Debt Management and IVAs

Debt can have a huge impact on your everyday life. If you are in debt and find you are struggling to keep up with repayments, or find yourself getting into even more debt, then you should look at what debt management options are available to you.

There are lots of reasons why you may be struggling to make your monthly repayments. You may have gotten divorced, lost your job and be unemployed, or you may have missed a few repayments and been charged extra by your credit card or loan company to the point where it has become out of control. Don't worry if you have a bad credit history, previous arrears or CCJ's as there are still options open to you. Whatever your current circumstances, there are people who can help you turn the situation around.

Debt Management is a key tool in clearing your debt and there are several debt management services on offer. These can include IVA's (Individual Voluntary Arrangement) and Debt Managements plans. All debt management is individual and specifically catered to suit your particular financial circumstances. The idea is to create a way to repay any existing debt (either partially or in full), but make it more manageable for you. It is vital to find the right option for you, which is why we always recommend speaking to a debt management financial advisor for debt advice, before making any decision.

Debt Management Plans

A Debt Management Plan is an informal, non-legal agreement between you and the people you owe, e.g. credit card companies, loan companies and banks (called creditors). By negotiating with your creditors, you can get them to stop adding interest to your current debt and ensure that no extra fees are added. This in itself can help you clear your debt much quicker if they agree to it.

You then agree on a set amount of money that is sustainable yet affordable for you to repay on a monthly basis, and on a date convenient to you. Often the best time is just after payday, to ensure you keep up to date and on time with your monthly repayments. It can take 1 -2 months to set up this type of plan. You continue payments until the total debt has been cleared. One issue that is really beneficial is that you do not need to borrow any more money in order to clear your debt.

IVAs

An IVA differs from a Debt Management Plan, as it is a legally binding agreement between you (the debtor) and your creditors (the companies you owe). Debts must total at least £10,000, but you could have all your cleared debts within a 3-5 years. You need to speak to an Insolvency Practitioner for advice on setting up an IVA, as it may not be the best course of action for you and your circumstances.

If you are recommended to set up an IVA, it can take at least 2 months to set up. Proposals will be sent on your behalf to all creditors. If accepted you can then arrange an affordable repayment amount which can either be a lump sum or regular monthly repayments, usually over a 5 year period. The difference is that you only pay a percentage of your total debt - any outstanding at the end of the IVA period is written off, leaving you completely debt free at the end of it. All interest and other fee charges are frozen from the point of acceptance. One major benefit is that your home cannot be repossessed by having an IVA.

There are advantages and disadvantages to both options which could affect your future credit rating, so it always important to seek financial advice before making a decision. But getting help with Debt Management can be an excellent way of getting back in control of your own finances without declaring bankruptcy.