Individual Voluntary Arrangements (IVA)
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Ask your advisor for a personalised IVA example to see how much unsecured debt you could write off and calculate how much you could save per month!
We’ll ensure you only pay back what you can honestly afford, starting from £90/month
Never have to deal with scary phone calls or threatening letters from creditors demanding payment
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“Without doubt the most professional Practitioners bar none. All conversations by email & telephone with both Marian & Zainab where extremely friendly & knowledgeable and not only put me at ease but gave me a better understanding of an IVA”
“Really quick to get IVA in place, Polite and interested in my problems and non-judgemental. Anyone who deals with this company will be able to stop worrying about creditors and will possibly be relieved of a lot of undue stress”
“When I first looked at this company the first person to call me (Steve) was very friendly and extremely helpful with understanding my situation. I didn’t realise I was in so much debt but now I am looking forward to a better financial future”
If you’re struggling with managing your debt, you may have heard of, or are considering, writing it off.
But what exactly does writing debt off mean, and how do you do it? Do debt write off loopholes actually exist in the U.K.?
This article will go through what it means to write off debt, as well as some potential loopholes you may not have heard of to relieve you of your debt burdens.
If your debt is written off, it means that your creditors (the people or company(s) that you owe money to) agree not to pursue you further to repay it.
Each debt write off is very individualistic, and many factors will be considered by your creditors before they decide to agree to write off your debts.
Some common situations which might influence whether your creditors agree to your debts being written off include: serious mental or physical health issues, unemployment as a result of something outside of your control, or potentially any other reason resulting in your inability to repay your debts.
If your creditors agree to write your debts off, you’ll then be completely exonerated from repaying them.
However, having your debt written off does have consequences.
Any write-offs will be recorded on your credit file, which will in turn harm your credit score and negatively impact your ability to be approved for loans in the future.
The short answer? Not really.
There are no so-called ‘loopholes’ in the traditional sense, meaning there’s no legal way to write off your debts without the harsh consequences, such as penalties on your credit score, which follow.
Likewise, there is no method by which a company can reduce your debt amount drastically or wipe it completely, so it is advised to always be cautious of companies claiming they can.
There are, however, in certain cases, repayment insolvency plans which are available to those who can’t afford to pay their lenders back within a reasonable time frame, or when credit was mis-sold to them.
Listed below are the potential repayment plans which can allow you to write off potentially thousands of pounds in debt, depending on your individual financial situation:
Debt relief orders are mostly applicable for those either on a low income or who possess very few valuable assets.
If you’re granted a DRO, your debts will be frozen for a year to give you a chance to improve your financial situation.
If financially you’ve remained stagnant after the year, and thus you are still unable to pay your debts, you will likely be eligible for your debts to be partially or fully written off.
If you’d prefer a quick summary, IVAs are legally binding agreements between you and the people you owe money to (your creditors) which last on average, 5 years (but this period of time can be completely dependent on an individual’s agreement).
If you are consistent with your monthly payments and finish your agreed IVA term, you will qualify for the remainder of your agreed debts to be completely written off.
On average, IVA’s have written off between 50% and 60% of an average debt amount of £60,000, resulting in a £25,000-£30,000 reduction in the total amount previously owed.
Therefore, if you plan strategically and are dedicated to meeting your monthly repayments, you may be able to write off a significant chunk of your debts.
However, before being approved for an IVA, you must be able to evidence that you will be able to consistently meet monthly repayments over your agreed time period.
At the time of writing this article, creditors will expect at a minimum £70.00 a month to contribute towards your IVA.
Alternatively, some people, if they have the option, may prefer to provide a lump sum upfront (like a deposit) as a way to reduce their monthly repayments.
Once an agreement has been reached, all previous interest and charges on your debts will be stopped, and your creditors will be prevented from enforcing further penalties against you, including a petition for your bankruptcy.
The most important thing to remember about IVAs is that they are legally binding, meaning once you’ve signed one, there are likely to be harsh penalties for defaulting or cancelling it.
If your IVA fails, you may end up wasting a lot of time and money in fees, so it is imperative that you comply with your IVA throughout the entire agreed term.
Arguably the most well known type of insolvency; bankruptcy, if successful, will write off all your debts that are permitted to be included in a bankruptcy order.
These will include almost all consumer debts such as credit cards, personal loans and car loans as well as utility arrears and overdrafts.
However, it is important to note that there are also many types of debt which a bankruptcy cannot relieve you of.
These include: child maintenance arrears, criminal fines, fraudulent debts, mortgages or debts secured against your home, social fund loans, student loans, court-ordered loans and TV licence arrears.
If you have any assets of value, they’ll be assessed to see if they can be used to pay off your debts.
You’ll usually be able to retain essential tools or equipment which you might need to generate your income, such as your toolkit if you’re a tradesperson or car if it’s absolutely necessary for you to travel to work.
So in summary, although direct loopholes or methods proclaiming to completely exonerate you of any debt-write off consequences don’t exist, the insolvency repayment plans detailed above, if utilized correctly, can be an effective way to potentially write off a significant portion of your debts.
It is always advised that you consult with a professional first before engaging in any large financial decision, to ensure you’re agreeing to the best suited strategy for your individual situation.