Will Debt Management For An IVA Put My House at Risk

Will Debt Management For An IVA Put My House at Risk

There has been much said about debt management companies in the news lately, and most of it has not made pretty reading for the DMC's. The OFT compiled a 'mystery shop' of the industry and uncovered bad practices being carried out almost across the board. Subsequently, 129 warnings were issued and many licenses have been revoked or rescinded since.

One of the reasons that consumers approach professional debt management firms is because they expect the DMC to be the experts and to give the correct advice. One of the most common fears that people have is that of losing their house, so this article attempts to explain the situations that should be avoided in order to reduce the risks associated with the repossession of assets because of a serious debt problem.

Firstly, people struggling to pay their credit cards and loans when the bills fall due should ensure that they do not cut back on secured loan payments in order to pay their unsecured debts. Secured debts include mortgages, secured loans, and car HP agreements. Secured loans should always be paid first because there will be a direct consequence for non-payment - repossession - whereas non-payment of unsecured debts will not lead to such severe consequences in the short term.

Secondly, homeowners should ensure that if they have missed payments on unsecured debts, that they should attempt to arrange an amicable arrangement with their lenders as soon as possible. If a person simply ignores demands for payment, the creditor will have no option but to attempt to recover the money through the courts. The procedure begins with an application by the creditor for a County Court Judgment (CCJ) which if granted, and not paid, will enable the creditor to apply for a Charging Order. A charging order, if granted, will mean the debt will become secured against the house and although won't necessarily mean the owner is facing eviction, it will mean that if the house is sold then the now-secured debt must be settled immediately from the proceeds.

Thirdly, if a person approaches a professional debt help company, then they should think carefully about which debt solution to choose. As part of 'best advice' guidelines, debt help companies should offer all the solutions available. Many people don't fully understand the difference between DMPs and IVA and many assume they are the same thing.

There is actually a big difference between and IVA, in that a DMP is an informal arrangement whereby IVA is a formal arrangement in which a person's assets - including their home - are put at risk because failure of IVA could lead to automatic bankruptcy. Not only that but also many debt management companies fail to make it fully clear at the outset that a person will most likely need to remortgage their house after year 4 on an IVA - meaning the debts are consolidated and secured against the house and will be repaid over many more years to come - long after the IVA period has finished.

Why Consider a Debt Consolidation IVA

Why Consider a Debt Consolidation IVA

Following recent changes in the law, Individual voluntary arrangements have been brought in by the government. An Individual voluntary arrangement is an easy alternative to bankruptcy and carries none of the stigma. It's an excellent way to deal with insolvency or personal debt issues. In accordance with government rules, a properly drawn up IVA will write off up to 60 percent (sometimes more) of personal debt immediately.

The IVA will be compiled by an insolvency practitioner who is properly qualified in these matters and will have a good working knowledge of personal insolvency procedures. The whole of the debt and the total number of creditors will be taken into account together. Income and expenses of the client will also be considered and a monthly or weekly expenses list will be compiled with the consent of both the client and the creditors. The essential household bills will be paid before any of the creditors are considered. Total debt will be diminished in this way by sixty percent or more, and the monies left over is used to reduce any remaining debt in this very structured way and on a considerably reduced basis.

Individual voluntary arrangements are generally set up to run over the course of a five year span, although sometimes it may be altered to fit with personal requirements. In Scotland, where these arrangements are known as Trust deeds or protected trust deeds, the term is typically three years but in some cases may be for four or five years. With both the IVA and the trust deed the client is defended from creditors by the various insolvency laws and their debts are completely and absolutely discharged at the close of the term (however long that may be set).

An Individual voluntary arrangement is a legal document and there are a number of things that creditors are forbidden by law to do now the IVA has been put into place. This includes not being permitted to telephone you or send you letters, or indeed to contact you in any way. If the creditor or his one of his agents (i.e. a debt collecting company) even attempts to contact you then they are deemed to be in breach of the insolvency laws. All creditors (such as banks, credit card companies, etc.) must stop all phone calls and letters and must not attempt to impede the day to day life of the client.

Not everybody can qualify for an IVA. There are certain restrictions on who can apply and who cannot. Usually applicants need to have a regular income from a verifiable source and also a surplus monthly sum in excess of ordinary expenditure to finance the repayments themselves, though this need not be a large amount. Those not qualifying for an IVA will likely qualify for a similar debt management programme, so it's always worth applying just to see.

