People from all walks of life encounter debt problems and asking for help is not something they should be ashamed of. A person’s circumstances can change very quickly and this can leave them struggling to manage commitments which weren’t previously a problem. Unfortunately, things such as redundancy and divorce cannot always be foreseen and too often these create a situation where making ends meet is a near impossibility.
Thankfully, there are a number of options available for those who have fallen behind with their debt repayments. Which is best depends on the situation and for that reason it is vitally important to seek out the expertise of a debt advisor before making any decisions.
One of most popular solutions in recent years has been an Individual Voluntary Arrangement (IVA). Used by more than 48,000 people during 2013, they’re an alternative to formal bankruptcy and allow users to make an agreement with creditors which will lower their debt and repayments.
Built in protection
Once an IVA has been put in place, creditors (the companies which are owed money) are no longer able to chase a person for higher payments and the debt is typically paid within five years.
This a great helping hand when things like loans and credit cards become too much to bear. However, people taking out an IVA have to be aware that it isn’t a traditional debt consolidation product and agreeing to one does have some draw backs. An IVA advisor will talk you though these, but they include lowering your credit score and impacting the chances of being to borrow money or being approved for a mortgage in the future.
The benefits of an IVA
IVAs have many benefits, though. The main one is getting you to a stage where all your debts are paid off and you can look forward to a debt free and exciting future. Because an agreement is made with a creditor up front, an IVA can dramatically cut the amount of money you repay within the time it is enforced for. This is usually five years, after which you will owe nothing.
An example of this would be someone who owes £25,000 and is paying £600 a month. With an IVA they could reduce their payments to, say, £250 a month. Over five years, they will have paid back a total of £15,000, meaning that around £10,000 has been written off.
IVAs are based on what you can afford. They don’t carry the same stigma that is associated with being declared bankrupt and they minimise associated costs and penalties, allowing you to concentrate on the things which are really important, such as keeping a roof over your head and feeding your loved ones.
Do you qualify?
In order to be eligible for an IVA, you must have unsecured debts of more than £15,000 owned to two or more creditors and be resident in England, Wales or Northern Ireland. People in Scotland are able to take out a similar service known as a protected trust deed.
If you are struggling with debts of less than £15,000, then you may be eligible for a Debt Relief Order (DRO).
Applying for an IVA is not something you should do lightly. It is a significant financial step so you must understand all facets of what it is and does before moving forwards. This is where good IVA advice IVA advice is so important. An experienced professional can talk you through the ins and outs of an IVA, help you to work out your budget and give you a clearer picture on the solution’s suitability.