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DEBT MANAGEMENT THE FACTS PART 1 REPAYING YOUR DEBTS WITH AN IVA Finding yourself with huge debts and unable to repay your creditors can lead to a great deal of stress. In order to help people in this situation, and to help avoid bankruptcy the UK government developed an initiative to help people repay these debts. The IVA (Individual voluntary Arrangement) as it is commonly known helps by bringing together all ones debts and repaying them through a monthly payment. As credit debt is now so wide spread, a very competitive market has developed, with hundreds of companies offering to help you. Upon reading the brief bits of information offered on some websites it would be easy to assume that your debt could be written off easily. Here we offer impartial advice, along with many of the facts you will find it difficult to get answers to. We also describe how an IVA works and answer some of the more commonly asked questions. But first a word of warning! An IVA can seem like a great idea, however it is a huge commitment so do get all the facts before deciding on this as a course of action. In addition, over time a large number of debt management agencies have sprung up that will help manage this on your behalf. Some of these agencies can charge a high fee which in turn does not help with your financial crisis. So do check very carefully before appointing a debt management company, within this article we offer no recommendation for any one particular organisation. An IVA is arranged and managed by an 'Insolvency Practitioner'. They negotiate on your behalf with all your creditors, taking into consideration all your debts. This can include credit cards, store cards as well as bank overdrafts. Your debts need to be in excess of £12,500 and have at least 3 creditors. This can include family and friends. Ideally you will have only a minimum of equity in your house, if at the end of the IVA term you have a significant amount of equity in your home you will need to consult with your mortgage broker and try to release some of this equity for your creditors. The IVA term is normally 60 months, during this time you pay one affordable payment towards your debt each month. At the end of the IVA any outstanding debt will be written off. This is why you will see many advertisements for companies offering to legally write off up to 90% of your debt. Whilst your outstanding debt will be written off at the end, it is highly unlikely to be a very high percentage of what you originally owed. Remember you will need to repay an amount every month for around five years. The setting up of an IVA should not cost anything and you should not need to pay any fees up front. However once the monthly payments are agreed your creditors will allow the company who have organised your IVA to take a supervisors fee from your contributions. These amounts can vary but are typically around £1,000 or more for setting up the IVA, followed by a monthly fee to manage it. Again do check before appointing your insolvency
Once the IVA is set up your creditors are not allowed to contact you, the Insolvency Practitioner will complete all further negotiations with them and deal with any subsequent problems. At any point during the agreement you can write off the arrangement by paying in full any outstanding amounts and the IVA will be cancelled. Agreeing an IVA will affect your credit rating, you will have to agree not to take out any unsecured debts during the full course of the agreement, and a note will be placed on your credit file to prevent you from doing so. However once the IVA has been successfully completed your debts will be listed as settled. It will take some time though to rebuild your credit rating. If you fail to co-operate once the IVA has been established and do not stick to the arrangement you can be made bankrupt. If an IVA is not a suitable method of debt repayment for you, have a look at our other impartial article on alternative debt managment.
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