Debt Management and Individual Voluntary Agreements IVAs

Are you struggling to remain solvent? Pay bank loans, credit cards and overdrafts? Is the list of creditors growing? Then take action and gain control of your finances through debt management.

Debt Management Plans are provided by third party debt management firms who will seek to negotiate with your creditors to help you avoid bankruptcy or an IVA.

Debt Management Plans (DMPs) should be your first port of call if your debt problems are short term and the amount you owe creditors is less then £12k. Debt Management firms will negotiate on your behalf a new repayment rate and even a freeze on interest.

Individual Voluntary Agreements (IVA)

An Individual Voluntary Agreement is the next step if you have unaffordable levels of unsecured debts and your finances have spiralled out of control. IVA’s are set in Government legislation and were introduced as a less radical alternative to bankruptcy.

An IVA is a legally binding contract, whereas a debt management plan is a flexible and informal agreement between a debtor and its creditors.

In order to be eligible for an IVA you must technically be insolvent. Insolvency means that you can’t pay off all your debts when they fall due. The majority of firms who handle debt issues such as insolvency and IVA’s will require you to have debts of over £15k to numerous creditors.

IVA’s are the final solution before bankruptcy and are supervised by a Licensed Insolvency Practitioner. The purpose of an IVA is to reach a suitable compromise with creditors and avoid bankruptcy. The aim is to offer the creditor a larger repayment than could be expected if the debtor were to face bankruptcy and have their assets liquidated.

Taking out an IVA is a giant step in becoming solvent and reducing your debt without the worry of losing your home. Voluntary agreements will set out how much you can realistically afford to pay back, generally over a period of 5 years. The proposal is then sent out to creditors, if the majority agree with the new terms then all your debts and any future interest is frozen. You will then pay back the agreed repayments over the set period of time. At the end of the voluntary agreement period (5 years) all your debts will be written off.

If you miss payments, or the IVA fails as you are not meeting certain obligations set out in the terms, then it’s likely that bankruptcy will be forced upon you.

If you feel confident that you can maintain small, regular payments on a monthly basis then an IVA could be the best solution for you. Realistically you could be solvent and debt free within 5 years or less.