An IVA is not the only personal debt solution. There are alternatives which you can also consider.
If you are living in Scotland the IVA, Debt Relief Order and Administration Order solutions are not available to you. You will need to consider solutions locally available.
Consolidation is often the first option considered to resolve a debt problem. It involves paying off multiple smaller debts with a single larger loan.
It is possible to consolidate debt using an unsecured loan from your bank. Alternatively if you are a home owner you could consider releasing equity by remortgaging or taking a secured loan.
Debt consolidation is normally only available if you have a good credit rating. It is the only debt solution that will allow you to maintain this position.
You should only consider consolidation if you can comfortably afford your new loan repayments. If not you must consider one of the alternatives.
Debt Management Plan
A Debt Management Plan (often known as a DMP) is an extremely common debt solution. It is an agreement which allows you to reduce your debt payments to a more manageable amount.
As it is informal you can carry out the negotiations yourself. Alternatively there are a number of organisations that can set up a Plan for you meaning you only have to make a single debt repayment each month.
The Plan is flexible. It is relatively easy to increase or decrease the payments you make into it. In addition you can change to a different solution at anytime if appropriate.
If you start a DMP you are still obliged to repay your outstanding debt in full. As a result it can take a very long time to become debt free.
Bankruptcy and Debt Relief Order
Most people believe Bankruptcy should be avoided. However this is not always the case. Depending on your circumstances it may be a very sensible way of dealing with your debts .
Once you are bankrupt all of your unsecured debts are taken away from you. You only have to continue making payments towards them if you cannot afford to do so.
If you are a home owner Bankruptcy may not be appropriate. However if there is no equity in your property it is certainly still an option to be considered.
The cost of Bankruptcy can be prohibitive. If your debt is less than £20,000 and you have a low income and no assets then A Debt Relief Order might be a better alternative. It gives the same results as Bankruptcy but costs far less to implement.
An Administration Order is available if your total unsecured debt is less than £5000 and a CCJ (County Court Judgment) has already been issued against you.
The Order allows you to reduce your debt payments to one affordable amount which you pay to the Court each month. It generally lasts for 3 years after which time any unpaid debt is written off.
Administration Orders can useful if you are a home owner. For non homeowners they have largely become redundant since the introduction of the Debt Relief Order (DRO) in 2009.
If you rent your home you would normally only consider using this solution if your surplus income is greater than £50 per month meaning you do not qualify for a DRO.