What is IVA Or Debt Management Program?
When a person in financial difficulties wants to avoid bankruptcy, they generally have two options. They can take either, an informal debt management program, or the formal IVA route. Here is a comparison of the two choices:
You can choose to use the informal route:
A debtor speaking directly to creditors, explaining that they are unable to continue their monthly payments at the agreed level and asking for a reduction in their repayments. Direct contact with creditors will help you save money on management fees for a commercial debt management firm, but you will still have to solve the problem.
A debtor can use the services of a company that manages debts. They will then contact creditors on their behalf and negotiate lower monthly payments for them. A debtor who uses the services of a commercial management company for their debt will have to pay management fees every month. This will reduce the amount that can be paid to creditors.
- These informal agreements play a part in the market for debt solutions. The decision on which option is best will depend on the particular circumstances of each case.
- There are other issues you should consider when negotiating informal debt management agreements:
- The debtor must repay the entire amount.
- The interest on outstanding debt may not be frozen by creditors
- Creditors can still bring legal action to recover the debt.
- Once the debtor has entered the informal arrangement, default notices will be sent to the debtor.
- An IVA will take you to the formal route.
