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Debt Management Or Iva?-00-2515
If you"re in debt, you may have heard of debt management plans and of IVAs (Individual Voluntary Arrangements). You may wonder how they differ and you may wonder ? most importantly ? which one could be right for you.
Let"s start with four important points:
First: they"re both arrangements that could help you if you can"t keep up with your monthly payments to your unsecured debts.
Second: they can both involve asking professionals to help you pay off your unsecured debts at a rate you can afford (professional help is a fundamental part of an IVA, but anyone thinking of debt management can either talk to their lenders themselves or ask a debt management organisation to do it on their behalf).
Third: one (debt management) is an informal plan, while the other (IVA) is a legally binding agreement between you and your lenders.
Fourth: they aren"t the only debt solutions ? you"ll need to talk to a debt adviser who understands the various debt solutions available and can provide advice on which one is most appropriate for someone in your situation.
Debt management plans
For anyone who ...
... goes to a debt management organisation, a debt management plan starts when you ask them to help you clear your debts. When you tell them what you owe, what you earn and what you need to live on, they can help you figure out how much you can realistically afford to pay towards your unsecured debts every month ? after taking your essential living expenses into account.
Once you"ve agreed on that figure, they"ll contact your unsecured lenders and ask if they"ll consider making a few changes to your repayment terms. They may agree to freeze interest, for instance, or waive charges. Perhaps most important, they may agree to accept lower payments.
If your lenders agree to the plan, you"ll start making the agreed monthly payments. The debt management organisation will usually handle all correspondence between you and your lenders, and re-negotiate if any change in your circumstances leads to an increase or decrease in the amount you can pay to your lenders ? if your income drops, for example, or your mortgage payments drop.
IVAs
As a form of insolvency, an IVA can actually write off some of your debt. It"s a legally binding agreement designed to help people who are unable to repay their debts within a reasonable time period.
Like debt management, an IVA involves making regular monthly payments, based on the maximum you can afford once all your essential expenses have been taken into account.
However, it will have a much bigger impact on your credit rating than a debt management plan. This may make it more difficult and / or expensive to be approved for credit for a year after it"s finished. For the duration of the IVA (normally, five years) the amount of credit you"ll be allowed to apply for will be severely limited.
To enter into an IVA, you"ll need to talk to an Insolvency Practitioner (IP). Together, you"ll draw up an IVA Proposal ? a document that tells your lenders how much they can expect to receive if they approve the IVA. If the Proposal is approved by lenders who collectively "own" 75% of your debt, the IVA can go ahead.
If it"s approved, you"ll spend (in most cases) 60 months making your monthly contributions and ? if you"re a homeowner ? you may be required to release some of the equity in your home in the 54th month. If all goes well, any outstanding debt will be written off at the end of the IVA.
About the Author:
I worked more than 20 year As http://bizblogged.com/,actually i'm testing an international experiment using tasks and skills all around the world in outsourcing.Now I hired some professional tasks from India and After the first difficulties,we are starting to do better. The Project is Called BizBlogged http://bizblogged.com/and this is its Philosophy: "We're bringing together business, finance and marketing bloggers to help bring together the best and brightest minds in business. From the weekly, and sometimes daily, contributions, we've got something for everyone."
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