IVA Debt Solutions Offered by Individual Voluntary Arrangements
These days, with needs growing, anyone can easily get stuck with debt and liabilities. Oftentimes, without radical help, you can't get yourself out of debt. Large debts are impossible for the common man to repay on a month-to-month basis. Even if you sincerely try to repay your debts, if you do not manage to do so, you will not be able to avoid the resulting disgrace and bad credit ratings. Those living in the UK can turn to IVA (Individual Voluntary Arrangements) to get rid of their debts. These companies are a great alternative to bankruptcy.
What are they?
IVA's are legal agreements signed between you and your creditors, which state that you agree to pay a certain percentage of the money that you owe to them. According to this agreement, you are supposed to pay off the whole amount borrowed over a period of 5 years. By doing so, you can write off a huge part of your debt. This provision is available only within the UK.
How Do these Agreements Work?
There are various debt companies that offer free reviews to debtors. They will first review your finances thoroughly and then approach you with a proposal and a suitable option. IVA organizations might also question you to determine your financial status. The agreement is then drafted and handed over to you to sign. You have to check the proposal well and go through each and every clause mentioned in it, and then, sign and return it to your insolvency practitioner. The IVA company then applies for an interim order in the court. An interim order protects you from any legal action taken by your creditor. Finally, the court gives a date for a meeting between the creditor and the debtor.
For the approval of such an arrangement, the creditors from whom the money was borrowed must agree and approve the plan. Though this a legal way of settling with your creditors, there is no compulsion for the creditors to accept the proposal. Once you sign the agreement, you are bound to it and are supposed to follow it even if your situation changes; these same rules apply to creditors too. You must stick to the agreement and make the repayments as mentioned; or else, the creditors will trouble you again.
This agreement is intended for serious and intense debtors only. People who can apply and become eligible for such arrangements must owe £15,000 or more that they are unable to clear. Under some circumstances, bankruptcy will also be considered for this arrangement.
Secondly, you must have a regular source of income that will serve as a security for the agreement. Thirdly, there must be various creditors to whom you owe money. Fourth, you must be a resident of the UK. If you face such a situation, approach a debt management company for advice and suggestions. They might also suggest other alternatives that have minimal consequences.
The interest for your debt will not get accumulated
It makes the repayments convenient and affordable
You can avoid those irritating calls from creditors by paying them off in installments
The repayment period of the debt is usually 3-5 years after which you will be debt free
The companies you approach will help you to negotiate with the creditors and come to an agreement
Let us check out a few pros and cons of seeking the help of Individual Voluntary Arrangements.
You can be debt free in just 5 years.
You don't have to fear the threatening calls of your creditors.
Interest is not accumulated, and there are no more late payments or surcharges.
As per the agreement, you have to pay a small amount to the creditors. You can also pay off the whole agreed sum in a single go.
Once you have repaid the agreed amount completely, your credit rating will be fixed, and you can borrow money whenever you require.
As both the parties agree to the terms and conditions of the legal agreement, there is no catch.
Such agreements are private and reserved; your friends, relatives and the media are not involved in it.
Though the positive aspects overcome the negative, one must be aware of the negative sides of IVA's:
IVA's are only applicable for huge debts of about £15,000 or more. The monthly payment for this sum would work out to be £170.
The worst part is that when you are serving an agreement like this, you will not be allowed to use your credit cards or store cards.
If you fail to maintain your finances during this period, the amount will accumulate.
Your credit rating might not be affected as in the case of bankruptcy, but you might not be able to borrow money for one year or so.
While you pay a very bare minimum amount or even no amount in bankruptcy, you must pay off at least 20%-50% of the debt as per the IVA agreement.