This is a sponsored post by Debt Advisory Line.
In response to the increasing number of individual insolvencies over the past years, a variety of tools, both private and government approved, has emerged, aimed at offering an alternative to bankruptcy and allowing those willing to pay off at least a substantial part of their debt to return to full financial self-determination. Two of these tools have become exceedingly popular: Debt management plans and IVAs, aka Individual Voluntary Agreements. On the face of things, they may appear to be all but identical, but there are subtle, yet incisive differences between the two which should by all means be taken into account.
Both a debt management plan and an IVA represent an agreement between a creditor and a debtor to change the existing agreement either on the overall amount of the debt, the interest payed on it or the conditions applying to how the debt is to be paid off. After such an agreement has been accepted by both sides, you could, for example, be paying off a lower monthly sum for the same period of time, making it easier for you to meet your obligations and gain your financial freedom again. Debt management plans and IVAs work according to the principle of debt consolidation, accumulating various unsecured loans under a single, affordable sum. By avoiding bankruptcy, they also protect you from the psychological stress and disadvantages typically associated with an insolvency.
The main difference between a debt management plan and an IVA consists in their specific legal framework: While a debt management plan is a private agreement between you and your creditors, the exact details of which need to be negotiated on a case to case basis, an IVA is a legally binding and government approved tool with a certain amount of fixed parameters. For example, an IVA usually runs for 5 years or 60 months, after which any remaining debt is written off – up to 70%, depending on the exact circumstances. At the same time, an IVA also has its disadvantages compared to a debt management plan. On the one hand, your credit rating will be affected for 6 years in total, for example, and homeowners will be required to release equity in their home. Not everyone can make use of the benefits of an IVA, either: To quality, you need to be a UK citizen and owe more than £12,000, among others.
Deciding whether a debt management plan or an IVA is best for you depends on a plethora of details and technical intricacies and it is certainly advisable to speak to a professional debt management company before arriving at a qualified decision. At the Debt Advisory Line, we can offer you award winning debt management advice aimed at your personal needs and circumstances. Don’t hesitate to call our free national debtline at 0800 157 7254.
