
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Disposal of Asset

There are some debt solutions where assets have to be realised for the benefit of creditors. These debt solutions include bankruptcy, an IVA or Trust Deed. When there is little or no equity, then the asset doesn't have to be sold or realised. However if the asset, such as a property, has value which can be returned to the creditors, then this must be considered. Sometimes we get asked whether the property can be transferred to another person. This is called disposal of an asset.

Transfer asset for free to partner

If an asset has been transferred to another person in order to hide it from a creditor, then it is the responsibility of the insolvency specialist to decide how to proceed. Any asset transferred unfairly within the past 5 years can be re-assessed. The person who purchased the asset could be required to pay the remaining balance until it reaches the correct value. Alternatively, the asset can be transferred back and sold again.

For example, a husband may transfer a property with £50,000 equity to his wife's name in order to protect his 50% share (£25,000). If this is done quickly before entering bankruptcy, an IVA or Trust Deed then the insolvency practitioner can check the land registry to see the asset has been disposed of.

What Can I Do to Protect My Asset?

The main option to protect your assets is to avoid entering an insolvency solution. There are some informal debt solutions which won't consider your equity in an asset, such as a debt management plan.

To be sure about the best debt solution for you, get advice. It can take 10-20 minutes to get debt advice but you will be given the advice you require to understand what each debt solution would mean to you.

Do not transfer assets to other people for an unfair value. It may seem like the best option but in the long term it can cause you problems.

If you would like advice from our charity on disposing of an asset or what debt solution is best for you, then please call Debt Support Trust on 0800 085 0226.

Monday, October 28, 2013
Debt Support Trust
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Can’t Pay Mortgage – Debt Worries

Many people contact Debt Support Trust because they can't pay their mortgage. This debt worry can cause people to ignore the problem and pretend it doesn't exist. When they eventually deal with the problem, the mortgage arrears have escalated or possibly repossession proceedings have begun.

There are plenty of reasons why somebody may be unable to repay their mortgage. The mortgage is a secured debt, meaning that failure to repay the money on time could result in the property being repossessed. If you would like help with your mortgage debt, please telephone our debt advice charity line on 0800 085 0226.

Reasons for Failing to Pay Mortgage

A mortgage is an important payment to make every month, it ensures you can remain in your property and repay the loan you borrowed. Rarely do people fail to pay their mortgage on purpose, usually it's because they are struggling financially.

mortgage-debt-problemsSome of the most common reasons for failing to make the contractual mortgage payments include:

Unemployment: A sudden spell of unemployment can mean that repaying the monthly mortgage payment is difficult. This is usually a short term problem but there is help and advice available so get in touch.

Overstretched financially: An over reliance on credit is the main reason for people being unable to repay their mortgage. Multiple credit cards, loans and overdrafts, coupled with the cost of the mortgage is just too expensive. There is support just calling 0800 085 0226 and speaking to a friendly advisor.

Please note that with priority expenditure, like a mortgage or council tax, this must be paid before credit cards and other unsecured debts. Our charity debt advice team can help you with your unsecured creditors so that you can afford to repay your priority debts.

Divorce/ Separation: When people separate or divorce the couple income remains the same, however the expenditure increases because people live in separate properties. This can mean the mortgage is unaffordable.

Increase in repayments: If the repayment amount each month is based on the interest rate, then a once affordable mortgage could become impossible to manage, because the interest rate has increased.

Advice on Mortgage Debts

By ignoring mortgage debt you will only make the situation worse. The sooner you realise a problem exists, it's important to speak to you mortgage company and explain the financial problems you face. The direct approach is always best. Your mortgage company can then help you with a payment holiday or move your mortgage to interest only for a short period. This can be expensive with fees and charges being included.

The Government's Mortgage Interest Scheme can help pay the interest on your mortgage for a short term period too. This usually lasts for a maximum of two years.

Debt Problems with Mortgage

When debt becomes a problem on secured credit agreements, like a mortgage, because of an over reliance on credit, then starting with a budget is best.

