Numerous ‘debt advice’ websites will just say that the criteria necessary to benefit from a debt management program will be much less than £15,000 worth of debt and can afford £100 per month or much more, and that the IVA criteria is much more than £15,000 worth of debt with £200 per month disposable income. Nevertheless, the reality is that deciding on the most suitable debt remedy means taking account of all local elements exclusive to the individual person in question. There is simply no ‘one size fits all’ set of criteria when it comes to a debt management strategy or IVA.
Individuals contemplating IVA as a means of clearing debt require to understand a number of points. Yes, the debt level usually will need to be above £15,000 to qualify, but that’s just the start off of it. The debtor will usually need at least £200 per month spare disposable income, at least 2 creditors (of which 70% need to have to agree to the proposal), and if they are a homeowner then the level of equity they have in their house ought to be between specific levels to qualify. Also, in contrast to a debt management strategy, IVA’s are a FORMAL arrangement and should be adhered to, as the consequences of failure consist of bankruptcy and home repossession. Debtors want to be conscious that if a creditor accepts their monthly repayment via an IVA, this monthly payment ought to be kept up with on time, every single month for (typically) five years and if 3 payments are missed (not necessarily consecutively) then this can lead to failure of the IVA. So, though eye catching adverts promising to ‘write off 70% of your debts’ can seem attractive, specially to those suffering debt troubles, the reality is not generally so rosy as the IVA providers would like you to believe.
In comparison, a debt management strategy is comparable to an IVA in that its success is based upon firstly agreeing an inexpensive monthly payment for the debtor but carries less risk, is much less formal and can be altered at any time to suit the client’s needs with out too significantly fuss. As no debt ‘write off’ is agreed at the beginning, a debt management strategy might take longer than an IVA to complete and with both debt solutions, a person’s credit score will be affected adversely and this is unavoidable. As it is an informal arrangement, creditors require to be contacted at the beginning to inform them that the debtor can no longer afford the original agreed repayments, but can afford a lower monthly payment. Debtors should provide what they can afford towards their debt management program, but there is no minimum monthly payment required. Unlike an IVA, failure of a debt management plan will not have direct consequences such as bankruptcy or house repossession, although clients need to be aware that lenders could enforce court action if debtors fail to pay their debts over a long period.
For further details on IVA or Debt Management Birmingham, London, Manchester, Glasgow or Belfast contact UK Cash Solutions who will explain all the pros and cons of both with no obligation.