Finance

These days there are a number of solutions available for those that have found themselves in unmanageable levels of debt, and one of these is known as the Individual Voluntary Arrangement, or IVA. Over the past year or so IVAs have been heavily advertised by a range of companies that describe the IA as new government legislation that can help to write off around 75% of your debt. However, IVAs have actually been around for some years, but the rising level of consumer debt in the UK has resulted in more forceful advertising and has helped to raise awareness of IVAs.

An IVA is a legally bonding agreement between the borrower and creditors. There are a number of eligibility requirements that need to be met if you want to enter into an IVA. This includes either you or your partner being in full time employment, having unsecured debts of over £15,000, and having at least several creditors to which you owe this money. An IVA has become known as a softer alternative to bankruptcy, and in order for the plan to continue it is vital that the repayments on the plan are adhered to.

In order to qualify for an IVA the majority of your creditors will have to agree to the plan. If they do this then your IVA case officer will draw up a repayment plan. You will make a set monthly repayment to the IVA firm each month, which will be based on your income and outgoings. This repayment will then be split between your creditors on a pro rata basis based on how much you owe to each creditor. The IVA plan normally lasts for a five year period, and at the end of the five years any debt that is remaining is written off. In the meantime any interest on the debts is frozen.

There are a number of firms that offer IVAs, but before you jump in fee first it is important that you consider all of the facts. Although an IVA can help those that are heavily in debt and are struggling to make ends meet you also need to remember that it can have a significant effect on your financial future, and that your credit profile could be seriously affected as a result of the IVA, leaving you to face the repercussions for many years. Therefore an IVA should not be entered into lightly.

If you are considering entering into an IVA it is best to speak to an experienced and qualified advisor. Many debt management firms charge fees for those entering into IVAs, and therefore are more likely to push you towards an IVA even if there is another option available. Therefore you should seek advice from a non-profit group, such as a debt charity or the Citizen’s Advice Bureau, as you will then know that the advice you receive in truly objective and in your own best interests.

Make sure you use the best advice when researching into an IVA. There are some brokers who could guide down the route of an IVA when it might not be the best option for you. Be aware.

Peter Kenny has been writing financial articles for 10 years and is a writer for The Thrifty Scot, please visit us at Debt Management and Homeowner Loan Visit The Pros and Cons of Bankruptcy

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