Write down all your income, like employment income, tax credits, pensions etc and then consider your expenditure. What do you spend on your mortgage, council tax, food, gas, electricity, insurances, telephones, car, transport, clothes, medical / dental or pets each month?

Next, consider how much money you are paying each month towards your unsecured debts, like credit cards, overdrafts, personal loans, store cards etc. If you're unable to pay your mortgage because you're paying unsecured credit, then you'll need to address this.

Your expenditure to live (including mortgage and council tax) should be paid first, before paying the credit cards. The reason may people give for paying the credit cards over their mortgage is because the credit card companies will call, write and text straight away, whereas the mortgage company will generally be more flexible. Unfortunately the mortgage company has a security over the property and as such they can repossess if you don't keep up to date with your repayments.

Get Advice on your Mortgage Debt

If you're unsure how to manage your unsecured debts and mortgage repayments, seek professional debt advice from a charity. A charity will consider your income, expenditure and debt repayments. You can then expect honest advice on how best to rectify your financial problems.

Debt Support Trust advisors are available to help by telephoning 0800 085 0226 or via email on contact@debtsupporttrust.org.uk.

Wednesday, October 23, 2013
Debt Support Trust
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PPI Reclaim and Debt Problems

Payment Protection Insurance (PPI) is being reclaimed across the UK. PPI which was mis-sold can be reclaimed and financial institutions must repay consumers if they are eligible. If you need help on how to reclaim mis-sold PPI please get in touch for advice. However, many people are also wondering what will happen with PPI in a debt solution.

In some debt solutions, assets must be reviewed to determine if there is any equity. PPI is considered as an asset. Most people don't expect they will have PPI so enter debt solutions without considering the implications.

Payment Protection Insurance and Debt Problems

In some debt solutions, all of the debt is not repaid in full. These solutions include an IVA, Trust Deed (Scotland) and bankruptcy. This means the creditors receive what they can back and agree to clear the rest of the debt.

If you have not entered an insolvency solution then you can apply for your own PPI. If you are due money back then creditors will often offset this money against any debts and give you the rest of the money back. This sometimes means you can repay a percentage of the money you owe.

If you are already in a debt solution, like an IVA, Trust Deed or Bankruptcy, then you will not be allowed to apply for your own PPI. If you do apply for your PPI and receive the money back then you would be required to repay this towards your debt solution before your solution is closed.

When Can My Debt Company Take My PPI?

When anybody enters an insolvency solution they sign over their estate to a regulated insolvency specialist. The specialist will then consider the assets to determine if there is equity. If there is realisable equity over a certain limit, then the asset will have to be sold.

In an IVA, Trust Deed or Bankruptcy it's procedure to check for PPI as it would become a windfall which could be returned to the creditors. The debt solution cannot be closed until the PPI has been resolved.  This process is managed by your insolvency specialist.

The same can be said for family inheritance or winning money, the windfall would go to the creditors to repay the debts. If there were to be money left over after repaying the debts and fees and charges, then you would receive this money back.

Tuesday, October 22, 2013
Debt Support Trust
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Debts Problems Feel Like I’m Giving Up

Asking for debt help is the first step in an important process of resolving debt problems. By contacting a debt advice charity, we can help you to find the debt solutions you are most applicable for. However, many people find the first step to be the hardest because of the feeling they're giving up.

In a survey at Debt Support Trust, two of the most popular responses people felt when dealing with unresolved debt problems was guilt and the feeling they were just "giving up". People often spend between 1 and 2 years trying to manage their debt problems before seeking debt help.

Debt Test Advice

Managing Debt Before Seeking Help

Our October survey found that in order to manage unaffordable credit commitments, people were

  1. Borrowing money from friends and family to afford the credit.
  2. Balance transferring debts to get the best deal. When the balance transfers were no longer possible they sought debt help.
  3. Negotiating with creditors to try and repay the debts.

The vast majority of people we helped told us they wanted to pay back their debt but felt like they were not able to do it on their own. Accepting help is not giving up, but taking responsible action to correct problematic debt worries.

Why Use a Debt Charity?

