IVA Alternatives

Are there any alternatives to an iva?

There are a variety of alternatives to an IVA. Below we have compared the differences between them:

  • Bankruptcy
  • Debt Management
  • Debt Consolidation
  • Administration Order

 

Bankruptcy

Bankruptcy is concidered the most serious of the debt solutions. With an IVA you will probably get to keep your property but with bankruptcy you may lose it. If you have sufficient equity in your property you may be expected to release it with an IVA.

As far as credit reference agencies are concerned an IVA and bankruptcy are of similar rating. Both stay on your credit file for six years. Mortgage and other financila companies mayask you if you have ever been declared bankrupt before. Therefore, bankruptcy could affect your credit status forever.

With Bankruptcy you are not able to carry out certain public duties, this may mean you have to change your career/job. With an IVA this is not the case and it has no bearing on current or future professions.

After you are discharged from bankruptcy you may still be required to contribute to your creditors for a certain period, usually up to 3 years. With an IVA you will be required to make your monthly payment for up to 5 years. But you will avoid bankruptcy and therefore the possibility of losing your property.

Debt Management

A debt management solution is an informal arrangement between yourself and your creditors. Ideally a more affordable monthly payment is negotiated on your behalf and an attempt will be made to get your creditors to agree to freeze interest and charges for the duration of the plan.

Debt management arrangements are not legally binding and the creditor may probably want to receive any full outstanding amounts. Whereas an IVA is a formal, legally binding agreement which the debtor and creditors are bound to.

Debt Consolidation

A debt consolidation loan (secured or unsecured) basically combines all your individual loans into one. The aim here is to obtain a lower monthly repayment and/or to reduce the total amount that is repaid, this is done because this type of loan carries lower interest. With Debt consolidation loans the amount owed is not reduced, the full amount has to be repaid.

Usually it is only the amount of interest, charges and monthly repayments that are reduced by reorganising your debts. Only with an IVA can it be arranged to repay just a part of what was originally owed. To summarise, you can expect to lower your monthly repayments with a debt consolidation loan because they tend to have lower interest and may be arranged over a longer term.

Although Debt consolidation is concidered a less serious debt solution it can sometimes lead to more severe problems. The reason for that is that if you consolidate your debt by a mortgage or secured loan and you can't keep up with the relatively high monthly payments then your house may be re-possessed.

Also people in this sort of situation tend to have a less than good credit rating and therefore a consolidation loan may turn out more expensive for people with bad credit, this is what is currently being termed as sub prime.

Administration Order

An administration order could be suitable if your debts are less than £5000, an IVA generally applies if your debts are over £15,000.

An administration order is a court backed procedure and can be implemented if one or more of your creditors have registered a county court judgement (CCJ) against you.

You must have a surplus monthly income as the order will state you need to make regular payments to the court to repay the monies owed.

 

Please contact us if you would like more details about any of the ways we can help you become debt free.