For example, if an individual has accumulated a debt of £15,000 and he agrees to pay on a monthly basis a sum equaling £250, the return for the creditor is no more than 79%, the rest is constituted by costs and extra charges. Now, the higher the amount of debt, and the lower the amount of money a debtor can pay on a monthly basis, the lower the return for the creditor, and the higher the return for the general cost of the IVA. For example, for someone struggling with a debt of £80,000, with a monthly payment as low as £250 the return for creditors after all costs might be as low as 15%. If the person is willing to pay a higher amount, for example £500, the return will be higher (around 30%).
It is important not to let yourself influenced in decision making. You need to act as your own financial manager and see which would be the best solution for you:
- A debt consolidation loan (which will help you pay off your creditors in full)
- Going through an IVA
- The last choice, filing for bankruptcy.
In order to avoid falling in the pit of bring misled about an IVA program you really need to know if such a solution is the best for you, given your present financial status:
- If you have accumulated very high debts and you don’t own a property, then probably the IVA is not the solution for you
- IVA many times requires that you release equity you have in your home. So, again, if there are too many outstanding debts secured against that property an IVA will not help you, because you cannot afford too high repayments
- An IVA’s term is usually 60 months; after you make some quick calculations you will know how much you have to pay on a monthly basis in order to have your debts fully covered in five years.
- Affordability should be the main concern when you think of going through an IVA. If you feel you simply cannot afford to pay for example £200 for five years, than you should think of other alternatives.
Professional assistance is very important when choosing an IVA. This is why you actually choose this solution, because you want to be guided through a process, which, given you keep up with all the payments, will have you debt free in 60 months. Do not hesitate to ask for continuous assistance, after all a part of your monthly payments in an IVA goes towards fees and charges for the Insolvency practitioner assigned to work on your case. You have to choose carefully between a bankruptcy option and an IVA, and if you can’t decide by yourself, then ask the opinion of a professional.
