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Posts Tagged ‘IVA’

It isn’t good economics for an IVA for under £20,000 to be taken on due to the fees imposed by the insolvency practitioner. The amount charged by the practitioner is very steep and problems keeping up the payments can prove very difficult. You should however seek IVA advice.

It is said that a certain amount is paid every month and gives the impression that the same amount throughout the IVA is kept to, but this is not true – the amount can change as the wage changes and as the cost of living is getting ever steeper it can prove difficult to justify your expenditures. It can seem a good way to rid yourself of the debt burden but it is for 5 years and that is a large portion of your life to commit for. If you own your own home at the end of year 4 you can be asked to re-mortgage and quite a large amount taken away from you which may mean you have paid all your debts owed anyway – considerably more than the 25% you are told you will pay.

On the other hand with bankruptcy you will automatically lose your home and if in certain employment, the police force being one of them, you will lose your job

But it is something that has to be thought about very carefully as an IVA is not an easy get out.

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Individual Voluntary Arrangements (IVA’s) are becoming an increasingly popular method in which to ease any debt problems. Recent figures suggest that the amount of IVA’s taken out each month now exceeds that of the amount of bankruptcies. However, IVA’s are not always the best debt management solution for some, and there are some advantages and disadvantages which you would have to consider before applying for an IVA.

One of the biggest advantages of an IVA is that they are private; none of your friends or family has to find out. This means there is no social stigma attached to IVA’s. Furthermore, an IVA leaves you debt free in up to five years whilst safeguarding all your assets at the same time. Even during these five years, the repayments that you make are within your means. You are never asked to repay more than you are able to.

Perhaps one of the most stressing aspects of debt problems is having your creditors continually threatening you for your payments. Luckily, an IVA ensures that creditors are unable to contact you, make any demands or take you to court.
For some people, the IVA period of five years is a long time to be repaying debts, and filing for bankruptcy gives you the option of being debt free in as little as a year. Although an IVA is not publicised in the same way as bankruptcy, you can still find a record of your IVA on the Individual Insolvency Register, which is searchable by the public. In addition to these disadvantages, the life of a debtor in an IVA period is highly monitored during an IVA period, with wage slips and salaries checked regularly to ensure that you are repaying the highest amount possible.

If you are seriously considering an IVA, be sure to do a thorough check of the Debt Management comany before you choose. Debt Free Direct discovered several agencies were giving consumers misleading advice on IVA terms, so it is always advisable do your research first.

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The thought of going bankrupt can be scary, but there are alternatives. The first alternative is to contact your creditors and try to reach an informal agreement. Explain to them that you are experiencing difficulty with their current repayment terms and try to negotiate a more suitable agreement. Most creditors would rather take this option and have you continuing to make repayments than risk you going bankrupt and having your debt written off.

If you are unable to reach an informal agreement then your second option is to opt for an IVA or Individual Voluntary Agreement. An IVA is a legally binding agreement between you and your creditors where you reach a compromise on how much of the debt you can repay and when payment should be made. An IVA is carried out in a much more formal manner than and informal agreement and if you decide to head down this route you have to involve a licensed Insolvency Practitioner to carry out the process.

Finally, if you want to avoid going through the process of an IVA you could enlist the help of a Debt Management Company. The company will provide you with your own debt manager who will prepare a financial statement and budget of your accounts and determine exactly how much you can afford to pay towards your debt. They will then approach your creditors on your behalf and agree a new set of payment terms. If you decide to use a Debt Management Company then read through their terms and conditions very carefully as some companies take a percentage of your monthly payments to cover their costs. To find one that charges no fees try contacting your local Citizens Advice Bureau.

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IVA or Bankruptcy?

Both of them are legitimate ways out of debt. Which is better? Well like most things it does depend on your individual circumstances. With bankruptcy your debt is written off, but there is a cost; with IVA only some of your debt is written off.

An IVA or Individual Voluntary Arrangement is where you set up an agreement with your creditors to pay off part of your debts. The amount you pay per month is based on what you can afford and it lasts about 5 years.. You can set up an IVA if you are at least £15,000 in debt and can afford at least £200 per month. Up to 75% of the debt can be written off.

For an IVA, your circumstances will be taken into account – like how much you earn, how stable your job is (is there such a thing as a stable job nowadays?) and how much you can afford per month. So this is not suitable for everyone as you need to have regular money coming in and you need to be able to afford the repayments each month for 5 years. If you fall behind with the payments, you risk being made bankrupt.

With an IVA, your debts need never be known to your friends, family, neighbours or work colleagues and as long as you can keep up the payments, you will have a clean slate within 5 years. An IVA is an arrangement between you and your creditors – no-one else need know, unless you tell them.

