IVA's were recently introduced in the UK as an option to bankruptcy, but some are asking whether or not they are suitable for people on state benefits.
IVA's or "Individual Voluntary Arrangements" are a relatively new alternative to bankruptcy, whereby an individual comes to a binding agreement with his or her creditors to make a fixed, monthly repayment on their debts, for which the interest is frozen.
Broadly, an IVA can only run if all (or the majority) of creditors and the debtor can agree on the repayment terms. Any IVA agreement operates over a fixed time frame; typically from three to five years. The hope is that the creditor, a bank or credit card company for example, can avoid an expensive bankruptcy hearing, and for the debtor perhaps there is the chance that their finances will improve during the duration of the agreement.
Some say that an IVA may not be a realistic option for people on UK state benefits however, because such people are by definition on a basic standard of living.
If a person is on means-tested benefits, they will rarely have any assets to fall back on, and should be realistic about whether or not they can meet any repayment schedule set in any IVA agreement; which is legally binding.
That isn't to say that someone on state support should exclude the possibility of an IVA being the optimum solution for their debt problems. However, there are other options, such as bankruptcy or a debt management plan, and the best professional debt advice should be sought.
Author: Diana Middleton
Author Bio:
Diana Middleton writes on matters relating to debt advice in the UK, and especially debt problems. She is particularly interested in personal finance, writing on best approaches to getting a secured loan, and the background issues relating to debt consolidation.
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