An IVA is therefore an excellent way of managing your debt over the long term and it implies a completely new start in life. Most of your debt will be wiped off immediately, before you even start your repayments. The rest is paid off after five years and at the end of the term the debt is written off completely and the creditors will be satisfied. A new start is possible. That new start can begin today. It's your choice.

Many people make the mistake of opting for a so-called debt consolidation loan, which only gets them into more debt. An IVA writes off most of your debt on day one and is the legal way to a debt-free life, chosen by thousands of wise people every month.

Pros and Cons Of Using IVA Debt Help

Pros and Cons Of Using IVA Debt Help

The financial problems that many people are having at the moment are well documented and it is not necessarily through any fault of their own that they find themselves in this position. For those people who are struggling to keep up with their monthly payments, it is important that they try to resolve the issue as quickly as possible. One way that has become much more common in recent years is to use IVA debt help to make your money problems more manageable. Before you make any decision about what choice you are going to make to start your financial recovery, you should find out a bit more about the possible options. We have highlighted some of the main pros and cons of using an Individual Voluntary Arrangement below.

Positives.

Using one of these arrangements will mean that you will only be paying one single amount each month that will be split between your creditors. This amount will be worked out depending on your own individual circumstances.

When the arrangement has been agreed by your creditors and is fully set up, you should not receive any letters or telephone calls from them. Anything that you do end up receiving can then be handed over to the insolvency practitioner that is dealing with you.

As well as there being no correspondence from creditors, you will also not be subjected to any extra interest fees or charges for making payment late.

Most IVA agreements will last for a maximum of five years and after this time you will be free of all debts. In a lot of cases this will result in a portion of the money owed being completely written off.

Negatives.

You will have to meet certain criteria in order to be eligible for one of these agreements. Usually your total amount owed must be over 12k and you must have at least three different creditors as well.

It is going to have an extremely negative impact on your credit rating meaning that you will not be able to obtain any credit for at least the duration of the agreement and quite possibly for some time after as well.

These arrangements will generally last for five years whereas bankruptcy would be three. Declaring yourself bankrupt would also mean that you pay back a significantly lower amount.

If you are giving serious thought to IVA debt help then it is important that you make sure that you understand as much as you possibly can about it. It is a major decision for anyone to make so it is always recommended to consult an independent financial advisor before taking the plunge.

IVA Help

IVA Help

All governments try to help folk who have suffered from insolvency. There are government schemes like IVAs, CVAs and CVLs to assist in the procedures of both personal and corporate debt recovery and to relieve what is recognized as a difficult time, and it is clear IVA help is an integral part of the solution. The object is intended to be toward safeguarding personal assets where possible and also in protecting the rights of individuals by using legal measures. This applies to both individual assets as much as the assets of corporations.

When we use IVA help it means that our enjoyment of life is not greatly disrupted. This is in stark contrast to the damage that bankruptcy or sequestration would cause us. With a proper debt management programme all your income and outgoings are evaluated and looked at as a whole, so lifestyle doesn't really change and the debt is reduced steadily but easily over time and over a period of years.

Encouraging help by the government in establishing debt relief for individuals as well as businesses has meant that IVA help is available everywhere and also that the level of professionalism is excellent. Insolvency practitioners are qualified to an exacting standard and this is a situation which is in stark contrast to the training or education needed by middling sales people who sell loans that promise to put an end to debt misery altogether but only manage to making matters worse. It is probably wise never to take out one of these terrible loans.

To be able to apply for IVA help the client must be able to show earnings in excess of a threshold amount and have debts of more than a specified amount and not greater than a certain sum, and such values will alter from one insolvency company to the next. Usually the income must be proved to cover the cost of these repayments after other necessary outgoings have been met such as mortgage and council tax. The average minimum amount of personal debt is around 2,000 though this can vary. A ceiling of fifty thousand pounds is sometimes stated, though by going through an intermediary the applicant may be alerted to appropriate service to look after their own particular circumstances.

One distinct benefit of an arrangement of this kind is that it may immediately cut the debt burden by a fair proportion. Normally this can be as high as sixty percent, sometimes even more. This great reduction of debt burden makes a substantial difference and is one of the things which distinguishes this from an otherwise regular debt management plan. Therefore anyone looking for any sort of debt reduction programme would be best advised to apply for this over a standard debt relief programme every time.

How often have we decided to change our ways and put an end to debt for all time? When we use IVA help that is a distinct possibility as we see the chance of long term change all around us. With the proper help and plenty of confidence we can turn the clock back and never again go into the red.

