Is There Any Way out of Unmanageable Debt?
Struggling with unmanageable debt can be a difficult experience for anyone. It can often feel like there is nowhere to turn to for help… It can even feel as though you’ve reached the end of the road.
However, don’t panic, because there is help available and there are ways to get rid of your unmanageable debt for good!
Here, we will take a look at just one of these ways: an IVA (Individual Voluntary Arrangement).
What is an IVA?
An IVA is a form of insolvency, designed to help people struggling with unmanageable debt become debt free in five years. In most cases, an IVA would only be appropriate for a borrower who cannot afford to repay their debt within a realistic timeframe, but could commit to making regular reduced monthly payments for the duration of the IVA (usually five years).
Before your IVA can start, voting creditors who collectively ‘own’ 75% of your total debt would have to agree to the terms set out in your IVA proposal (which you will draw up with your Insolvency Practitioner).
If your creditors do accept, the IVA can start. You will start making lower monthly payments to your Insolvency Practitioner, who will then share funds amongst your creditors as agreed before the IVA started.
There are several advantages of an IVA you should take into consideration:
• You will know the date you are due to become debt free.
• Once the IVA draws to a successful close, any unsecured debt left outstanding will be written off – as long as you’ve stuck to your side of the agreement throughout the IVA.
However, an IVA also has its drawbacks:
• If you enter an IVA, your credit rating will be impacted for six years – which will affect the cost and/or availability of credit for this time.
• If you are a homeowner, you may be required to free up some of the equity in your property during the 54th month of the agreement. This extra money will be used to repay more of your debt.
