With the global economic meltdown, many households have found themselves struggling with crushing debts crisis.

If your debt problems are spiraling out of control and you face difficulty to make ends meet, you must immediately look for a solution. However, while looking for debt assistance, you must stay cautious as quick fix solutions often end up creating far bigger debt problems.

If you are confused by debt solution options, the following points can help you out. Debt Management and an IVA both can help you relieve debt in a manageable way. Read on to get a clear idea of the advantages and disadvantages of both debt management and IVA and choose the best possible debt solution for yourself.

Debt management

Debt management is one of the proficient ways to get rid of your outstanding debts. A Debt Management Company or a credit counselor negotiate with your creditors on your behalf and strive to make your loan terms more favorable. Depending on your current income and expenses, Debt Management Company usually recommends you a suitable budget, which helps you to bring your finances back on track. Once you hire a debt management company, you no longer have to worry about your monthly payments, all you have to do is you have to make one monthly payment to the company, who will further disburse it among your creditors. Now if you can continue making consistent, timely payments and in return you can enjoy reduced interest rates.

However, debt management program involves certain pitfalls as well. Some experts believe that the debt management company never reduces the amount you owe, but instead shifts your debts or offers reduced interest rates in order to help you pay off your debt faster. In addition, enrolling in a debt management program will affect your credit adversely. In Scotland, people should definitely consider the option of a debt arrangement scheme which is a government tool that legally freezes creditor interest and charges.

Individual Voluntary Arrangement (IVA)

An IVA is generally considered as an alternative to bankruptcy. Under an IVA, your Insolvency Practitioner (IP) negotiates with your lenders on your behalf in the hope that they will accept less than what you actually owe. However, just like a debt management plan, it has a number of downsides as well. IVA can drop your credit score significantly and can stay on your credit score for 1-6 years after the IVA has ended. Furthermore, you won’t be able to take out any new credit agreements when you are committed to an IVA.

Final thought

In conclusion, no matter what you opt for debt management or IVA; make sure you understand the terms of the agreement before accepting it. Remember, the agreement you sign during an IVA is a formal one, and if you fail to comply with these terms, you will be forced to declare bankruptcy, whereas in debt management you don’t have to go into such legal binding. Finally, if you are still confused between Debt management and IVA and can’t make up your mind, it’s highly recommended to seek help and guidance from a financial expert in this regard.

If you owe more than £16,000 in unsecured debt and you have lost control of your finances, you may have found that there are limited options for you and if you have decided that other options such as a Debt Management Plan or an IVA are not applicable to your own needs, the last resort you will have to probably consider is Bankruptcy.

Quite rightly so, non-profit debt charities such as the CCCS and CAB are up-in-arms about the new increase in cost for declaring oneself Bankrupt.

If you owe more than £15,000 to unsecured debts such as store cards, credit cards and loans and live in England, Wales or Northern Ireland, there is another option that you can explore to avoid bankruptcy.

It is known as an Individual Voluntary Arrangement (IVA) and allows debt to be written off over a typical period of 60 months.

Any debt left after this period is then written off allowing you to get back to normal, free of debt and the stress associated with debt.

While an Individual Voluntary Arrangement is a suitable solution for some people with debts in the UK, there are many companies offering an IVA and of those companies, like any other business, some offer a better service than others.

IVAcompare.net only works with ethical IVA providers with established reputations.

If you would like to speak to an advisor and get free, confidential IVA advice, you can call us on 0161 452 0557.

The IVA calculator takes your income and expenditure details and calculates the monthly repayment that you will repay towards your IVA for 60 months.

This payment is known as your disposable income and takes into account all your income such as wages, child benefits or any other form of income. Expenditure can be anything from your rent to telephone bill.

In order to qualify for an IVA, you need to be able to contribute a regular payment to your creditors and failure to adhere to this could result in you being made bankrupt, therefore it is important that you can pay an affordable amount as you will soon begin to struggle if your payment are not right, a couple of months into a 5 year IVA plan.  This is why your disposable income must be correctly assessed according to your circumstances and an important debt tool such as the IVA calculator is an important first step towards debt freedom.

An IVA is a solution to debt for people who owe more than £15,000 in unsecured debt such as credit cards and loan. Up to 75% of a debt can be written off with an IVA but the procedure is not suitable for everyone and therefore it is recommended that you speak to a qualified money advisor in order to assess your eligibility.

Not all IVA companies are the same!

Beware of unethical IVA companies who may attempt to charge you a setup fee or any other administration fee. Ask for fees to be explained to you upfront and only deal with IVA companies who will meet with you.  IVA companies have a duty of care to an individual in debt and adding unnecessary fees only adds to the overall indebtedness.

At IVAcompare.net, we can put you in touch with an IVA firm who do not charge setup fees. IVA providers are not all the same and therefore IVAcompare.net compares different IVA quotes from trusted IVA companies in order to find the best deal for YOU.

If you would like to find out if an IVA is a suitable solution to your debt problems you can give us a call on 0161 452 0557 or use our IVA Calculator.

Debt Collectors work on a commission basis. This means that for every penny that they get you to pay, the more money that they earn for themselves in wages. Furthermore, the commission is paid in regular intervals on a weekly or monthly basis so the quicker that you pay, the quicker that they get paid their commission.

It is easy to understand why the debt collection industry is so aggressive in this manner, however it is not an enjoyable experience for those who find themselves in this situation.

