Filed under: IVA
Instead of declaring bankruptcy, how about trying these commonly used debt solutions….
1. An IVA. These were introduced by the Government as a way of debt management without resorting to the complex legal process of Bankruptcy. You negotiate a percentage with creditors of how much you can pay back, and if they agree you may end up paying significantly less than before. It’s not an easy option however, so you should seek advice.
2. Debt Consolidation. Instead of paying the huge interest and fees on separate credit, store cards and loans, these firms can give you one loan which means one payment. Although these are advertised heavily on TV, they are rarely suitable as they mean a very long term commitment.
3. Remortgaging. If you have equity in your home, remortgaging can be an easy way of getting some extra cash at a low rate. It does mean however that the length of your mortgage will increase and again, it’s not for everyone. It could be a risky option, given the ups and downs of the mortgage market.
February 26, 2010
Bankruptcy should only ever be seen as a last resort. The consequences are serious, affecting the person’s ability to retain their home or earn a living through their own business, for up to 15 years. The increased pressure from being in such a dire long-term situation puts pressure on the person emotionally, effecting personal well-being and relationships. Possible alternate avenues to clear debt include:
Option 1
Review current finances and consolidate debt; take into consideration incoming and outgoing finances and prioritise payments. There are payments that you must not miss at any cost and these include your mortgage and household utilities. Cut out non-essential outgoings and lower loan or credit card payments by consolidating debt into lower monthly payments.
Option 2
Use a debt management company to devise a debt management plan and act as a middleman between yourself and your creditors. Debt management companies will review what you must pay, for instance household builds, and split the remaining money between the creditors. Beware: not all creditors will be willing to go down this route and County Court Judgements (CCJs) may ensue.
Option 3
Many of us will have already seen the glossy television ads promising to wipe away 75% of our debt. Individual Voluntary Arrangements or IVAs is a formal arrangement between the debtor and creditor, arranged by an Insolvency Practitioner (IP). Unlike bankruptcy the IVA should protect your home during the term of the arrangement. However, IVAs are complicated solutions and should be investigated in detail before being pursued.
December 12, 2009
At MoneyStand, we frequently talk about debt solutions to offer some advice to anyone landing on the blog looking for some support and advice. Judging by UK debt news, theres been some increases in the amount of people getting IVAs, so this week I’m going to talk about Individual Voluntary Arrangements. An Individual Voluntary Arrangement, or IVA is a formal agreement with your creditors to pay some or all of your debts. An IVA will normally last five years, after which you will be debt free as a large proportion of your debt may be written off.
IVAs offer a number of advantages over bankruptcy. You will probably be allowed to keep your home, you can keep the matter private rather than having it announced in a newspaper, you can still hold a current account (albeit one without an overdraft) and you can still act as the Managing Director of a company or hold a public office. This means that the stigma of IVAs is much less than that of bankruptcy.
However there are also a number of disadvantages. Firstly, an IVA is only an option if you owe more than £15,000, and creditors representing at least 75% of the amount you owe must agree to the IVA arrangements. If your IVA fails you may still be made bankrupt, and the cost of your IVA will be added to your debts. Finally, your finances will be heavily scrutinised by an Insolvency Practitioner, and your IVA will appear on your credit file, thus affecting any subsequent applications for any type of credit.
October 27, 2009
What is an IVA? An IVA is an Individual Voluntary Arrangement which gives you the facility to set up a formal agreed payment plan with your creditors. In order to be eligible you must have debts of over £15000 that you cannot afford the repayments on.
What is Bankruptcy? Bankruptcy is an order from a court that means your finances are controlled by the Official Receiver and there are a series of things you cannot do when you have been made bankrupt. This also means your bank account will be frozen and you will likely lose your home (if you’re a home-owner)
What debt solution is better for you? That’s a tough call that only you can make with the help of some serious debt advice. Overall an IVA seems to offer you much more freedom in having some control over your assets, in my humble opinion (but I’m no financial advisor). When you are bankrupt you can be made to hand over everything that is not deemed essential to your living (eg work items or household items like clothes). With an IVA you can still operate your bank account and have your wages paid in as normal. You still have to provide detailed information on all your income and expenditure and then you will be told how much you have to repay to your creditors. If you do not keep up with this you could be subject to bankruptcy proceedings.