Sometimes a problem shared is a problem halved. Just by speaking to another person about your debt problems, you can often find that they can offer a different perspective on your debts.  Especially at Debt Support Trust, our debt advisors provide honest advice on all debt solutions so you have information about each route to become debt free.

You can ask us anything about being in debt and how to rectify your money problems. We will cover questions about your assets (like a house or car), your monthly repayments to your debts, your credit file, the length of your solution, any fees or charges the solution may include and information about your employment, among other questions you may have.

Take the First Step

When you're ready to get debt advice, our debt charity will be here to help. There's frequently a point when a person realises they can no longer manage the debts alone and that a debt solution may be required. That length of time will vary from person to person.

When you're ready to get debt advice, we'll be here. You can telephone our advice team on 0800 085 0226, email us at contact@debtsupporttrust.org.uk or complete our debt analyser below.

Debt Test Advice

Thursday, October 17, 2013
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Debt Advice Service

The correct debt advice, whether it's bankruptcy, IVA or debt management is dependent on your personal and financial debt problem. The debt advice service available from Debt Support Trust may differ to other debt advice organisations.

We like to ensure you're not rushed into a decision on your debt solution. Your advisor will caringly listen to your financial problem and give honest and transparent advice. This enables you to decide which option is right for you.

Debt Test

Not for Profit Debt Advice Service

Debt-Advice-ServiceOur not for profit charity advisors will review your income and expenditure to understand:

  1. Your salary from any employment (or pensions)
  2. Your benefits including working tax credits, housing benefit and child tax credits, among others
  3. What expenditure you have every month, like rent/ mortgage, food, gas/ electricity and other monthly expenses, before you pay your credit agreements.

The next stage is to understand what credit agreements are in place and which companies you owe money to. Most people we help are able to live month to month, but are overstretched when it comes to repaying their credit agreements.

This means there isn't enough money to live and pay debts in full, but a debt advice service could help.

By using the available disposable income each month a debt solution could be applicable. The available disposable income is calculated by subtracting your expenditure from your income. The remaining amount is your disposable income.

Solution after Seeking Debt Advice

All debt advice services must use a set of budgetary guidelines to ensure food and other essential expenditure is within an appropriate range.

After reviewing the expenditure and understanding how much disposable income is available, then debt advice can be recommended. Debt advice services must also consider assets, like a house or car as equity may be required to be released in some debt solutions.

Some of the most popular options to resolve debts include:

Token payments: When you're disposable income is very small (e.g. £20 per month) but you anticipate your financial situation improving, then you could consider a token payment each month. This is typically the best option for people who are recently unemployed but expect to gain employment again shortly.

Debt management: The debt management plan is an informal debt solution. You make one payment towards your debts each month. Typically a debt management plan would be suitable for somebody with £6,000 and who could afford £200 towards their debt each month.  There's no guarantee interest and charges would be frozen, however if they were, the person would be debt free in 2.5 years.

IVA: A formal debt solution where interest and charges are frozen and written off at the end of the debt solution. One monthly payment is required, usually for 5 years, and any remaining debt is cleared at the end. Assets, like equity from a house or car will be considered at the end of the solution.

Trust Deed: A Protected Trust Deed offers Scottish people the chance to be debt free, in a fixed period of time. If the debt is not repaid at the end of the solution then it will be written off, along with interest and charges. Again, equity from assets will need to be taken into consideration.

Bankruptcy: A one year debt solution. There is a fee to enter bankruptcy which varies depending on the correct route. You may also have to pay money each month towards the bankruptcy for three years. At the end of the bankruptcy any debt which is not repaid is written off.

Debt Advice: The Service Provider

You have a choice over which service provider you choose to give you debt advice. Any debt solution above should come with a warning - your credit file will be impaired. This usually means a default is added and it lasts for 6 years.

If you would like help from our debt advice service team, then please call us on 0800 085 0226. This is a free call from a landline, however, if you're phoning from a mobile please let us know and we'll call you back to save your bill. Alternatively, you can email contact@debtsupporttrust.org.uk with your details and we'll be glad to call you back.

