When you are having trouble with debt, you do everything you can to find a solution. Sometimes, however, there just seem to be too many options to choose from. While you might think a debt management plan looks like the right solution for you, your debt management company may advise you to consider an IVA, or individual voluntary arrangement instead. So, which should you choose?
When you are struggling to determine which debt management solution is best for you, you should consider the advantages of both and see what one can offer you the other cannot.
Advantages of a Debt Management Plan
A debt management plan offers many advantages for helping you become debt free.
- With this type of solution, you only have to make payments each month that you can afford. Your debt management company will make arrangements with creditors to reduce your payments so you can make the best effort possible to pay off the money you owe. Often times, these payments are much lower than what you would be expected to pay with an individual voluntary arrangement.
- You don’t have to give up your home with a debt management plan or release equity from it if you don’t want to.
- Debt management plans work with you instead of against you. They allow you to increase your payments and pay off your debt more quickly if your circumstances change and you are able to.
Debt management can be an effective solution for becoming debt free. However, you must understand that this type of solution offers no legal protection. Your creditors can still take legal action against you if they want to. You also have to pay your debt off completely, including fees and interest if they are not stopped; this may require years of payments.
Advantages of an IVA
Even if you think a debt management plan is the right option for you, you need to consider the alternative as well.
- An IVA lasts for five years, or 60 months, in most cases. This provides you with a specific amount of time you have to make payments. You also don’t need to worry about additional charges or interest being added to your debt while you are trying to make your payments.
- Unlike a debt management plan, where you are required to pay back all of your debt, an individual voluntary arrangement only requires you to pay about 75%. When the 60 months is over, you are forgiven of any debt you still owe your creditors and are allowed to begin again with a clean slate.
- With an IVA, you will be required to release any equity in your home to your creditors to help reduce the amount of debt you owe. However, you will also obtain legal protection that will prevent your creditors from seizing your property.
Debt Management or IVA
Choosing between a debt management plan or an individual voluntary arrangement is a personal decision that you should feel comfortable with. Keep in mind that you have to maintain your IVA payments no matter what, but if you start with debt management and decide later on that an IVA will be better, you can make the switch easily.
Martin Bradley is a representative of Harrington Brooks. Martin says “Although it’s hard to decide which debt management option will be best you may find that you don’t have a choice at all. There are eligibility conditions that you must meet in order to be accepted on to an IVA. If you fail to meet this criteria you only option may be a debt management plan or even bankruptcy. The best advice is to speak to a professional who does this day in and day out. They are in more of a position to listen to your individual circumstances and advise you which way to go. Nothing is better than experience.” More information about Harrington brooks can be found at their website .