The time in which you will be paying the debt back does vary between these two. The IVA is usually over 5 years whereas the bankruptcy order means you will usually be paying the debt for 3 years (although the bankruptcy order may only last one year, the agreement to pay is 3 years). Although you will be paying for less time with the bankruptcy order, it does affect you for longer as you can not be company director, Managing Director, MP or Judge and you will have severe difficulty in obtaining a mortgage (especially after the sub prime credit crisis in America).
So overall, if you can have an IVA over a bankruptcy order then this would seem the better option for the majority of circumstances but this depends largely on your debt.
September 30, 2009
Bankruptcy in the UK
Bankruptcy is a very difficult decision, but there are a few alternatives to the procedure.
Firstly, an IVA (Individual Voluntary Arrangement) is an option. This is where you arrange an agreement with your creditor in which they decide to pay all or part of your owings. This is flexible according to the individuals own circumstances. The arranged fee is generally more than the creditors would receive if bankruptcy is filed by the person(s) in debt. Read this article on ‘What is IVA‘ if you’d like more information.
Secondly, an Administration Order can be installed in which a court will decide your payments scheme. The small print is that you must have a regular paying wage and debts that do not exceed 5,000 GBP to be eligible for an Administration Order.
Thirdly, a similar, yet more informal agreement can be attained which is an agreement between an individual and a creditor in which they both agree to a schedule of payment. This is referred to as a Family Arrangement. This however is not legally binding, and the creditor can decide that the arrangement will be scrapped and the full amount should be repaid.
If Bankruptcy is a real possibility for you and your family, it’s not something to go into before you’ve explored every other option first and considered what else is available. Before you go Bankrupt, understand all other debt solutions. Even if you do end up going bankrupt, it won’t be the end of the world. You can start again on a clean slate. THINK positive. CHANGE your spending habits. ASK for help.
September 1, 2009
This week we have a guest post by a reader who would like to remain anonymous. She contacted Money Stand to tell more people about her personal struggle with debt, which she hid from her partner. She hopes this story will encourage others in debt to face up to their money problems.
Before deciding to take control of our debts, they did worry me to the point that it was affecting my sleep patterns and I did suffer from a lot of stress. I did lie to my husband, mainly by not telling him how bad things were financially, and just letting him think that everything was under control and there were no problems whatsoever. Things really came to a head when I had to go into hospital and had to trust him to handle the finances for a week. There was no option then but to tell the truth and hope for the best.
It was the best thing I had done in ages! Yes he wasn’t pleased, yes he did have a good whinge. But at the end of it all, he was supportive and we have sat down since and worked out how we can afford everything we need and get some extra money together to save up to pay off the smaller debts. We only have 3 debts but they amount to £30,000 but we only have an annual wage of £27000 coming in, and we are a family of 5.
We sat down together and looked at money coming in and money going out. We have seen areas where we could cut back our spending, like on the little luxuries of brand names at the supermarkets. I now shop around instead of getting everything in the one shop. We have changed our suppliers for utility bills, we have letters in to reclaim charges, and I am now not afraid to complain to a company about anything I find unacceptable.
I have to say that the stress of keeping it all in has lifted and I feel so much better for being honest with my husband. We are now working as a team to try and clear our debts as quickly and painlessly as possible. They say that a trouble shared is a trouble halved, and it is true. I don’t have to bear the burden alone and I know there is someone there that I can talk to and be honest with, instead of plastering a false smile on my face every day and lying to everyone about things. I feel better now, and hope that by reading this someone else will have the courage to face their debts head on and will feel like I do now.
If you would like to write a guest post for Money Stand, please get in touch.
July 15, 2009
Before declaring yourself or business bankrupt it is worthwhile seeking debt counselling to make sure it is the right option.
Provided the directors of the company have and continue to act responsibly, voluntary liquidation may be an option for debts over £50,000. Although the company will cease to trade, the directors won’t be held financially culpable. If the company has no assets it will be necessary for money to be set aside to cover the practitioner fees.
If there only have a few creditors it may be possible to reach an ‘informal agreement’. It is similar to an IVA, but requires the agreement of all creditors. It is necessary that the company or individual has the spare money to offer creditors, but may result in a significantly reduced level of payment.
An IVA offers a less intrusive alternative to bankruptcy. You make a payment to creditors for a period of 60 months. It allows you to keep your home and maintain your professional status. Your insolvency isn’t printed in the local press.