Our online debt analyser is available to offer online debt advice too.

analyseyourdebt

Tuesday, October 15, 2013
Debt Support Trust
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A Focus on Benefits

During a conversation with an indebted individual, we heard their story of being trapped in a debt cycle which they were powerless to avoid.

David was in his 50's and lived in a two bedroom flat. His son had moved into his own property and now his extra bedroom was no longer required. David had mental health problems and had been on benefits for many years. He wished to get back to work.

David's Predicament

David called Debt Support Trust to get benefit and debt help. He had fallen behind on his rent because he couldn't afford the additional 14% for having the second bedroom.

BedroomTaxWarDavid had requested a smaller property however there were none available. He asked for help to manage the arrears with his housing association and there was nothing they can do. David was getting the benefits he was entitled to but the cost of rent, gas, electricity and food left him short every month. Prior to receiving support for mental health problems, David was an engineer working for over 20 years.

For David, he felt like he was being left behind and isn't a valuable member of the community. When he spoke to a Debt Support Trust advisor, we sympathised with David's situation but there was little we could do to help. We reviewed David's income and expenditure to find cost savings, we ensured he was getting the correct benefits and gave him tips to deal with creditors. However, as David said, "this won't solve the fact I'm stuck in a property I can't afford".

David was correct. He's in a property which is too expensive so to compensate he has cut his food bill to below the breadline to survive.

David said "We spent £37 billion fighting a war in Afghanistan and we're trying to save £1.2 billion off the benefits bill. It doesn't make sense".

The Benefits Argument

Many disgruntled people on benefits explain their frustration to our money advice team. Most people we speak to wish to get back to employment, however they argue the opportunities don't exist. People who are on long term unemployment and wish to move into a smaller property are being told they can't because the properties aren't available.

Being stuck between a "rock and a hard place" is a difficult problem, which many people face. The Government doesn't appear to be making any U-turns in the near future, so we can expect an increase in people owing money to their landlord.

We need to separate the "can't pays" from the "won't pays". Debt Support Trust help the "can't pays" find a route to manage their debt problems. The majority of people we help want to improve their lives and don't want to accrue debts. Very few people we help are earning excessive amounts of benefit income while being capable of working. Most struggle to make ends meet and are currently accruing debts because of rent arrears.

Monday, October 14, 2013
Debt Support Trust
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5 Tips to Prepare for Christmas

It happens once a year and yet somehow we never really feel prepared. As Christmas approaches - there is only 75 days to go - we're encouraging people to get prepared so as the cost of the festive period is spread out across a couple of months.

Saving for Christmas doesn't have to be difficult, it can be fun! Here are some of our Christmas saving tips.

Savings Tips for Christmas

  1. Christmas Savings: You can save money on a weekly basis with the main supermarkets and their Christmas savings cards. By saving a little each time you're in the supermarket, you can buy presents or Christmas food.
  2. Secret Santa: Whether it's in work or with family and friends, why not consider a secret santa. Buying a present for everybody can be expensive, especially in a large office or family. A token, anonymous present so everybody receives one gift is often the best option.
  3. Buy Presents Now: You don't have to wait until the last week before Christmas to buy your presents. You can a couple of presents now and store them away. This means the cost of buying presents is spread out and more affordable.
  4. Christmas Dinner: The cost of the Christmas dinner can be expensive so purchase your crackers, food and alcohol in advance. Food which is not perishable can be purchased now.
  5. Planning: Organisation is the key to a successful and affordable Christmas. Whether it's buying presents and hunting around for the right present at the right price, or organising your transport in advance, planning is essential. You can save money on trains by booking in advance. When it comes to Christmas shopping, set a budget and stick to it ridgely.

Thrifty Savers

Most people are saving money for Christmas in Debt Support Trust. We'll be sharing our best money saving ideas on the run up to Christmas, so why not tell us how you're preparing for the festive holidays?

You can email us to tell us how you're preparing on contact@debtsupporttrust.org.uk.

Friday, October 11, 2013
Debt Support Trust
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