There are a number of debt solutions available to people with unmanageable debt. One option may be an IVA (Individual Voluntary Arrangement): a legally-binding agreement with your lenders in which you`ll repay as much of your unsecured debt as you can afford, and your lenders will write off the rest.
An IVA will usually involve making monthly payments for five years, and on successful completion you`ll be legally debt-free.
However, having severe debt problems does not necessarily mean that an IVA is the best option for you - there may be a number of alternatives available, each of which is designed to help people in a different situation. You should always speak with an expert debt adviser before deciding on any debt solution.
It`s not so much about how much debt you`re in; it`s more about how manageable your debts are. IVA companies tend to give a typical figure of £15,000 or higher as the `minimum required` for an IVA, but it is possible for people with smaller debts than this to enter into an IVA.
An IVA is for people with unsecured debts that they cannot afford to repay within a realistic period of time. So whether your debt is £12,000 or £50,000, you may be eligible for an IVA if you can demonstrate that (a) you cannot afford to repay your debts, and (b) you can commit to regular payments towards an IVA.
Of course, just because you`re eligible for an IVA, this doesn`t mean it`s necessarily the best approach to your debts. It`s important to consider the advantages and disadvantages of IVAs.
It can help you to clear debts that you would otherwise not be able to clear, but on the other hand it is a significant financial commitment that will leave you with very little spare income while it`s in progress.
And there are other things you`ll need to think about: an IVA will often require you to contribute most of any increase in income (while it`s in progress) towards your debts, and if you`re a homeowner, you may also be required to free up some of the equity in your home to put into the IVA. It`ll also have a serious impact on your credit rating, affecting your ability to obtain further credit while it`s on your credit report.
Also consider that if you can`t commit to regular payments - if you have an erratic income, for example - then an IVA will not be appropriate.
Finally, you should always consider your other options. For some people with unmanageable debt, a debt management plan, DRO (Debt Relief Order) or bankruptcy could be the most appropriate solution.
For more advice on IVAs, click here or call one of our expert debt advisers on 0800 195 2911.
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