If you are struggling to pay back substantial debts you may be able to apply for Individual Voluntary Arrangements to help you get back on track. IVAs are government supported in the United Kingdom. There are a few other options that may be available to you so make sure you a see a debt specialist for advice.
The IVA works by the creditors reducing the amount of the debt that you owe them in order to make it more likely that you can pay it back. This government backed scheme was started in the eighties as part of the Insolvency Act. It is a good solution for those with large debts however people with smaller debts might be better suited to a Debt Management Plan.
When you propose an IVA all of your creditors will be contacted and asked to consider reducing the debt to a more manageable level. In order for the IVA to go ahead, seventy five percent of the creditors, in terms of value of the debts, must agree to the arrangement.
If less than seventy five percent agree to the plan, you will have to find another solution, which will probably be bankruptcy. Bankruptcy is not ideal if you are a home owner as your home could be taken in payment of your debts. This is not usually the case with an IVA.
One of these arrangements can last for any length of time, although up to five years is common. Once the IVA has been concluded there is no reason in theory why the borrower could not enter into further credit agreements. This makes it an attractive idea for somebody who has lost their business, as they could potentially start up again with the help of credit. Although they can technically get credit again, the IVA will have an impact on their credit history and it will remain on there for six years.
If you have decided to take out an IVA there will be some fees that you will need to pay. These are normally added to the debt amount and covered in your monthly payments. Your creditors will also still be within their rights to charge interest on the remaining debt until the full debt has been paid off. You may have to resort to bankruptcy if you fail to keep up your IVA payments.
An Individual Voluntary Arrangement could be way for some people to manage their debts. If they own their own home it will probably remain safe and the balance of their debts will be reduced. It is essential to visit a debt counselling charity to talk through all of your options before agreeing to a debt plan of any kind.
Want to find out more about IVAs? Visit Payplan.com