1. When I can afford to make my debt repayments.
We may have been seduced by the adverts making it all sound so straightforward – write off 75% of your debt with a simple Government backed solution. Well – who wouldn’t be interested? I may be managing my debt repayments and up to date with everything – but I’d happily pay less and have debt written off instead.
But of course it’s not that simple. Before creditors will agree to an IVA, a licenced Insolvency Practitioner will have to undertake a thorough investigation of a debtors financial state including proof of income, household and personal expenditure, assets and of course debts. And only if it can be demonstrated that a debtor simply cannot afford to make the debt repayments, having allowed for priority bills such as rent/mortgage, house bills, food, travel etc, will an IVA be at least considered. If we can afford to meet debt repayments, an IVA will simply not work.
2. When I can’t afford to pay anything on debts
Some for commendable reasons want to avoid the bankruptcy/Debt Relief Order route. For some it’s a stigma thing, for others bankruptcy could create more problems than it solves (eg employment problems). But an IVA is the wrong solution if a debtor simply can’t afford anything on debt repayments. There are those so determined to apply for an IVA, they set unrealistic and unsustainable budget aspirations. If all our income is needed for basic living costs, leaving nothing for debts then an alternative solution is needed.
3. When I can utilise an asset
An IVA is an insolvency debt solution that affects someone’s credit rating for at least 6 years. And if that is not a huge concern for a debtor, the knowledge that they will have to live on a fairly strict budget throughout the IVA, as well as disclosing assets that may have to be considered within an IVA, a far simpler route maybe to make use of an existing asset. And of course an IVA won’t work if creditors feel that asset could be used to clear debts. So – releasable equity in a property or a vehicle that could be sold and another bought at a much reduced price are potential solutions to help clear debt.
4. When there are changes ahead
No one knows what the future holds, but for some struggling with debt they are aware that significant changes will create new financial opportunities. A likely promotion at work, a business that has just been set up and feeling its way, a house move, the threat of redundancy, a likely inheritance – could all be factors in the choice of a debt solution. For some it’s a short term cash flow problem. If we can get through the next 6 or 12 months we will be ok. In such circumstances, it is unlikely that an IVA is the answer. Some kind of repayment plan organised directly with the creditors or through an authorised debt solutions company may well alleviate the need for an IVA.