UK consumers who are finding they cannot meet debt repayments on time may choose to consider entering an IVA. Properly arranged and managed Individual Voluntary Arrangements create a managed repayment schedule, with monthly instalments typically over five years. It must be arranged with the professional services of a licensed IP, who usually oversees the plan until its end. Unfortunately, not all debt management firms operate with high professional standards when it comes to arranging IVAs. This article explains some of the myths about IVAs circulating on the internet; the reality in each case; and action consumers can take to protect themselves.

Myth 1: It will ‘wipe out debts’ by 95%

The Reality: Providing you adhere to the terms and conditions of Individual Voluntary Arrangements, they prevent any fresh interest or charges being added to your debts. If you complete it successfully, the debts it covers are indeed written off. However, it lasts at least five years and requires you to make regular repayments on due dates. And typically it would not write off as much as 95% of debts. It is a legal solution creating a manageable state of affairs – you are advised to be wary of companies making inflated promises to ‘wipe out debts’.

Myth 2: It is a new Government ‘loophole’ scheme to end debt problems

The Reality: It is part of the 1986 Insolvency Act and should simply create a manageable solution to unmanageable unsecured debts. It is legal, widely used and certainly not any kind of ‘little known legal loophole’.

Myth 3: It is the ‘new’, ‘smart’ way to end all problem debts

The Reality: Again, it’s not new and it won’t be suitable for all situations and there are some debts it cannot apply to. Typically it is used for people who owe a total of £15k to 3 or more creditors. In Scotland, Individual Voluntary Arrangements are not used – interested consumers there should gain independent advice on a Trust Deed instead, plus of course any other debt options open to them.

Myth 4: You have to pay ‘separate fees’

The better companies simply incorporate their fees into your monthly repayment instalments and its worth remembering that those fees should be competitive.

Myth 5: IVAs are the only UK “alternative to bankruptcy”

In some appropriate sets of circumstances, it is true they can avoid bankruptcy – but they’re certainly not the only legal debt option. In some cases they wouldn’t be appropriate at all.

Myth 6: Pay whatever the debt management company asks, it’s better than bankruptcy

A properly arranged IVA would allow you to meet reasonable everyday living expenses before any money were set aside to repay creditors via the monthly instalment plan. Additionally, there are other alternatives, including those for debts which may not meet IVA criteria. Finally, bankruptcy might still occur if your repayment plan was too high for you to manage over time.

One good piece of advice is to read as much impartial information about Individual Voluntary Arrangements as you can before moving onto seek expert advice, tailored precisely to your unique debt problems. The better debt management companies will include a confidential assessment of your financial situation; and explain IVAs plus any other legal debt options open to you, including bankruptcy. You should not be asked to pay for this initial advice or feel pressured in any into choosing an IVA, especially by any promises to ‘wipe out debts’.

Author Bio: Paul Goodman works with Debt Options, who provide advice on all the major legal debt solutions, including IVAs. They can advise you on whether an IVA would be the best option for your individual circumstances – without misleading promises to ‘instantly wipe out debts’.

Category: Finances
Keywords: IVA, IVAs, Individual Voluntary Arrangements