When you’re having real trouble keeping up with your debt payments, it can seem like everyone is offering you easy solutions to your problems.
IVAs or Individual Voluntary Arrangements can help many people to sort out their debt problems, but they should certainly not be seen as a quick fix.
Debt written off?
There are often stories in the press about people having their debts totally written off, but in practice this is actually very rare. Typically, an IVA will involve paying just a portion of your overall debt back, and having the rest effectively written off. It’s best to view an IVA as a way to settle your debts in a way that is manageable to you, rather than as a way to avoid having to pay them.
Bankruptcy
If your debts have gotten to the point where you simply cannot meet them according to the original repayment agreements, there is always a real possibility that you may ultimately become bankrupt. An IVA is a way to avoid this consequence, by offering to pay your creditors at least some of what you owe them.
IVA Proposal
Normally when an IVA is used your Insolvency Practitioner will draw up a proposal for your creditors in terms of what you can pay them back over time. This will involve you making monthly payments into a single pot of funds, and your IP will deal with the distribution of these funds back to your creditors.
IVA Payments
The amount that you commit to paying back each month is designed to be manageable to you while still allowing you to live well. Your IP will help you to work this out by looking at your total financial state, including income, outgoings, assets and all of the debts that you currently have.
Debt Settled
Providing your creditors accept your IVA proposal, and there is a good chance that they will, you will then be able to work towards clearing the debts concerned. Providing you manage to keep up with the IVA payments, at the end of the term your debts will be regarded as settled and any outstanding balance forgotten about.
During the term of the IVA, you will not be able to get other credit. Although this may seem hard, it means that you will be far more likely to successfully use the IVA to get rid of your debts for good.
Once the IVA is finished, you will be free to seek further borrowing, and will be able to repair your credit rating over time. IVAs are not a quick fix, but are certainly a realistic way for people to address debts that they are currently struggling with. If your debts are mounting, the reality is that there is no quick fix, only realistic, manageable ones.