Further Advice:
If you’d like to talk to someone about debt solutions and alternatives to bankruptcy, we’d recommend contacting an expert for free advice. Dropping into your local Citizens Advice Bureau or calling a company like Debt Free Direct is a good start. There’s also plenty of UK based forums where others going through IVA and bankruptcy talk about their experiences which could be a great place to get involved and ask some questions to people who are actually going through it before you make up your mind.
July 7, 2009
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 reasearch first.
April 16, 2009
With the recession just starting to take effect many of us will be feeling its force. Losing your job or knowing someone that has, the credit crunch is affecting us all. Most of us have payment protection on our mortgages or loans in case something unexpected happens, but what about those who don’t know about such products and are now defaulting on payments.
Most of us shop around to get the best deals when looking for financial products, we also know what we’re looking for to meet our specific needs i.e. tracker interest rates or fixed rate loans but there are thousands upon thousands of adults who are uneducated when it comes to personal monetary issues.
Lack of education in the financial area can and will lead to large losses of money from the purchasing of unstable and unsuitable financial products. In turn this can lead to even more dramatic effects; those who have got into debt will have to find a financial package to help them recover from that position whether it’s an IVA, bankruptcy or a consolidated loan, choosing the right one that will provide the best solution is a hard task if you don’t have the understanding of what each option offers. You need to know the pros and cons of what they are offering. People need to develop an understanding of economics and finance so they can make the right choices before they get taken advantage of by a loan shark.
Financial education should incorporate lots of different areas to help people manage their money more effectively. The key points being:
• Planning ahead with savings, pensions other investments for the unexpected
• Keeping organised with financial documents and making assessment of advice received
• Knowing whether the credit limit, loan, mortgage is right for them
• Looking for suitable financial options and opportunities
• Engaging confidently in financial situations
Getting children educated about money from a young age either at school, college or at home has massive benefits and sets them up for a happier future with less stress and strain over their finances.
Financial education will enhance and develop people’s understanding of economics and finance and give them a much needed foundation to manage their money better and make knowledgeable choices with financial packages.
February 5, 2009
The dreaded B-word, bankruptcy is an increasing possibility for many families and businesses and it can appear to be an attractive alternative for those struggling to pay off large debts, but what may seem like a get out of jail free card does have some long term implications that can be far worse
The first advice I would give to someone thinking about bankruptcy would be to get some free debt advice and look at all options especially an IVA before declaring yourself bankrupt, once the bankruptcy proceedings have started there can be no going back.
Once declared bankrupt by a magistrate, you will find yourself in a very limited position within the world of finance; it will be impossible to get a mortgage or a credit card, all assets will be lost such as house, car etc and there are restrictions on being a managing director or in charge of a company. You may also lose your career and some professions will not employ those who are or have been bankrupt. As well as all of this there is the social stigma; bankruptcy is advertised in local papers and if you are renting a property then the landlord will be informed.
The best alternative I’ve seen to bankruptcy is an IVA (Individual Voluntary Arrangement) which is similar to bankruptcy but is not surrounded by so much doom and gloom. It is a voluntary agreement between the debtor and the creditors on a settlement figure, and this is paid into a fund over a 5 year period. Interest charges are stopped and the creditors are not allowed to pursue any further legal action against the debtor. Having an IVA rather than declare yourself bankrupt has numerous advantages, the main being that you can keep your house and car (if it’s small and essential). The affordability of monthly payments is agreed in advance and fixed so there are no unexpected sales of assets. Employers do not require information about current or previous IVAs and having an IVA will not be printed in the paper. Your credit rating will not be harmed as much, but it will still be poor. I can’t see why anyone would choose bankruptcy over an IVA unless the creditors cannot agree on a figure for repayment or they wish to carry out an investigation into the debtors affairs.
It is never really in the best interests of the creditors to make someone bankrupt as they usually will get less of their money back through bankruptcy than if they agreed an IVA with the debtor. Court costs of bankruptcy are very high and repossessed houses that have quick sales do not achieve their maximum price.
As the credit crunch goes into full swing it seems likely that bankruptcy and IVA cases will increase as the nation falls further into debt. If you are teetering on the edge of financial collapse or ruin then get some free advice and take some weight off your mind.
December 10, 2008
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