It’s difficult to say which debt management methods are going to help you get out of debt without analysing your situation, however Individual Voluntary Arrangements have helped a great many people to sort out their financial difficulties.
Types of debt
Most of us these days end up with multiple different types of debt to different lenders, and problems with these are also dealt with differently. IVAs are generally intended for use with unsecured debts. This means that it would not generally be normal to use an IVA for secured borrowing such as mortgages or loans secured against property such as a home or car.
Unsecured Debts
IVAs are typically used for such debts as credit cards and unsecured loans. Your unsecured borrowing should also generally be owed to 3 or more lenders and total at least £15,000 for an IVA to be an option.
If your borrowing is out of control to the point where you may be facing bankruptcy, you should speak to an Insolvency Practitioner as soon as possible. They may well recommend using an IVA, but will first get a good sense of your overall finances before offering you any specific guidance.
Terms of an IVA
If your IP does suggest using an IVA, they will discuss the possible terms of it with you. An IVA involves offering to pay a certain amount back to your creditors over a set period of time. Generally this will not involve paying them back the full amount of the borrowing, but they will likely receive more of it this way than if you end up bankrupt.
IVA Payments
Normally an IVA will entail monthly payments of at least £200 although this is naturally dependent on your own circumstances. You need to be sure that you will realistically be able to make these payments, and still have enough left to live on.
If your creditors accept an IVA, and you manage to keep to the requirements of it throughout the term, it will have been a success. In this case your debts will be effectively settled, and any outstanding balance forgotten about. IVAs are a way to clear your debts legally and avoid bankruptcy.
It is sometimes the case that your IVA may require releasing equity from your home if you own one, but your IP will make sure you understand exactly what it is that you’re agreeing to before the IVA goes ahead.