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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.