Do you consider yourself good at managing your finances? Sometimes, no matter how strict you are with yourself when it comes to spending money, you unknowingly incur debts which cause you to be in a financial mess. There are also some decisions which could have a domino effect on your finances. With the reliance that people has on a credit system, borrowing more than the amount that you are capable of paying happens often enough – that is why a lot of individuals find themselves deep in debt most of the time or worse, having to face the prospect of filing for bankruptcy.
IVA Debt Management: The Basics
The good news is that with a bit of analysing your current financial situation, you can come up with a decision on how to handle your debts. To start right off, here are a few signs that you might have to file for bankruptcy or find an alternative solution to deal with your financial problem:
- When you are having trouble paying for the full, or at least the minimum amount due on your credit card bills.
- You have problems paying your utility bills or not having enough money to spend for your home maintenance expenses.
- You often receive harassing calls from creditors or collections agencies.
- You are facing the prospect of losing your home, car or any other valuable property.
If any of these conditions apply to your current financial situation, there are a few alternatives that you can go for. First, you can consider credit counselling where a credit expert will give you advice on how to draft a more manageable repayment scheme for your debt. Second, you can go for debt management, though this cannot deal with extremely serious situations. Third, there is debt consolidation where a financial expert will help consolidate several debts into one so that you can have just one loan to pay. Your last and final resort is filing for bankruptcy.
In the United Kingdom, one additional option that you can consider is an IVA. This stands for Individual Voluntary Agreement. It is a result of the Insolvency Act of 1986 which allows a debtor to clear his or her debts after paying off a certain percentage of the dues over a period of time. IVA debt management usually lasts for five years, although it still depends on how much you owe.
Should I Go for IVA Debt Management?
As compared to taking out a loan to pay off your debts, an IVA is definitely a much better option. When faced with such financial difficulties, the number one rule that you need to keep in mind is that bankruptcy should always be your last resort. Never consider it until you have laid out all your options on the table.
Now, as far as IVA debt management goes, there are a lot of advantages that you will get to enjoy, although it does have its downsides as well. When the IVA was first introduced in the UK, it was meant to only help small business owners. But when world economy experienced a downfall a few years ago, it became the closest thing that the government has in providing citizens with debt assistance. It is now considered as a viable alternative to bankruptcy.
With IVA debt management, about 75% of your debt can be written off. However, there are a few conditions that need to be fulfilled. For instance, you should have at least three creditors. There is also a certain amount of debt that needs to be paid off within a five year period.
The good thing about applying for this form of government assistance is that the amount of monthly payments that you need to make can be more manageable. Harassing phone calls from creditors can be stopped. If your home is about to be foreclosed, you can put a temporary stop to the prospect of losing your home.
It can also clear or write off any debts that you are unable to pay considering your current financial situation, so you can slowly but surely get back on your feet. As you can see, there are plenty of benefits from going for IVA debt management, so seriously consider it if you are this close to filing for bankruptcy.