An individual voluntary arrangement (IVA) should be a last resort and isn’t the easy option portrayed in television adverts, Which? warns today.
An IVA is a form of insolvency that stops short of bankruptcy.
It’s a legal contract between an individual and their creditors that allows the individual to pay the creditors all or some of the debt owed.
The individual must stick to the agreed monthly payments for five years and after that time is clear to borrow again.
But IVA companies are under no obligation to give the best advice and as commercial organisations are unlikely to recommend a deal with no fees or charges.
Fees alone can be as much as £7,000 and for many people, an IVA can mean crippling levels of repayments.
Debt charities that are largely government funded, such as Citizens’ Advice Bureau and National Debtline, should be the first port of call for anybody in financial trouble.
As independent organisations they are far more likely to give impartial advice.
Phillip Inman, author of the new Which? essential guide ‘Managing Your Debt’, said: ‘Many people opt for an IVA as they see it as a way to escape debts without repercussion, yet an IVA can give false hope and lead into bankruptcy.
‘Think carefully before doing business with an IVA company. There are far better options if you’re in debt, such as calling into the local CAB office for advice.’
‘Managing Your Debt’ gives clear and practical advice on everything relating to debt, from credit and store cards to students loans and bankruptcy.
It costs £10.99 and can be ordered on 01903 828557, through our online book store or from bookshops.