IVA Debt Problem Explained

An IVA is a popular debt solution within the UK. The IVA can often be described as being "Government backed", "Government debt solution", "Endorsed by the UK Government", which suggests this is a safe route to resolve your debt problems.
An IVA can be the right solution for people who are technically insolvent, however too often it's 'sold' as a cure for all debts by "writing them off".

What is the IVA?
An IVA is an agreement made with your creditors whereby you make an affordable monthly payment towards your debt. The IVA is a legally binding agreement which requires you to co-operate with your Trustee. If you meet all of your Trustee's requests you will be debt free after your discharged and have repaid a percentage of the debt you owed (minimum 25%).
To enter the IVA you must owe at least £12,500 in unsecured debt, be able to repay at least £200 a month towards your debt and repay a minimum of 25% of the unsecured debt over the 5 year period.

Alternatives to an IVA?
There are a number of different debt solutions available to people suffering with debt. In some instances, people can repay their debt without an IVA, for example with a debt management plan. The debt management plan would enable people in debt to enter an informal arrangement to repay all of the money owed. In some circumstances the interest and charges can be frozen. For most people entering an IVA the Debt Management Plan would not be suitable because the solution would last too long.
Bankruptcy is another option for people with severe debt problems.

What are the negatives of the IVA?
The IVA is a popular debt solution with over 40,000 people using this solution to resolve financial troubles. - Whilst your IVA lasts for 5 years typically, your default on your credit rating will last for 6 years. This equity would need to be released, which may mean selling your car or house.
- If you fail your IVA your Trustee will usually proceed with Bankruptcy. Interest and charges which would have been frozen during your IVA will be added onto your total debt for the period you were in the IVA.

Choosing the right debt solution
Different companies will advise on debt solutions differently. An IVA has become a popular debt solution for people in debt. Money problems can be made better or worse by speaking to the right organisation. A charity will ensure the advice, support and solution is tailored to your exact requirements. There are a number of ways you can get help from an advice charity, including face to face, internet or telephone. A debt advice charity can ensure the IVA is the right debt solution for you.
Debt Support Trust is a registered charity providing advice on general money advice, debt management, IVA, Trust Deed or Bankruptcy. The Debt Support Trust team can provide qualified, independent debt advice and support free of charge.