At a time when the UK has certainly not been immune to the effects of the global economic downturn, IVAs have been increasingly used by consumers with multiple debt problems. Recent years have seen record numbers of personal insolvencies and some consumers are finding themselves reliant on credit to pay regular, everyday bills. This strategy can become highly problematic over relatively short periods of time as they may then struggle to manage multiple repayment obligations alongside those bills. This article explains some key facts about why consumers may find themselves in this position and how an Individual Voluntary Arrangement (IVA) is one formal debt management solution which can be particularly well suited to address it.

How do the Problems Start?

Consumers in the UK may find themselves affected by a variety of common problems. They may find that they are simply ‘over-committed to credit’, and struggle to meet repayments in ‘ordinary’ circumstances. They and others can be affected by a sudden redundancy, or by an unexpected reduction in their working hours; some will be affected by a sudden or unexpected illness or disability leading to a reduction in their household income. These and other situations can lead to finding it more and more difficulty keeping up with the rising costs of living. And if credit becomes a way of ‘solving’ everyday budgeting gaps, of course the interest only adds to the problems.

Debt problems can affect those who might least expect it and UK consumers struggling with debt problems actually have no reason to feel isolated. Money education charity Credit Action reported by the end of 2010 that in the UK, individuals owed more money than the entire nation produces in a year, the latest personal debt total stood at £1,425 billion and for the equivalent of every 53 seconds during the working day one more person would declared insolvent or bankrupt. There is no such person as ‘the typical debtor’ and women are now beginning to match the men in terms of UK bankruptcy statistics. Finally, households with an income from work may find they also have debt problems alongside those who are looking for work or are unable to work at all.

Debt Options to Sort The Problems Out For Good

Against this background of problems due to multiple lines of credit, the IVA is typically used when a total of £15,000 or more is owed to 3 or more creditors.Close to 1300 UK consumers entered into IVAs during the last quarter. Other solutions may also be appropriate, but individual advice is essential. For example, with Debt Management Plans creditors may sometimes misinterpret these as an indication that financial problems are insurmountable, just when the consumer is actually trying to address the problems. This will not happen in every case and there are no rules set in stone; the only reliable maxim here is that individual tailored debt advice is essential before committing to an Individual Voluntary Arrangement.

Once approved, IVAs prevent any new court action by creditors and prevent them from making demands for repayment. No new interest or charges are added to the debt. A correctly arranged IVA should involve a repayment schedule according to your monthly budget only after you have indeed paid all you regular reasonable living expenses such as heating and hot water bills, rent or mortgage, council tax bills, food, expenses incurred due to your children’s needs and so on.

It is important to partner with a company who offer all the major legal major debt management solutions to ensure that all the IVA advice you receive is genuinely impartial. It’s also a good idea to read as much as you can out IVAs before getting this proper advice tailored your particular situation. Finally, never commit to an Individual Voluntary Arrangement or any other debt option until all you understand all avenues open to you with time to consider each one in turn.