Debt Solutions - Individual Voluntary Agreement

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In short, an Individual Voluntary Agreement – commonly known as an IVA – is a legally binding arrangement between you and your unsecured creditors. You agree to a single consolidated affordable monthly repayment typically of at least £90.00 a month over a period of time - usually five years. After that, any unsecured debts you haven’t been able to repay are written off.

Before we go in to the in’s and out’s of an IVA in further detail, let’s clarify the difference between secured and unsecured debt first.

Secured Debts - Secured debts are so-called because they

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re secured against something. For example, when you take a mortgage out, your mortgage lender has security against the value of your home. So, if you default on a repayment, your creditor is within their legal rights to come after the asset

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your home

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that your loan is secured against. So, what usually happens is your creditor starts proceedings to repossess your property if you can

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t maintain your mortgage repayments.

Unsecured Debt

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Once you

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re clear about secured debt, unsecured debt is relatively simple to understand. When you take out credit lines such as credit cards and catalogues your creditors don

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t have any security. They offer you credit based on your assumed creditworthiness. Unsecured debt

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credit card debt in particular

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is the unsecured debt type that can get out of control. But your creditors can

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t try to recoup the things you

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ve bought like they can when you have secured debt. Instead, they take other courses of action to recoup the money they

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ve lent you, such as

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• Court Action

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  Your creditors can take you to court to request the

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  docking

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  of an amount directly from your salary or wages to ensure they get repayments from you.

  
  
  

• Credit Rating

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  You

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  ll get a black mark as a bad debtor against your credit rating, which will affect your ability to access credit in the future.

  
  
  

• Debt Collection

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  Your creditors can pass your debts on to debt collections agencies who will visit you at your home.

  
  
  

• Individual Voluntary Agreement (IVA) – an agreement with your creditors to pay all or part of your debts. This is where a person agrees to make regular payments to an Insolvency Practitioner, who then divides the money between the person’s creditors. This option gives people more control over their assets than bankruptcy, Individual Voluntary Agreement (IVA) information. <<more info>>

• Debt Management Plan (DMP) – The difference between a DMP and an IVA is that with a DMP, all outstanding debt is repaid. It’s a much more informal solution and therefore, there is no guarantee that interest and charges will be frozen by creditors. It’s also true that creditors can still pursue legal action, whereas, with a legally binding IVA, no changes can be made to an approved agreement. Debt Management Plan (DMP) information. <<more info>>

• Bankruptcy – Bankruptcy presents the opportunity to clear debts and go for a ‘fresh start’ but there are many consequences which must be considered before declaring bankruptcy. Citizen’s Advice covers this in more detail, including timelines, checklists, costs, and implications at, Bankruptcy information. <<more info>>

• Debt Relief Order (DRO) – This presents people with a way of dealing with their debts if they can’t afford to pay them. It is usually granted for 12 months and means a person doesn’t have to pay certain types of debts during that period of time. AN authorised debt advisor, who acts as the intermediary is the only route available for people looking to obtain a DRO. Debt Relief Order (DRO) information. <<more info>>

• Scottish Protected Trust Deed (TD) – A Protected Trust Deed is only available to residents of Scotland and presents an opportunity for people to remain in possession of their home (in most cases). This formal but voluntary agreement is overseen by the Accountant in Bankruptcy, Scottish Protected Trust Deed (TD) information. <<more info>>

• Scottish Debt Arrangement Scheme (DAS) – This scheme was set up by the Scottish Government to allow people an opportunity to pay back their debts without the threat of court action. The DAS presents people with a manageable way of paying back their debts and is eligible for application from people with any amount of debt. Scottish Debt Arrangement Scheme (DAS) information about applying for a DAS. <<more info>>