What is the Difference Between Debt Management and an IVA?
Being in debt can be an incredibly daunting experience for all involved. With money going out faster than it comes in, working your way out of debt can seem like trying to catch sand. Seeking a solution is vitally important but the decision needs to be paid sufficient consideration as to not plunge yourself further into trouble.
There are a number of different debt solution options that can be undertaken, tailored for individual cases and their specific necessities and problems. Here we explore the differences between two of the most popular solutions: Debt Management Plans and IVAs.
Debt Management Plan
Debt Management Plans consolidate all of your monthly repayments into one centralised payment made to an advisor. It is then the responsibility of the advisor to distribute this payment between all of your creditors.
The first step is to meet with a debt management advisor who will measure your levels of debt and determine your monthly income. The advisor will then construct a repayment structure that allows you to pay back what you can afford effectively. The advisor will contact all of your creditors (the people to whom you owe money) and propose the new repayment plan to them.
If the creditors agree to the new repayment plan, the payments will begin. At InControl, our expert advisors will provide you with updates every 3 months to demonstrate the progress of the repayment plan. Additionally, all parties can review the repayment plan every six months to ensure that everybody is still comfortable with the agreement. After an agreement is made, creditors can no longer pursue you for the debt.
Who is Eligible for a Debt Management Plan?
To be eligible for a Debt Management Plan, you need to have:
– £1,000+ Unsecured Debts
– Minimum Disposable Income of £80
– Two of More Creditors
– Proof of Income/Benefits
Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) is similar in structure to a Debt Management Plan, but contains different parameters. An Insolvency Practitioner will work on your behalf, determining a preferable repayment scheme for you to pay back your debts to your creditors.
The Insolvency Practitioner will arrange a meeting with all of your creditors to discuss the new repayment structure. If creditors who make up 75% of the total debt agree to the IVA, then all parties are obliged to sign on.
Once the proposal is agreed and signed upon, the IVA is legally binding and all parties must adhere to it. Changes to the IVA can only be made if all parties agree to it.
If you are a homeowner and have equity in your home then you may be asked to release it in the 4th year of your IVA. Furthermore, any cash lump sums that you receive during the term of the IVA must be declared and your creditors may request that part of it be paid to them.
Who is Eligible for an IVA?
To be eligible for an IVA, you need to have:
– Debts of at least £12,500 (though some IVA’s can be done below this figure)
– Minimum Disposable Income of £125
– Three or More Creditors
If you require any additional information, simply contact one of our dedicated customer services team on 0800 072 6623 or by email..