IVA & Debt Management Plans

Individual Voluntary Agreements or IVAs were first introduced in 1986; currently, the number of those acquiring IVAs and using these agreements to get out of debt has increased on an average of 25% every quarter. Debt management plans include IVA's and other debt solutions.

This increase in IVA agreements may be attributed to the rise in consumer debt, recent changes in bankruptcy law, and of course an increase in bankruptcies.
With an IVA, the debtor agrees to pay a certain amount every month to all the creditors covered in his IVA for a period of approximately five years.
An Insolvency Practitioner or IP oversees and manages the IVA starting from the proposal stages up to the point of completion.
Applying and starting an IVA is an alternative to declaring bankruptcy. IVAs are also an option for individuals considering availing of debt management plans.

A debt management plan is quite different from an IVA.

Firstly, a Debt Management plan is merely an informal arrangement set up to organise and manage your debts.
It is a way to deal with your financial situation. The choice of whether or not to do a debt management plan is ultimately up to you.
What is important is that you are taking steps to prevent your debt from going out of control. You can ask for expert advice and have yourself assessed if you are suitable for a debt management plan.

Advantages of Debt Management Plans

Some advantages are freezing charges on your unsecured debt which may happen in most cases.
A debt management plan will remain unpublished unlike declarations of bankruptcy that will be printed in local newspapers.
Administrative costs are lower than those incurred for bankruptcy or IVAs; you as a debtor can retain a current account provided there is no overdraft.
A debt management plan will allow you to write off all your debt; debt management plans are also not recorded in public registers and are highly unlikely to affect your future applications for credit lines.

Debt management plan disadvantages:

You as the debtor must have at least £4,000 in unsecured debt
Creditors must agree to your proposal, and
You will be required to maintain a certain budget for the entire duration of the debt management plan
They are not as legally binding as an IVA, so you remain unprotected from them chasing you and calling off the debt management plan.