Debt Cutting IVA

Advice On Using A Debt Cutting IVA

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Debt Cutting IVA – How To Eliminate Serious Debt

A debt cutting IVA is a very popular way to solve debt problems for individuals in the UK. It is the only real alternative to bankruptcy for people in very serious financial situations. While debt management plans and other solutions are widely used to eliminate debt, these are not appropriate if you are in real hardship and struggling to keep up with the repayments on your debts.

The way a debt cutting IVA works is to allow you to make an affordable payment towards your debts every month for five years, and at the end of the arrangement your remaining debts are written off. This is how an individual voluntary arrangement can eliminate huge debts that you could never afford to pay back by the usual means.

Who Is Eligible For A Debt Cutting IVA?

You cannot simply pick and choose which debt solution you want to use, because each one can only work in certain situations. A debt cutting IVA is only viable if your situation is such that you are in real hardship, perhaps considering bankruptcy or facing legal action. If you try to set up an IVA when you really have enough money to keep up with your debt repayments if you chose to, it will not work because your creditors will not agree.

Your creditors need to know that setting up an IVA will give them their best chance of getting as much money out of you as possible. If they know that the alternative is that you might become bankrupt and they could end up with nothing, then an IVA starts to look quite attractive. So if your situation is not that serious, you should look at a debt management plan instead.

If you are considering an IVA, you should be aware that you need to have at least £15,000 worth of unsecured debts to be eligible. Unsecured debts include credit cards, personal loans and other household bills, but not debts that are secured against assets, such as mortgages.

What Are The Advantages Of A Debt Cutting IVA?

The main huge advantage is that you just make a single monthly payment, which is within your means, and at the end of the IVA you are debt free, even if you still have thousands of pounds worth of debt outstanding. For some people this can mean that 75% of their debts are written off.

Because a debt cutting IVA is a legal agreement, this gives you certain advantages. To set up in IVA you only need the agreement of the creditors responsible for 75% of your debt, for the remaining creditors to be bound by it too. This can be very useful if you have one or two reluctant creditors, and it is a significant difference between an IVA and other informal agreements such as debt management plans. With informal agreements there is nothing you can do to compel a creditor to sign up if they do not wish to.

Another advantage of the legal aspect is that, once your IVA is in place, your creditors are not allowed to pursue you for money, and are barred from taking any legal action against you over outstanding debts. Any creditor has to go through the Insolvency Practitioner, so you have the benefit of not being bothered at all by creditors. This aspect is very attractive for people who may be used to being harassed night and day over unpaid debts.

Another big plus with individual voluntary arrangements compared to bankruptcy is that you will not normally need to sell your home. With bankruptcy you lose control of your assets immediately and your home may well be sold to help repay your debts. With a debt cutting IVA this is very unlikely, though people sometimes have to release the equity in their homes if that is what is agreed with creditors.

How To Apply For A Debt Cutting IVA

The first step towards setting up an individual voluntary arrangement is to apply to a specialist debt company in the UK, who will then review your financial situation in detail before giving you advice on the best way forward, which will be an IVA if that is the most effective solution.

You should apply to a few different companies to give you something to compare, and this is very easy to do without committing you to anything. All the best companies have easy online forms that you can complete very quickly, after which they get back to you by telephone to go through things in more depth.

The safest approach is to apply only to reputable companies with a good track record of debt cutting success. You can find a list of recommended companies on the main IVA page of this site by following the link below:

Go To The List Of Recommended IVA UK Specialists

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Advice On Individual Voluntary Arrangements