Many UK residents who have financial problems due to high levels of debt may be eligible for a debt solution known as an IVA, or Individual Voluntary Arrangement. This mechanism has been set up as a formal, legal structure – an alternative to a full bankruptcy – allowing the debtor to repay what they can afford for a fixed period. After that time the creditors are obliged to write off (cancel) any remaining debts.
Many UK residents find themselves in severe financial difficulty at the moment. People have difficulty repaying all classes of debt, including rent arrears, gas and electric bill, and debts incurred on credit cards.
Being in debt can be very upsetting and stressful, especially when aggressive and threatening demand letters are received, and when visits are made by debt collection agencies. Some people make the mistake of borrowing more money to repay creditors, and simply sink further into debt. Others make the mistake of paying the creditor who sends the most threatening letters.
The important thing for those who have debt problems is to realize that there are ways to get help. Charities and some commercial organizations offer debt counselling services, and lenders are obliged by law (e. G., The Banking Code) to act in a reasonable way towards those who get into financial difficulties.
A review by a credit counsellor should identify a person’s assets, living expenses, priority debts and non-priority debts. A plan can then be devised to resolve the problems. Priority creditors (e. G., rent, mortgage) are paid before non-priority creditors (e. G., credit card bills), and the debtor should always be left enough income to cover basic living expenses.
There are many solutions which a credit counsellor could propose, and as all individuals have different circumstances the best solution for one individual may not suit another. Money which is left over after priority creditors and essential living expenses can be paid to the remaining creditors using either a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA).
One advantage of the IVA is that it is a legal agreement with the creditors – in return for receiving payments for a specified time (no more than five years) they will write off any remaining debts after that time.
Juggling your finances can be a real struggle at times. If you need help, contact the debt management experts at deltadebtmanagement.com.
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Tags: Bankruptcy, Debt Management, finance, iva