When you owe money to several lenders, the experience tends to get amplified, it is understandable yet inadvisable for UK individuals with debt to ignore calls and letters from debt collection agencies but it is common nowadays, especially as the country goes through a recession.

Now here is some information you may not know…

If a debt collection agency fails to contact you within an agreed timescale set out by their lender, or fails to get any payment from you, the debt is passed ‘round the houses’ for another agency to try their hand. Once the debt is passed on, the commission for collecting the debt increases due to the debt becoming harder to collect or ‘aged’

Debt collection agencies are assessed against their peers, so rather than lose accounts or ‘points’ the debt collection agency will employ tracing agents to look for you, to validate your whereabouts and your contact information.

Previously, the tracing agencies would use traditional methods such as electoral roll checks, credit applications, your neighbours, possible family connections, employers.  While some of these techniques are illegal, it is quite hard to prove where a tracing agency gets your details from and because people are worried about contacting the company, it often goes on without complaint.

Step forward the rise of Social Media websites…

Most people in the UK now have access to social media website such as Facebook, Twitter or the business network site LinkedIn.  So too do debt collectors and they are not shy in using the websites to contact you, to contact your friends. Reports from America show a 17% increase in complaints regarding debt collectors and part of this is attributed towards contact through Facebook.

How can I protect myself against debt collectors abuse social media sites?

• Set your profiles to private.
• Do not accept requests from people you do not know.
• Do not publish your contact details on the sites.
• Remove anyone who do not recognise.
• Take screengrabs of any postings made from debt collectors or tracers, send this to the both the ICO and also the lender with a formal written complaint. This is a breach of the Data Protection Act (DPA) and with your help, you can help to ensure that anyone who uses this technique to pursue a debt is reprimanded accordingly.

If you have UK debts and you are struggling to repay your debts or if you are feeling harassed by debt collectors then there are options open to you. For residents of England, Wales and Northern Ireland there is a solution to debt for those who owe £15,000. This process is called an Individual Voluntary Arrangement (IVA) and it allows you to take advantage of UK government legislation and clear up to 75% of the amount you owe. An IVA lasts a typical period of 60 months, there are pros and cons of doing an IVA and you can find out if you are eligible by completing an IVA calculator. Alternatively, you can call 0141 241 6294

If you live in Scotland, a Scottish IVA is known as a Trust Deed. Call 0141 221 0999 to find out if you are eligible for a Trust Deed. Trust Deeds are suitable for people who owe more than £10,000 but you need to be currently living in Scotland for at least 6 months in order to qualify.

The overall debt that you can write off is dependent on your own personal circumstances.

So why would a lender accept a lower amount than what they are owed?

There are a couple of reasons why creditors accept the offer proposed by an IVA plan.

1.       If you declare yourself bankrupt, the likelihood would be that you write off debt even more so than if you had arranged an IVA.

2.       Creditors and lenders are under pressure by charities and the media to demonstrate that they are helping people with financial difficulties.

3.       They are also regulated by government bodies such as the Lending Standard Board whose responsibility it is to ensure fair practice among lender.

4.       Lenders are under pressure themselves to write off debt and balance their own books.

If you have debts that are spiralling out of control then perhaps an IVA could help you write off debt. If you owe more than £15,000 to unsecured debts i.e. loans and creditors then an IVA may benefit you.

IVAcompare.net uses a large panel of professional firms with whom we work with and have expert knowledge of the IVA market. We strive to get the best deal for you and we only work with firms who do not charge an IVA setup fee.

If you would like to speak to an advisor on whether you could write off debt with an IVA, you can reach us on 0141 241 6294 or complete the following contact form for an immediate callback.

We recommend that you have a quick, FREE informal chat with one of our qualified advisors on 0141 241 6294, to discuss this with you. In the meantime though, here is some information that may help you decide your best option for clearing debt.

An IVA is an option for clearing debt that has been approved by the government through government legislation.

Both options for clearing debt will adversely affect your credit rating, although chances are that if you have been in financial difficulties for some time, you may already have an adverse credit rating.
An IVA lasts a typical period of 5 years (60 months) and a debt management plan will last until the conclusion of the debt. In some cases, more extreme DMP’s have been known to last 20 years.

Why would a debt management plan last so long? Well, it all comes back to you. Both a DMP and IVA will take your overall debt level and disposable income (income minus expenditure) into account when calculating how long and how much you will need to repay. If you only afford to pay £200 per month on a debt management program and you have £50,000 debt then this would take you twenty years to complete payment at this level.

With an IVA, the fixed term is typically 60 months, so therefore any debt left after the term of the IVA has complete will then be written off.

Debt Management Plans are accepted by most creditors but there is no legal protection offered, therefore the lenders are adhering to the DMP through their own voluntary codes of practice.

Once secured, an IVA stops creditors from contacting you.

If you are a homeowner, you may need to release equity with an IVA.

Certain employers such as the Police prohibit you from entering an IVA. Employers such as High Street Banks forbid their employees from having excessive overdrafts and debt problems so this may need to be clarified before choosing either option for clearing debt.

The Debt Management Plan is an option for clearing debt that can be broken off at any point by yourself, however if you choose to do this then your creditors will then begin to treat you as though you are no longer in financial difficulties, treating the debt as though it is due in full. If you do decide to break off from a debt management plan, ensure that you have clear and defined alternative solution.