There are many available options for people who are struggling with debt. Debt management comes in many different forms, and can be hugely helpful with troublesome debts. However there are situations in which you need to use the law to protect yourself from bankruptcy, in which case using an IVA may the better option.
Range of services
Debt management organisations operate up and down the country, and can give advice as well as other services. If you’re having difficulty dealing with your creditors direct, debt management professionals can negotiate with them on your behalf. Many of these organisations offer their services free of charge, but it’s worth checking any possible costs before going ahead with anything.
Debt management services can also set up payment plans for you, and some offer systems whereby you simply pay them whatever you can afford each month in one single payment, and they handle the distribution of these funds to your various creditors in a way that will best handle the debt that you owe.
Insolvency
If your debt situation is serious enough that bankruptcy may be a real possibility, you need to consider speaking to an insolvency professional. Insolvency Practitioners specialise in these matters, and can help you to work through your various options, with any luck avoiding bankruptcy.
An IP will have a close look at your money situation, and may advise any number of different things. If you have assets, they may advise either selling or releasing equity to ease the burden on your debts. If you have substantial unsecured personal borrowing, such as credit card debt, they may indeed recommend using an Individual Voluntary Arrangement.
IVA
IVAs are a way of offering an alternative payment plan for debts that you cannot manage. If the alternative is likely to be bankruptcy, the creditors realise that it is in their interests to accept an IVA, which is also preferable for your own future financial stability. Through an IVA, you pay what you can afford towards the debt, rather than what is required by your current credit agreements.
Income
To use an IVA, your income needs to be sufficient to make the IVA payments each month. Similar to debt management, you make one payment towards the IVA, and your IP handles the distribution of this to the creditors involved in the IVA. If creditors are signed up to an IVA, they cannot take any legal action against you during or after it, providing you keep to the arrangement.
Choices
Many debt management options can help with debts that you are finding difficult. However if those debts have landed you in a position where you simply can no longer manage them, it’s best to get insolvency advice and to consider such measures as IVAs to really get things under control.
Whichever option you end up exploring, the importance of getting sound financial advice cannot be overstated. An Insolvency Practitioner is required to give you trustworthy guidance, and is best placed to use the law to protect your position.