What is Debt Management?

What is debt management? Debt management is the simplest way to get rid of existing financial stress caused by large levels of debt. Debt management solutions are tailored to the circumstances of the debtor to ensure that the repayments are affordable. By choosing debt management, you can start to bring your financial life under control. In the UK, thousands of people face financial problems because of excessive debt repayments. Debts are typically in the form of credit and store cards, loans and overdrafts. One potential Debt Management solution is the IVA, or Individual Voluntary arrangement.

It is usually better to use a debt management service rather than filing for bankruptcy. In England and Wales, a bankruptcy will stay on the debtor’s credit report for six years, although the bankruptcy itself usually only lasts for one year. Depending on the circumstances of the bankruptcy, the debtor may be placed under additional restriction for a period of time after discharge. During the period of the bankruptcy, and any additional restriction period, the bankrupt faces severe restrictions in their financial activity and may also find obstacles when seeking employment in certain industries. An IVA can help to avoid these restrictions and the embarrassment caused by bankruptcy.

An IVA is a flexible, tailor-made solution to your debt problems. With an IVA, between 25% and 70% of your unsecured debt is typically written off. The payments you make into an IVA are determined at a level that is affordable based on your personal circumstances. After the IVA has been agreed by your creditors, you are required to make a monthly payment, usually for five years. After this period, any remaining debt is written off. Additionally, if you have any equity in your property, you may be required to release a portion of this towards the end of the IVA and pay this to your creditors. Because an IVA is a legally binding contract between you and your creditors, they cannot ask for any additional payment unless your financial situation improved during the term of the IVA.

IVAs have a proven track record of helping those people suffering from large debts who want to take control of their situation. An IVA is suitable for both simple and complex debt situations and can help to prevent you getting into further debt and potentially being made bankrupt. Management of debt becomes significantly easier with a solution such as an IVA and many creditors view them favourably as their chance of recovery is increased.