Many people regard bankruptcy as a “cop out”, because all your debts are written off and the bankruptcy may even be written off after a year, but this does come at a cost. The bankruptcy remains on your credit reference file for 6 years, so you will find it hard to get a mortgage or any form of credit. Your credit rating is damaged and this can last for many years to come.

With bankruptcy, you also have to declare your bankruptcy in the local newspaper, so all the busybodies in the neighbourhood will know about it – it will be great gossip-fodder for them. This is not very good if you are a private person who doesn’t like to share their financial distress with the rest of the world. You also will find many jobs closed to you – not just high powered jobs like Financial Director of a company, or Company Secretary, but also normal administrative jobs in the Financial Sector. You also can’t practise as a lawyer or chartered accountant..

Basic things like running a current banking account or having a credit card will be closed to you. You will only be able to hold a basic bank account with no direct debits or overdraft facility or even cheque book. So bankruptcy is a step not to be taken lightly as it impacts on so many areas of your life.

Creditors prefer IVA to bankruptcy, because they get at least some of the debt back. IVA is an alternative and should be considered provided you can meet the minimum monthly repayments.

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Those IVA adverts on TV stating that people can write off 75% of debt are a best case scenario. It is also a highly improbable scenario but it can be better than bankruptcy.

If you choose IVA as a debt solution, your creditors will seek a minimum of 25p for every £1 of debt as an absolute minimum which is where this figure in the adverts originates. It will be necessary to accept that there is a strong possibility that you will have to pay a lot more than this, particularly if you have a high earning professional vocation.

The insolvency practitioner also comes with a hefty price tag and can add a further £7000 to the amount you need to raise. If you also own a property you will be expected remortgage at the end of year 4. This could actually mean that you end up paying your debts in full.

If you maintain your payments for 60 months you will be discharged from your remaining debts. There are however some IVA benefits. It is not an easy option, but does give people with crippling debt problems the chance to keep their job, home and self respect.

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Life and debt

Some people are so deep in debt, they will never know what it is like to not owe anyone money.

Some families have raked in debt so high that they can only afford to make minimum payments to all of their creditors. Debt Free Direct commented that unless a miracle happens such as a jackpot win on the lottery or a huge inheritance, these people will see out their lives making token sums to debt accumulated many moons ago.

Every six months you will need to refresh the form to see where else you can make savings, and if need be, help raise additional money to repay your creditors.”

Britain’s ever increasing debt mountain is growing larger by the day as mortgage debt escalates by £1 million every four minutes and someone declares bankruptcy every seven minutes.

It is estimated that over 104,000 people will sink into bankruptcy this year or take out an IVA. This is three times the figure for people with money problems ten years ago.

Some people in the UK owe over 17 times their monthly income in loans, credit cards and other bills. Others who are receiving state benefits could take up to 77 years to repay their debt. If they are in their twenties or thirties, these will see them to the grave.

The ‘Buy now worry later’ culture has shown that over 1.6million people have problems in repaying accumulated debt and 1 million people will choose bankruptcy as a means of solving their financial problems.

What can I do to consolidate my debt?

If you do not want your creditors to see you to the grave, stop spending now and seek the services of a debt management company who will take into account your current financial position and help you to clear your name as quickly as possible so as you can experience life without the ball and chain of debt following you in every direction you turn.

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Debt and divorce

Besides the emotional turmoil which divorce entails, there is often the anguish of unforeseen financial matters such as debt and personal assets to contend with.

Urgency to make a fresh start can cause many individuals to make hasty decisions when going it alone and there are many bogus companies who will happily take advantage of their situation. If you are not careful, the result has been known to get quite serious – even to the extent of bankruptcy or getting an IVA (Individual voluntary arrangement)

Watch out for companies who promise to sort out your debts upon payment of a fee. Free debt advice is just as easily available; always look out for trusted companies that can offer a range of advice on IVA’s debt solutions and also bankruptcy and loans. Its also important to find debt advice that is unaffiliated and unbiased, that way you know they have your interest at heart.

In order to be able to cope with added debt, you need to obtain a clear indication of exactly how much more you need to find each month. You should also list the contact details of your creditors in order to pay them quickly and efficiently each month. Work out your new budget and ensure that your primary utility bills receive priority attention.

Does a joint bank account add to debt problems?

If you have a joint bank account, you should ask the bank to freeze it so as no-one can take out more than the other. Alternatively, you could ask the bank to make up a new arrangement where both signatures have to be used for any withdrawals. One last option would be to close the account completely and work out an amicable agreement for each of you to receive an agreed sum into your personal bank accounts.

If you have joint credit cards and you are the main account holder, you could ask the company concerned to cancel your ex-spouse’s right to use the cards.

These small steps can prevent your ex-spouse from running up further debt on your accounts whilst your divorce is pending

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