IVA (Individual Voluntary Arrangement) or Debt Management Solutions
While seeking debt solutions most people are debating between Individual Voluntary Arrangement (IVA) and Debt Management solutions. To learn which of the two options is best suited for you, read ahead and find out for yourself. Though both are capable of preventing you having to resort to bankruptcy.
Individual Voluntary Arrangement commonly known as IVA is a formal agreement between a debtor and his creditors while Debt Management Plan is not.
The main difference between the two is that IVA is legally binding whereas Debt Management is not, which can cause problems if the creditors decide to change the repayment terms. The main idea behind both options is to pay a reduced, affordable amount regularly each month. However in IVA, the interest charges will be frozen. Moreover, the debt will be written off on behalf of the creditor after five years. Under Debt Management, even though you pay an affordable amount, there is no provision for writing off your debt as there is no time limit involved to pay the debt. It can go on for a longer term, or until the full amount is paid.
Since the IVA is legally binding, the creditor cannot pressurize the debtor or change his mind. Thus, it is more secure. The Debt Management Plan does not offer this solution. Since it is not bound by law, the creditor can change the terms and conditions at his convenience.
The cost of administration is lower than IVA, thus enabling higher payments for creditors. It is always advisable to read the terms and conditions of both forms of solutions before making an informed decision. Beware of huge interest charges and other fees involved in the two processes.
One downside on an IVA however, is the credit rating of the debtor is likely to be affected more severely, which is not true with Debt Management.
Which one to choose greatly depends on the amount you owe and your income. By all means, the help of a professional must be sought if you are not completely sure which financial route is best for you
What does IVA mean?
APR, CCJ, IVA … all these different financial terms can get a little confusing. I am in the proccess of compiling a debt jargon dictionary, as there seems to be a number of debt related terms that are quite confusing to the average Joe. Today however, in more detail, i will explain what the term IVA means.
An IVA is short for an Individual Voluntary Arrangement, which is a legally binding contract both you and your creditors. These are often popular with individuals in very severe levels of debt. The IVA is set up to help you reduce the amount of money you have to pay back on a monthly basis, so for some individuals it is a viable way to pay back their debt.
As lenders are keen to get back money that is owed to them, often they will be flexible on payment terms to ensure that some money is paid back, rather than none at all. These payment terms can vary on size and duration, but is usually around 5 years. The IVA is agreed between your creditors, and a repayment plan is adapted to suit your current lifestyle and circumstances.
When individuals are in severe debt, they are faced with a decision - filing for bankruptcy or an IVA, so it is advised to seek professional help if you are unsure on the diferrence between the two.
