When you have a lot of different debts and are struggling to manage them, it can be a real task just working out which options are going to help your situation. The advice of professional debt experts is invaluable if you’re in this position, as the best option for you is something that’s really impossible to say without looking at the details of your case.
Debt types
If you have a mixture of different types of debt, for example both secured and unsecured, then it is likely that a number of different measures may be used to alleviate the situation. Individual Voluntary Arrangements are used for unsecured debts, in cases where the alternative is likely to be bankruptcy.
IVA
An IVA is essentially a way to renegotiate your outstanding debts with creditors, and use the protection of the law to prevent further legal action being taken against you. With an IVA you propose paying a certain amount to your creditors over the IVA term. Typically this amount will be only a portion of the debt that you owe, but will be an amount that you can actually manage to pay them in your current situation.
Secured debts such as mortgages or loans secured against an asset such as property are not normally covered by IVAs. However, if you have a mix of debts, the IVA may be used to ease the pressure on your finances generally, allowing a little breathing space for you to get on top of your other debts.
Amendments
Sometimes when you propose an IVA, your creditors will ask for amendments to be made to it before they will accept it. In some cases they may request that you release equity from your home, for example. Your Insolvency Practitioner will handle all of the negotiations on your behalf, and will make sure you are involved in any decisions that are taken, as well as that you fully understand the consequences of any choice that you make.
Payments
An IVA is only going to be a success if you manage to keep to the payments. For this reason it is hugely important that you and your IP make sure you put together a proposal that is going to work for you throughout the term. You should only sign up to an agreement that you feel you can manage, as the IVA is a legal contract and you are bound to it once it starts.
If you have a lot of debts that you cannot manage, and don’t have sufficient income for an IVA, your IP may in fact recommend bankruptcy. However they will be sure that they explore any alternative options and explain the advantages and disadvantages of each before anything goes ahead.