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For some people, IVAs (Individual Voluntary Arrangements) are a suitable alternative to bankruptcy. They could offer an affordable route out of debt for people who cannot repay their debts in a reasonable period of time. For people who enter an IVA, the debt they cannot afford to repay can actually be written off.

An IVA may be suitable for someone with a total unsecured debt of £15,000 or over, who:

• Wants to avoid the consequences of bankruptcy.
• Cannot afford the monthly repayments of their current agreement - but can afford to make regular monthly payments for the duration of the IVA (normally 5 years).
• Cannot repay their debt in a realistic time.

What’s the difference between an IVA and bankruptcy?

There are many differences between IVAs and bankruptcies, but the ones listed below are often considered the most important ones:

What are the similarities between an IVA and bankruptcy?

Although there are others, the similarities listed below are often considered the most important ones.

1.      Both IVAs and bankruptcies are forms of insolvency.

2.      They both allow people to write off the debt they cannot afford, while paying back what they can afford.

3.      Both IVAs and bankruptcies stay on a credit report for 6 years, which could affect the cost and availability of credit during this time.

4.      IVAs and bankruptcies both restrict the amount of money that can be borrowed while they are underway.

5.      Some debts - secured debts or court fines, for example - cannot be written off by an IVA or a bankruptcy.

Debt management and credit card debts

If you’ve ever found yourself struggling with repayments to your credit cards, then you’ll know how quickly the debt can grow.

With a typical credit card carrying an interest rate of anywhere between 12% and 20%, making purchases on a credit card can mean you will have to repay a lot more than you have borrowed. If you keep adding to the debt by making further purchases, it might not be long before your debt becomes unmanageable.

Can debt management help with my credit card debt?
If you can’t keep up with your credit card bills under the existing terms, then a debt management plan could help to make your debt repayments more affordable.

In short, a debt management plan is an agreement between you and your creditors (in this case your credit card providers - and perhaps other unsecured creditors as well), in which you will pay a reduced amount towards your debts every month. This helps you make sure you can repay everything you owe, but at a pace that you can manage.

This could have a negative effect on your credit rating - the fact that you are no longer repaying your debts under the original terms will be noted on your credit history - but for a lot of people, the lower monthly payments will be the most important thing.

It’s possible to arrange a debt management plan on your own, by contacting your creditors and negotiating new repayment terms. However, because this can take a lot of time, many people prefer to arrange their plan through a professional debt management company.

The advantage of this is that a debt management company may negotiate with your creditors on your behalf. Rather than going it alone, you could benefit from the experience of a company that will have dealt with many people in your situation.

As well as reducing your monthly outgoings, your creditors may also agree a freeze or reduction in interest and other charges. This means your debt won’t grow any bigger (or at least it won’t grow as quickly).

However, be aware that your debt management plan could still mean you will pay more in the long run. Since it will take you longer to repay the debt, you will also pay interest for longer. Even if you have had your interest rate reduced, this could ultimately mean you pay more interest overall.

How do I know if debt management is right for me?
As with any debt solution, this really depends on your circumstances.

Debt management plans have helped many people clear their debts by reducing their payments and making them more affordable. However, if your debts have grown so much that you can never see yourself repaying them in full, you may want to consider another debt solution, such as an IVA (Individual Voluntary Arrangement), which could help you to avoid bankruptcy.

You should always speak with a professional debt adviser before making any decisions. A debt adviser can offer help and guidance on the best way to tackle your debts, based on your circumstances

Living day to day in this world nowadays can prove to be very expensive; we are therefore going to look at an effective way to consolidate bills before they get out of hand. Going through your daily expenses such as food and power consumption could easily give you migraines, not to mention unplanned expenses such as medical bills, car repair, and rising tuition fees. Because of all these things, it shouldn’t come as a surprise for the average person to find his or herself deep in debt. Not only would you be in debt, but you have several types of debt to think about such as a house loan, student loan, and maxed out credit cards. Dealing with so much paper work really is a burden on your back, but there is a solution to this problem: consolidate your debt.

How debt consolidation works

First, you would have to look for a company that offers to consolidate bills online. After they have figured out a consolidation plan that would be best for you, they’d negotiate with your debtors and seek to lower your interest rates, as well as give you a longer payment term. They will even get you a discount on your principal amount (sometimes even up to 60% off) especially if you are in deep financial trouble and in danger of bankruptcy.

Here is the best part; all of your debts are consolidated in to one. This way you would only have to think about one payment plan, one bill, and one debt. No longer would you have problems with paper work and figuring out different interest rates. These are just some of the reasons why it is the logical course of action.