The United Kingdom’s government estimates that as many as 700,000 of its residents are using some form of informal arrangement as a means of paying off their debts as a result of the financial pressure they are experiencing.
Whilst this might offer a degree of relief from the overburdening monthly costs of their debts, an informal arrangement will not provide them with any actual debt relief in the form of debt forgiveness.
To stand a chance of some debt forgiveness they would need to consider entering an IVA.
An IVA, or Individual Voluntary Arrangement, is a formal debt solution available to all UK residents who are struggling to keep up with their contractual debt repayments.
Unlike an informal arrangement, under which payments continue until the whole outstanding debt has been repaid, an IVA has a predetermined repayment term usually set to 5 years, after which, all outstanding debt balances are written off.
This provides significant advantages to the IVA applicant for, in most IVA cases, there will be a large amount of the original debt that will never be repaid, giving true debt forgiveness to the applicant. Applicants with credit card debts are guaranteed a complete freeze in interest, effectively halting the debt from growing bigger whilst the IVA is in force.
Payments into the IVA are always set to what is assessed as an affordable level for the applicant, once all their personal living expenses have been accounted for from their total income. This gives added cash flow relief to the household budget, ensuring that priority debts, such as mortgages and utility bills, can be maintained.
For many UK residents the global crisis has hit home hard, but at least there are some safeguards in place to assist people when the weight of their personal debt becomes too much.
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