IVA or Trust Deed: which is right for me?
If you owe significant amounts to multiple unsecured creditors, there’s a chance that an IVA (Individual Voluntary Arrangement) or Protected Trust Deed could be a good way for you to reduce your monthly payments and clear your debts.
The two debt solutions are very similar in some ways, but very different in others. Perhaps the most obvious difference between IVA and Trust Deeds is the geographical one: IVAs are available to people who live in England, Wales or Northern Ireland, while Trust Deeds are available only to people who live in Scotland.
Please note: this article is a comparison. Click on one of the following for more in-depth information on IVAs and Trust Deeds.
IVAs and Trust Deeds – the differences
IVAs are:
- Only available to residents of England, Wales & Northern Ireland
- Normally only suitable for people with unmanageable unsecured debts of around £15,000 or more
- Normally in force for five years
Trust Deeds are:
- Scotland’s equivalent of an IVA
- Normally only suitable for people with unmanageable unsecured debts of around £10,000 or more
- Normally in force for three years
IVAs and Trust Deeds – the similarities
IVAs and Trust Deeds work in much the same way – and deliver similar benefits to borrowers and creditors alike.
Requirements:
- IVAs and Trust Deeds are normally only available to people who owe money to three or more creditors.
- IVAs and Trust Deeds both need to be approved by enough of those creditors before they can start.
- IVAs and Trust Deeds both require a serious financial commitment from the borrower, who must be able to make regular monthly payments for the duration.
Benefits:
- IVAs and Trust Deeds both allow borrowers to pay back a portion of their debt at an affordable rate.
- IVAs and Trust Deeds both allow borrowers to write off the outstanding debt at the end of the term.
- IVAs and Trust Deeds both protect borrowers from legal action by their creditors.
- IVAs and Trust Deeds are both forms of insolvency, and are both seen as an alternative to bankruptcy/sequestration.
- IVAs and Trust Deeds both benefit creditors, who will get more of their money back than they would through bankruptcy/sequestration.
IVAs and Trust Deeds – the alternatives
Even if you meet the criteria for an IVA or Trust Deed, there’s no guarantee that this is the best way for you to clear your debts. It’s never a good idea to commit to a debt solution before you’ve spoken to a debt adviser who understands the pros and cons of other debt solutions that might be appropriate.
If you’d like to know more about IVAs or Trust Deeds, call Think Money on freephone 0800 074 4222.