If you are finding it difficult to keep on top of your unsecured debts and don’t think you’ll be able to repay them in a realistic amount of time, then an IVA (Individual Voluntary Arrangement) may be a suitable way out of debt for you.

In most cases, you will be required to make regular monthly payments that reflect how much you can actually afford. IVAs are legally binding agreements and usually last for 5 years. When an IVA comes to a successful conclusion, any remaining unsecured debt you have will be written off.

If you can’t afford to keep on top of the repayments, then an IVA would not be right for you. This may well be the case if, for example, you don’t have a fixed income. However, it is important to understand that no-one can predict exactly what may happen in the future, and anyone’s circumstances can change. For example, your essential expenditure may increase and/or your income may drop.

If this does happen to you, you can talk to your Insolvency Practitioner (IP) about an IVA variation.

Your IP has the responsibility of arranging your IVA. However, they are also there as a point of contact for you and your creditors throughout the agreement.

If your circumstances change, and you can longer afford to make the payments to your IVA, your IP may be able to arrange an IVA variation.

An IVA variation allows you to alter the repayment terms to reflect the change in your circumstances, so your IVA still has a chance to succeed even though your circumstances have changed. For example, your creditors might accept smaller repayments – for a longer timeframe.

An IVA variation is arranged in a similar way to your original IVA. Your IP will help you draw up a new proposal, which will be given to your creditors. Voting creditors who collectively ‘own’ at least 75% of your debt have to agree to the new proposal before the IVA variation can go ahead.

Although your proposal may outline the only way you can continue with the IVA, your creditors may still reject it. If this happens, you could:
1.    Propose an alternative IVA variation
2.    Look into a different debt solution: for example, a debt management plan.
3.    Allow the IVA to fail, and then petition for bankruptcy. Although bankruptcy has downsides, it can be the most appropriate way out of debt for some people.

Some of us will be able to afford our repayments, while some of us won’t – it all depends on individual circumstances.

So, if you have been left with debts after the recession… what could you do to pay them off this year – or at least make some real progress towards that goal?

Enter an IVA
An IVA (Individual Voluntary Arrangement) is a legally binding agreement between you and your unsecured creditors. It may only be suitable for you if you are struggling with an unmanageable level of debt that you can’t afford to repay, but that you can afford to make regular reduced payments towards.

You must be able to commit to making these payments for, in most cases, five years. If you can commit to this, your creditors may agree to write off the portion of your debt that you can’t afford to repay – but note that they’d only do this once you’d fulfilled your side of the agreement.

Enter a debt management plan
If you can’t afford to keep up with your repayments as you had originally agreed, but you can afford to repay your debt within a reasonable period of time, a debt management plan may be suitable for you.

Basically, debt management involves talking to your lenders and asking them to accept changes to the original repayment plan. They may agree to accept lower monthly repayments and/or freeze/reduce interest and charges – allowing you to repay your debt in a realistic and affordable way.

Take out a debt consolidation loan
You could take out a debt consolidation loan and use it to repay your existing unsecured debts. This can help to make your finances much easier to manage and help you keep on top of your monthly debt repayments. A lot of people consolidating their debts take the opportunity to slow down the rate at which they are repaying their debt: by arranging to repay it over a longer time frame, they can lower their monthly payment. Having said that, remember that the slower you repay any debt, the more time it’ll have to accrue interest.