Debt management can include debt consolidation and confidential debt advice, which is specially designed to assist those who are struggling with their existing level of debt. Generally, it is open to those who feel their existing debt repayments are already too much or unmanageable and would like to apply for a debt consolidation loan or other management approach to cover the ongoing repayments.

However, an individual voluntary arrangement (IVA) for debt is another option available for those who feel they may struggle to make regular repayments in the future. One such example of this would be where the borrower negotiates with the creditors to pay a lump sum payment into an account which is then distributed among creditors instead of making monthly repayments to individual creditors. The advantages of IVAs are that they offer relief from creditors while offering the borrower a good chance to improve their financial situation.

An IVA is usually coordinated with the help of a debt management company who will take over the administration of the IVA and negotiate lower repayments and a more affordable monthly payment for the borrower. The creditors do not lose anything, as the repayments through an IVA are tax deductible to the government. The IVA can also work if the creditors themselves have the capability of covering the debt repayments through some other solution, though not all will have the capacity for this.

The debt management company will create a pay plan which can be used by the individual to pay off debts. In some cases, the individual will be paying off one creditor at a time to reduce the monthly amount of debt that they have to pay. Usually, the pay plan consists of a monthly payment that covers the principal amount of the debt as well as any accumulated interests and charges. The debt management company will take care of any court actions taken against the individual and will work with creditors to agree new terms for the repayment of debts.

A debt management plan can result in a debt management advisor assisting you with alternatives to bankruptcy such as helping you to apply for an IVA. If you are already considering bankruptcy, an advisor can help you decide whether to go ahead with the bankruptcy or to explore other options such as debt settlement. If you have a large amount of unsecured debt, it may be more practical to go ahead with debt settlement. IVAs and other options for debt management can be more appropriate for those with a smaller amount of debt. It is essential to take advantage of confidential debt advice as soon as possible as the longer you wait the less likely it is that you will be able to find the best debt solution.

Insolvency is a complex process but it is possible to work out a sensible and workable arrangement on your own. This is often the best debt solution for those who have enough money to repay their debts but simply want the peace of mind that comes from being able to pay off the debt without having to declare themselves bankrupt. In order to arrange a bankruptcy, a debtor needs to contact the insolvency practitioner on his own behalf. It is important to remember that most insolvencies are supervised by the government.

Most creditors will agree to debt management arrangements and this is usually done through the debt management companies which have sprung up across the UK over recent years. The majority of these companies offer no obligation services. However if you find that your debts are becoming too much for you to cope with on your own, or that you feel that you may soon become overwhelmed, you should speak to a debt management advisor immediately. On meeting the advisors, the first step will be to set up a meeting with your creditors where they will be able to discuss a proposed debt management plan.

A debtor and an advisor will then work out the details of the plan including a repayment plan and when this has been agreed, a meeting will be arranged to begin negotiations. The aim is to reach an agreement that satisfies both the debtor and the creditors. The majority of agreements are suitable for a range of debt totals and the debtor and their advisors can often achieve good results. One of the advantages of an individual voluntary arrangement (IVA) is that it provides the debtor with the opportunity to repay their debts without declaring themselves bankrupt.

Resources:

• Money Advice - Harvard
• What Is an IVA - Launchora
• Debt Solutions - Techsite
• IVA Experts - University of Southern California
• IVA Specialists - Vingle