There are a few alternatives to IVAs that debtors can consider. Get the best professional advice possible and do not get into more debt by dealing with companies who act unethically.
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We base these solutions on your financial circumstances
Protected Trust Deeds are the Scottish equivalent of an IVA. In many ways a Trust Deed, which is only available in Scotland is a superior solution to an IVA. Whilst they are not the same they are similar approaching the problem of overwhelming debt with a legally binding repayment plan which offers the debtors protection from their creditors. Both achieve Debt Forgiveness, in that all the debt that isn’t repaid during the IVA/TD is written off. Whilst this is, typically 60 months for an IVA, it is 36 months for a Trust Deed.
Debt management is an alternative debt repayment plan that allows you to pay just one monthly payment to your creditors. Explore both options before deciding which plan you will take. A debt management plan has no legal protection from your creditors, does not freeze interest and charges, and you will have to repay the debt in full. But it offers you a short term solution that enables you to avoid legal insolvency procedures.
However, debt management plans show your creditors you want to repay your debts. Your creditors and their collection agencies may also lessen the pressure they enforce on you.
This type of plan is an informal arrangement between you and your creditors. The debt management company negotiates the payment with your creditors. They will reduce the monthly payment to something you can afford and charge you a monthly management fee.
Are there disadvantages to debt management plans?
Reading the above list of disadvantages you may feel that Debt Management has no redeeming features. What a Debt Management plan offers you is the ability to regain control of your life without having to adopt complex and legally binding insolvency procedures. You will be able to repay only what you can afford each month and clearly the consequence of paying less is that it will take longer to pay off what you owe. Most debt management clients are not bothered about how long it takes to repay, just can they make a reduced payment each month.
A debt management plan does not solve your debt problem instantly. It allows you to manage your debts and it reduces pressure from your creditors.
Consider bankruptcy only after all other options had been exhausted. Take professional advice from a licensed insolvency practitioner only.
Can you consolidate your unsecured debts? You may qualify for a secured loan, consolidation loan or a re-mortgage if you have enough home equity.
But this would only work if you can afford to borrow more; further borrowing against your property will be futile if you do not have enough equity. Do not use your property to pay off unsecured debts if this means you may struggle with future repayments. Seek help from someone who is qualified to determine whether you can afford the repayments. And remember to find out whether the person receives commission to sign you up.
People in financial difficulty will struggle to get an unsecured loan at a good interest rate. But you may be financially stretched if you need to borrow more than what you are repaying at the moment. Think whether you need more credit, or whether you should make your existing debts more affordable.