May 21 2011
How To Free Yourself From Debt Explained In Basic
For persons who are caught in a debt trap or heading towards it, Individual Voluntary Agreements (IVA) offer them a government sponsored solution to free themselves from debt. The IVA, which is governed by the Insolvency Act of 1986, is a formal agreement between the debtor and his creditors, whereby the debtor agrees to repay his creditors over a specified period of time (usually five years). This solution can help a person regain a healthy financial status at the end of the five year period. The advantage of IVA over other non regulated schemes such as Debt Management Programs is that they are legally binding since the government backs Individual Voluntary Agreements and a Licensed Insolvency Practitioner supervises the agreement.
Individual Voluntary Agreements are available to any individual, sole trader or partner who has been unable to repay his creditors for a short period and is now coming under the pressure of having his/her property attached in case he/she is declared bankrupt. It is especially useful for individuals who have been affected by an economic downturn due to which their business or finances are suffering a temporary setback, but are likely to recover in the future. An IVA is an alternative to taking out new no credit check credit cards or new no credit check payday loans.
A person has to meet certain criteria in order to be eligible to make use of Individual Voluntary Agreements. Firstly, he has to have debts greater than £15,000. Secondly, these debts have to be incurred from three separate creditors. This means having three different loan components such as a credit card, mortgage and personal loans from a single bank or creditor does not qualify a person to get an IVA. Besides this, he needs to be able to pay the repayments to the creditors every month and have a regular source of income.
The first step to using Individual Voluntary Agreements is to get advice from a professional, who can assess the situation and help the debtor decide if it the best option for him. If it is found appropriate, the professional can help the debtor in working out the monthly payments that he can afford to pay to creditors and draw up an agreement. Once this is accomplished, a formal agreement is drafted and signed by the debtor and witnessed by a solicitor or a commissioner of oaths. After this, an interim order is applied for, after which the creditors can’t attach the property of the debtor. The terms of the agreement are then discussed with the creditors and if they agree to the conditions, the debtor can clear himself of his debt so long as he makes the payments agreed upon for the specified period, even if they do not cover the entire amount of the original debt.
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