When your debts are spiralling out of control and you just can’t seem to get to grips with your finances, bankruptcy can seem like the only way out. But does this decision manifest itself from a considered thought process or through a lack of information?
When it comes to your finances you have multiple options available to you to regain a firm hold on your debts. Sometimes bankruptcy can seem like the only way out, but before you make a firm decision it’s worth looking at alternative options. You see, people make decisions based on their current knowledge and may not be aware about debt management plans, debt consolidation or even this topic about individual voluntary arrangements (IVA’s).
Thousands of people are managing to stay clear of bankruptcy because of the benefits provided by an IVA, so let’s take a look at this debt management option.
Tell me more about Individual Voluntary Arrangements
An IVA is a legally binding arrangement that you can voluntarily make with your creditors in order to pay an amount of your debts back over 60 month. Any outstanding balance owed after this period is written off by your creditors, allowing you to start your credit file all over again. It’s available to individuals in England, Ireland and Wales. People living in Scotland have their own version of an IVA known as a Trust Deed. In order to apply for an individual voluntary arrangement you must have a number of unsecured debts in be in a position where you can prove there is no way for you to pay all of the outstanding balances. If you are successful in your application for an IVA your creditors can no longer contact you to chase the debts which means no more harassing phone calls or final demand letters threatening court action, leaving you to get on with your life.
These IVA’s can be delivered and completely managed by a debt management company such as Harrington Brooks. Not only will they negotiate with your creditors but they also arrange your monthly repayments on your behalf, so all you need to do once your application is successful is to ensure you have enough funds available in your bank account to cover your payments.
OK, so how do I qualify for an IVA?
An IVA isn’t the right solution for everyone as there are certain criteria you have to meet to qualify.
Your financial situation– It’s important to prove to your creditors that you just can’t make the repayments of your debts. To do this your debt management company should work with you to create an income and expenditure document that takes in to account your debts, all essential outgoings as well as your total income. This should show your creditors how much you can realistically afford over the period of your IVA.
How much do you owe?– Generally your debts need to be £10,000 or more and you should have at least 3 lines of credit with 2 creditors.
How much will you need to repay– You will be expected to be able to afford a minimum of £150 per month towards your repayments. Your income and expenditure document will show whether or not you can afford this payment.
Where you reside– As mentioned earlier you must be a resident of England, Ireland or Wales to qualify for an Individual voluntary arrangement. If you are a Scottish resident you will need to look for their alternative which is known as a trust deed.
The value of your assets– You need to show that you cannot pay your debts in any way, therefore if you have any assets that you can easily liquidate to pay off your debts you will not qualify for an IVA.
A better return than bankruptcy– Your IVA must provide your creditors with a higher return than if you were to file for bankruptcy.
Will I lose my home or my car?
An IVA works differently than bankruptcy. Unless you have unnecessary assets that can be liquidated to pay off your debts your assets such as your home or other belongingswill be safe. If you own a vehicle on hire purchase or valued less that £8000 you will not lose your car.
If you think you meet the criteria for an IVA it could keep you from filing for bankruptcy and allow you to continue with your life.
Martin Bradley is a representative of Harrington Brooks who provide IVA, Individual Voluntary Arrangements and Debt Management Plans to individuals struggling with debt. For more information please visit our website