If your problems with debt have got so bad that you don`t think you can afford to repay your unsecured debts in full, one option may be an IVA (Individual Voluntary Arrangement). On an IVA, your unsecured lenders will (if enough of them agree) accept a percentage of the money you owe them, paid over a number of years, after which any remaining unsecured debt will be written off.
Another advantage of an IVA is that your payments are `consolidated` into one - you`ll make a single payment per month to your Insolvency Practitioner (IP). Each lender will get their share of the funds, as laid down in the terms of the IVA.
This should make managing your finances much simpler.
Most IVAs involve making monthly payments over a five-year (60-month) period - although the repayment period can be longer or shorter than this. You`ll make payments through your Insolvency Practitioner, who will send on the agreed amounts to each of your lenders.
You`ll be expected to pay as much as you can at all times - the part of your income that`s left over after your other essential expenses (such as food, bills, mortgage/rent and other household costs) have been taken care of.
You`ll be protected against further action regarding your debts - such as a lender trying to make you bankrupt - and on successful completion of the agreement, any outstanding unsecured debt will be written off.
IVAs are often considered preferable to bankruptcy in that they avoid some of the downsides - like the possibility of repossession. However, there are still some downsides to an IVA that you`ll need to consider: it`ll have a damaging effect on your credit rating, and it usually lasts longer than bankruptcy (bankrupts are usually discharged after one year).
Also, if you`re a homeowner you may be required to release some of the equity in your home in the final year of the IVA.
To qualify for an IVA, you must have debts that you can`t afford to clear in full, but you must still be able to commit to regular (smaller) monthly payments.
If you`ve weighed up the pros and cons and you think an IVA sounds like the best way of clearing your debts, then you should speak with a debt adviser and find out more.
But keep in mind that there are many factors involved in whether a certain debt solution is right for you, and even if you qualify for an IVA, another solution such as bankruptcy could still be more appropriate for your individual circumstances.
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