If you are having financial trouble then you may be considering what to do to help you get back on your feet. Some people will declare themselves bankrupt in the hope that this will help. Others will look at an Individual Voluntary Arrangement. This is less well known and something that could really help.
An IVA is a special type of payment plan which is set up between the debtor and their creditor. It is a legal agreement which will replace any other financial agreement you had in the past. They will normally last for five years and are set up so that the debtor will repay what they owe in one single lump sum payment or over a fixed term which tends to be five years.
IVA’s can only be used on debts above £10,000 and they tend to be more likely to be accepted if money is owed to two or more people. The amount you will have to pay each month will depend on how much you owe but tend to start at a minimum of £100.
Basically the IVA is an alternative to bankruptcy for people who want to protect assets they hold or who may suffer in other ways if they are declared bankrupt. It can be used by people who are not close to bankruptcy too, if they need help with repaying their debts. If you want to know whether you might qualify, then you can do this simple IVA test to find out.
Paying off debt is very important as failure to do so can result in a criminal record. You will therefore need to make sure that if you do change your repayment schedule by using an IVA, that you will be able to stick to it and are happy to commit to doing it for the agreed term. It will limit what you can spend money on and could affect your ability to borrow, but it may be the only way that you will be able to afford to pay off the debts that you owe.
It is a big decision and it is worth talking it over with an IVA advisor as well as an independent financial advisor. It may also be worth going to your bank and speaking to a debt advisor at the citizens advice bureau before you make up your mind. They should all be able to give you advice that will help you to make the right decision for you.