Debt Management Guide
How You Can Manage Your Debt
Individual Voluntary Arrangement
Are you trying to improve management of your finances? The first thing you need to do is to sit down and try to work out, where all the money is going. Write down all expenditures (even the small ones) and withdrawals. Do this for at least a month, so that you get a good picture of where all the money is going.
Once you have identified where all of your money is going, work out a monthly budget and stick to it. Make sure you include all expenditure.
Look for ways to economize and cut your living expenses.
Start to pay off your debts, choose the ones with the highest APR (annual Percentage Rate) and not the ones with the most outstanding debt.
| How You Can Manage Your Debt | Top |
You will need to create a debt management plan, write to all your creditors and ask them if it is possible to reduce your minimum monthly payments and freeze the interest. With any luck they will agree, but remember, this arrangement is not legally binding. This is only a short-term solution and is most likely to be reconsidered after six months.
However, that may be all the time you need to get back on track.
You can get help to write your debt management plan from Citizens Advice, and better still, it is free.
| Individual Voluntary Arrangement |
Top |
Individual Voluntary Arrangement (IVA) differs from a debt management plan by the fact that an IVA is a legal contract that lasts for a specific number of years. IVAs allow you to have lower monthly payments, and in some cases even write off a percentage of your outstanding debt. Reductions that you make in your repayments, or reductions that are made against the total amount that you owe your creditors, are fixed, providing that your creditors agree to the revised terms.
It must be pointed out that IVAs are not the answer to restructuring debt for everybody. In fact, the majority of people struggling to get themselves clear of debt would be better advised to look for other answers for their problem such as debt management plans, stricter budgeting, and even bankruptcy in extreme circumstances.
The charges associated with IVAs are also very high compared to other forms of debt management. Companies that offer IVAs as a solution for debt management, actually make their money from them, so it pays to look for advice from alternative sources such as Citizens’ Advice.
