Did you know that approximately in every 3.5 minutes somebody is entering into an IVA in the United Kingdom (June 2009 Statistics)?
It does not mean that IVA is the best option for you. In a previous article we compared IVA and Bankruptcy. In this article we will compare IVA to debt management. After reading this article you may be in a better position to decide between IVA and Debt Management.
An Individual Voluntary Arrangement (IVA) is a way to manage your debts. Court and the Official Receiver’s fees are normally less than that you would have paid for bankruptcy. If you owe over £15,000 to three or more creditors and can’t afford to repay then you may be eligible for an IVA.
Debt management involves a company assisting you to get your debt under control. Many companies offer paid debt management services except services like debt advices or preparing a personal budget sheet for you. You will also find many non-profit organizations that offer free debt management services.
IVA will provide you with the opportunity to write off a portion of your debt, whereas a debt management plan makes your payments more affordable, but it will not write any debt off.
IVA would help if you consider
- That certain detail will be recorded on the Individual Insolvency Register. A debt management programme is private.
- To make monthly payments that must be for at least £200-250. You can make monthly payments as low as £80-100 per month if you opt for debt management.
- To safeguard your assets. Debt management is completely informal so your assets can still be financially affected.
- To have yourself debt free in 5 years. The debt management schedule may last longer.
- To write off debt. Up to 75% of your debt can be written off in an IVA. In a debt management programme all of your debts have to be paid back.
- To involve yourself in a legal binding. A debt management plan is not legally binding.
- That Debt management plans have upfront fees which can be quite high. This will leave you with less money to pay off your debts. Some Debt management plans are subject to the first month’s payment being a fee. This makes your account overdue or past due by a month or more. These arrears may affect your credit rating.
Debt management can be helpful
- Where the person owns investment properties.
- Where the person is on low surplus income
- Where there is an uneven or unpredictable income such as a person with more than 20% of his/her income coming from bonuses or commission, or an unemployed person.
- When a person is on benefits. A debtor with more than 20-25% of their income coming from benefits should consider debt management.
If you need more information, please write a comment here or ask us directly via the “Ask a Question” box.
