An explanation of IVAs / debt management

IVA stands for Individual Voluntary Arrangement. An IVA is a legal process in the United Kingdom (for UK residents) whereby you can arrange to pay debtors back a reduced amount of the money that you owe them, due to personal debts that are perhaps overwhelming. IVAs / debt management is usually available on debts of £15,000 and more. If you have a debt below this amount, you will often have to look for an alternative to IVA.

IVAs / debt management is an excellent option in many cases however it can not be used for debts related to a mortgage, a secured loan, Hire Purchase (HP) or utility bills so there are specific restrictions. It is important to ask about and inform yourself of the specifics of an IVA before applying for one.

The important things to note about an IVA is that once you enter into this type of agreement, you will typically no longer be contacted or hear from your original creditor. If you are behind on your payments and have been receiving daily phone calls, this alone can give you a huge amount of relief. Another key characteristic of an IVA is that once you enter into the agreement, interest and charges will no longer be charged to the account. This removes another level of pressure because it means your balance is set and will no longer rise on its own due to interest and fees.

An IVA agreement usually requires you to faithfully and reliably make the agreed payments for up to 5 years (60 months). If you stick with this agreement, the balance of your debt will be written off by your creditor. This agreement will be honored by your creditor if you honor the payment arrangement made between you and them in the IVAs / debt management arrangement.

Depending on your circumstances, you may be offered an alternative debt management solution if you do not qualify for IVAs / debt management. The information that you will need to find out whether you qualify to apply for IVA or other forms of debt management can be found on certain government web sites, if you search carefully. They can also be found on the web sites of debt management companies that specialize in helping people in debt. These companies will review your debts for you. If you agree to work with them they can at times negotiate solutions for your debts. One solution could be debt management where a debt management company will contact all of your creditors and negotiate lower payments for you if possible. At times, they can also negotiate a freeze of interest and other charges so that paying off your debts is easier.