IVA Or Debt Management Plan?

IVA Or Debt Management Plan?

IVA Or Debt Management Plan?

If you are amongst them, you may find a Debt Management Plan or Individual Voluntary Arrangement to be a potential solution. Most people are unclear what these are, how they differ and what to do to get one of them. Could debt management help you? Having two or more credit agreements and a monthly deficit is more than enough reason to consider debt management.

Remember to think of all of your debts, loans, credit and store cards and secured finance should all be taken into account. Both solutions take your creditors into account and treat them equally, spreading the payments across proportionally to the amounts owed. With between 10,00 and 20,000 of debt, you could potentially qualify for either an IVA or DMP. Most people reading this are unsure of the specific differences between these, so I am hoping to outline the two and help you to make a more informed decision.

Debt Management Plans

The debt management industry is regulated on a voluntary basis by The Debt Managers Standards Association or DEMSA. DEMSA and its members have gained Office of Fair Trading (OFT) approval, this means that they have proven to the OFT that they treat their customers fairly and honestly. Explanations of all costs must be outlined prior to the client agreeing to use the company. There are only seven regulated companies (09/2009), who have gained this approval.

It is normal to pay a flat monthly amount which will include any fees on an ongoing basis. Payments should be ongoing monthly payments with no upfront fees. This payment is assessed to take account of your circumstances and should be affordable to you. You should not be asked for any money up front, any fees must be paid as part of your monthly payment. DEMSA and the OFT have recently been helpful in pointing out misleading advertising within the industry. Companies have claimed to be able to clear the majority of your debt, when the reality is far less. Creditors may reduce charges and interest when a good debt management company uses its relationship to leverage this. You do not need large amounts of debt to qualify; debts of even a few hundred pounds can be enough to warrant help. If you are in doubt, and want some free advice, speak to any of the companies listed on the DEMSA website.

Individual Voluntary Arrangements

Individual Voluntary Arrangements (IVA) are mandatorily regulated by organisations such as The Institute of Chartered Accountants in England and Wales. Make sure that any company you deal with for an IVA have a registered Insolvency Practitioner who can work your case. IVAs do more than a debt management plan in that you will be debt free within a set time frame, usually five years. It is more true to say that with an IVA, a significant percentage of your debt could be wiped out, obtaining an IVA is not as easy as a DMP.

The down sides to IVAs is that it will have a much more significant effect on your credit rating than a DMP and can take up to 3 months to set up. Your credit file will be less damaged than if you are declared bankrupt, however, so are still a good option. If you owe more than 10,000 you could qualify, however, you should definitely get in touch with a reputable company for advice.

Professional Debt Advice

Speak to a professional organisation prior to signing up for any debt plan. Many of the companies listed on the DEMSA website will have an IVA part of the company and will be able to provide good advice one way or another.

All that is left is for me to say is good luck.

Debt Management Information provided free of charge fromChiltern Debt Management. IVA information provided free of charge fromThe Debt People.

Article written by Gareth Chidgey.

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