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There are three main alternatives to an IVA. Firstly, a debt consolidation loan may be considered depending on your credit history and level of debt. If you would like to consider this as an alternative to an IVA, visit our section on debt consolidation for further information.
The second possible solution to your debt problem is bankruptcy. Becoming insolvent is always the last resort, so make sure you know all the facts by visiting our bankruptcy section.
Thirdly, a Debt Management Plan may provide the ideal solution to your money worries.
A Debt Management Plan (DMP) is a convenient way to repay your non-priority creditors and avoid the severity of an IVA or bankruptcy. What you owe your creditors and what you can afford to pay are probably quite different. With a debt management plan, a debt counsellor will calculate your expenses and income before negotiating with creditors. If creditors agree to the debt management plan – as is usually the case – you would commit to an affordable sum to be paid monthly.
A debt counsellor negotiates with creditors on your behalf. When creditors deal with a debt counsellor under a debt management plan, many often freeze or reduce the amount of interest being charged on your accounts. Other benefits of a debt management plan include:
A debt management plan is not suitable for everyone. If you haven’t much money left after expenses, it is unlikely a DMP will benefit you – simply because you have little to offer creditors. A debt management plan will not cover every kind of debt. Priority debts, those being debts you must pay or risk losing your home or other asset, are not covered by a debt management plan.
Priority debts include:
A debt management plan is unlikely to prevent any damage being inflicted to your credit rating. Even with a repayment plan being agreed with creditors, you will are probably already reported to credit reference agencies. The reality is, if you are at the stage where you are applying for a debt management plan you will have already breeched the terms of your finance agreements. Breaking terms and conditions of a credit agreement will badly affect your credit score. See our Credit Reports section for further details.
Both the level of debt and the amount you can afford to pay will determine the duration of your debt management plan. As a rule of thumb, however, if you take your total debt and divide it by your monthly instalments you will be able to calculate the duration of the plan.
No, is the short answer. With the help of a debt counsellor, however, your creditor is more likely to accept your payment proposal. Creditors will have more faith in your ability and willingness to pay knowing you are using the professional services of a debt counsellor within a debt management plan. In addition, they may be prepared to freeze any interest payable or at least make a reduction.
If you believe a debt management plan can help you avoid IVA or bankruptcy, you should contact us on 0800 520 0923 or complete the online form. Even if you are unsure, an informal chat with us will help you better undertand your options. Our friendly advisors are waiting to hear from you.
