Finding a debt solution is the half the task done when it comes to writing them off. One needs to hot upon the right option. In UK when it comes to dealing with creditors, you will find two options: IVA or Individual Voluntary Agreement and Debt Management. Are you in a dilemma? Here are some facts that can help you to find answers to your questions.
The main importance of an IVA or Debt Management is to make an agreement with your creditors so as to make a lower monthly payment. If you want to go for an IVA, then you must know that it is a legally binding procedure and its records are kept in the court as well as on the public register of IVAs. On the other hand a Debt management is an informal procedure. Debt Management is also an agreement. Here a representative will deal with your creditors on your behalf to freeze interest rates and get you an affordable monthly repayment scheme. Once this is done, the debt management representative will distribute this amount amongst your creditors. An IVA is drawn up by a licensed Insolvency Practitioner.
An IVA is a legal process and so the creditors are legally bound by the terms of an IVA. This is advantageous to debtors as it protects them from creditors and even rules out the possibility of getting bankrupt. A Debt Management is just another option to make your monthly repayments affordable based on your financial status. It is not legally binding and its terms can be easily changed.
There are differences between IVA and Debt Management when it comes to the eligibility factors. Have a look:
| IVA | Debt Management |
| For an IVA, at least £15,000 of unsecured debt is required | For a Debt Management, you need to owe at least £2000 of unsecured debts |
| If you want to go for an IVA, you must have an income of at least £200 per month | For a Debt Management you must have an income of at least £100 per month |
| You must have at least three or more creditors | You must have at least two debts |
| You have to be an insolvent o enter into an IVA | You do not need to be an insolvent. This means that your assets can be more than your debts. |
When it comes to an IVA, remember only a portion of the debt is paid off. Up to 75% of the debt can be paid off in an IVA. However in a Debt Management debt is fully written off. An IVA lasts for more than 5 or 6 years but a Debt Management Plan continues till your debts are cleared. But it is essential for you to note that Debt Management Plans are often associated with high upfront fees. This can once again land you in trouble and may also have a negative impact on your credit rating. A Debt Management Plan turns out to be useful especially when a person owns investment properties or has a low surplus income or an unpredictable income or is on benefits.
Whether to go for an IVA or Debt Management depends on your financial status. If you want to save yourself from creditor harassment, IVA can be an ideal option for you. It effectively fills up the gap between bankruptcy and solvency. Since it is a formal route out of debts, it is not easy but yet a powerful measure. While heading for a Debt Management Plan, you must select the right company. In UK there are a lot of fraud debt management firms that deceive debtors with flashy advertisements such as reducing your debts to half. For more advice, contact your nearby Citizens Advice Bureau. It is important to think before you act and select the right option for yourself for debt relief.
