With unemployment currently rising from 2.46 million in the UK, people are increasingly finding that the fact that they found another job shortly after losing the first is not always the end solution. The problem is that when they were going through the period of unemployment, they were set back financially to a point that they cannot recover.
The credit agreements they have fall into arrears and there is little or no chance of earning enough money to catch up, savings have also usually been diminished and this is when the individual starts to seek a personal debt solution such as an IVA or Individual Voluntary Arrangement.
Hard times are ahead for the UK consumer and people need a solution to clear personal debts that they can trust. The IVA or Individual Voluntary Arrangement is a UK government approved scheme that is legally binding between the individual who has the debts and the creditors who have leant the money.
- The IVA usually runs for 5 years (60 months) and has an exact end date.
- Creditors will be expected to stop further interest and charges being applied to the credit accounts whilst the IVA is in place.
- Any money left to pay the creditors at the end of the IVA process will be written off.
- In certain circumstances where the individual is a home owner with equity in their home, they will be expected to release some of this equity in years 3-5 of the IVA agreement. This increases the overall contribution back to the respective creditor.
With the rising cost of living on the horizon, household expenditure in the UK is going to be stretched and only those who plan correctly and take advice when required will survive financial turmoil.
If unemployed, one needs to cut costs and be pro active in finding work, downgrade personal expectations in the current economic climate and accept an income that will provide a living.
People in the UK should now start to gear their lives to living without credit, we have been conditioned as a society to use credit and live by using it. The only people who will succeed in the future financially are those who will reduce their need for credit to a basic level.
If you have been considering a debt solution such as an IVA or Individual Voluntary Arrangement, you will be familiar with an alternative personal debt solution called a debt management plan. It is important to be aware that a debt management plan is NOT legally binding and does NOT have an exact end date.
Some companies will claim they can write off all your debts, you should be very careful of these claims, only certain amounts of debt can be written off under an IVA agreement and a voluntary petition or creditors’ petition for bankruptcy is the only process that would usually write off 100% of any persons’ unsecured debt.
When you enter into an IVA or Individual Voluntary Arrangement, your IVA is managed by an Insolvency Practitioner and this person is legally responsible for proposing the case to your creditors and administering the IVA process on your behalf. An IVA or Individual Voluntary Arrangement should not be entered into without much consideration.
You are at risk of being petitioned for bankruptcy by your creditors should your IVA fail. An IVA can fail for many different reasons and the main one usually is due to the client no longer being able to afford the agreed monthly repayment. In this situation, the Insolvency Practitioner will re assess your income and expenditure and offer advice accordingly of what the best route forward for you would be.
- A great number of people do successfully complete IVAs’ and are then confident that they chose the best solution to clear their debts.
- To qualify for an IVA an individual would have approximately £25000 of unsecured debts and be able to contribute a disposable income repayment of around £250 per calendar month.
Not all situations require an IVA and you should not enter into an IVA or Individual Voluntary Arrangement without much prior consideration. For further advice regarding personal debt issues please call our free from a landline personal debt helpline using 0800 018 6868, lines are open 24 hours a day and your call is free.