Any IVA help is a highly useful device and most people would jump at the chance of applying for one because it is bound in law and releases the holder from the entirety of the debt at the end of the agreed term. It is a much more gentle response to personal debt than other sterner instruments like bankruptcy and carries none of bankruptcy's sting.

IVA Debt Solution How to Solve Debt With an IVA

IVA Debt Solution - How to Solve Debt With an IVA

The IVA debt solution is a way of tackling serious debt problems, which is only available in the UK. These formal arrangements are used as a solution for debt situations similar to those which would be considered suitable for debt settlement in the US. IVA stands for individual voluntary arrangement and is as formal legal agreement that is set up between you and your creditors.

By using an IVA you agree to make regular affordable payments towards your debts for up to five years, and after than any debts left are written off. This is a very effective way of eliminating huge debts that you just cannot afford to pay back. For some people this can mean writing off about 75% of their debt.

You will only be considered for an IVA debt solution if you have debts of 15,000 or more to a few different creditors. The debts have to be unsecured, which means you are not able to include mortgage debts or other loans secured against assets. For most people, the majority of their debts are made up of credit cards and personal loans and bank overdrafts, all of which are unsecured and can be included in an IVA debt solution.

For an IVA debt solution to work, the majority of your creditors need to vote in favour of it. Given that agreeing to an individual voluntary arrangement almost certainly means agreeing to considerably reduce how much money they get back from you, creditors are not likely to do this unless your situation is clearly very serious. If a creditor has reason to believe that you could actually afford to pay them back if you really wanted to, they are unlikely to agree to setting up an IVA, so you need to be able to demonstrate that it is just impossible to repay all that you owe.

One advantage of the legally binding nature of an IVA debt solution is that you only need the creditors for 75% of your debts to agree to it for the other creditors to be bound by it too. So if most of your creditors agree, but you have one of two creditors who are reluctant, they will have no option but to join in too, provided they are not owed more than 25% of the debt. This can be a big help in getting an IVA set up, and is something that you cannot do with informal agreements like debt management plans.

One of the worst aspects of being in debt can be the constant calls from creditors seeking overdue payments. Another legal consequence of an IVA debt solution is that your creditors are legally prohibited from contacting you and are not allowed to take any legal action against you either. All their dealings and communications have to be with the Insolvency Practitioner who sets up the individual voluntary agreement for you.

To arrange an IVA debt solution you need to first approach a specialist debt company so that they can assess your situation and see if an individual voluntary arrangement is possible for you. It is best to apply to a few different companies before deciding which advice or proposal you want to accept. You can apply to any of the leading IVA debt solution specialists without any obligation to accept what they propose. Look for a list of recommended IVA providers that you know are reputable and effective.

IVA Debt Problem Explained

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. This typically last for 5 years (60 months). 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. You can clear a percentage of your debt but there are negatives to the IVA which are often overlooked.

- Whilst your IVA lasts for 5 years typically, your default on your credit rating will last for 6 years. - You cannot continue to use credit - Any equity in your assets (house, car etc) will be considered on the 54th of the 60 months. 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. The service is free and you will not be pestered or sold to.

A debt advice charity can ensure the IVA is the right debt solution for you.

IVA Debt Help FAQ Part Two

IVA Debt Help FAQ - Part Two

Following on from our first article on the most commonly asked questions about Individual Voluntary Arrangement or IVA Debt Help, here we have provided you with another selection to give you a little more information. If you are finding it increasingly difficult to keep up with your debt payments then these payment plans are definitely worth thinking about.

Who is eligible for these agreements?

Different companies can have different requirements in regards to the minimum level of debt required. As a broad rule though, if you meet this level and can meet monthly payments of around 200 then you should be eligible.

How does this affect my current credit?

You will not be allowed to use any credit or store cards throughout the durations of your agreement although you can still use pre-paid cards during this time. You can usually still take out a mortgage whilst in an agreement but you should always seek advice before doing so.

Do all of my creditors need to agree?

Under the terms of these arrangements if less than a quarter of your creditors disapprove then it does not matter as they will be bound by the majority agreement. If there are not enough of your creditors that agree then you may have to turn to bankruptcy although you can come to revised arrangements in the hope that they will then agree.

What will the agreement cost me?

When the company you go to calculate how much you can afford to pay each month they will include their own fees in this figure. This means that you will still be paying the single amount each month and will not be hit with any further bills in the future.

Remember, if you need any further advice or have any more questions to do with IVA debt help then it is important that you speak with a professional. These solutions can be an extremely effective way of getting yourself out of a financial hole but you should ensure that you do full research before you enter any agreement.